COMMUNITY FACILITIES DISTRICT NO. 97-1 OF THE TUSTIN ...cdiacdocs.sto.ca.gov/2015-0540.pdf · 2034 5,340,000 4.00 4.09 98.804 HA7 2035 5,700,000 4.00 4.11 98.493 GK6 $19,655,000 5.000%

The date of this Official Statement is: May 13, 2015.

NEW ISSUE

RATINGS: Standard & Poor’s Insured Rating: “AA” Underlying Rating: “BBB”

(See “Ratings” 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 2015 Series A 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 2015 Series A 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 liabilities. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxes. 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 Exemption” herein.

$92,455,000 COMMUNITY FACILITIES DISTRICT NO. 97-1 OF THE TUSTIN UNIFIED SCHOOL DISTRICT

SPECIAL TAX REFUNDING BONDS Comprised of

$82,820,000 2015 Special Tax Refunding Bonds, Series A

(Federally Tax-Exempt)

$9,635,000 2015 Special Tax Refunding Bonds, Series B

(Federally Taxable)

Dated: Date of Delivery Due: September 1, as shown on Inside CoverThe Community Facilities District No. 97-1 of the Tustin Unified School District 2015 Special Tax Refunding Bonds, Series A (Federally Tax-Exempt) and

Series B (Federally Taxable) (the “2015 Series A Bonds,” the “2015 Series B Bonds” and collectively, the “Bonds,” as applicable) are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), and the Fiscal Agent Agreement (the “Fiscal Agent Agreement”), dated as of June 1, 2015, by and between Community Facilities District No. 97-1 of the Tustin Unified School District (the “Community Facilities District”) and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). The Bonds are payable from proceeds of Special Taxes (as defined herein) levied on property within the Community Facilities District according to the special tax formula for apportionment of special tax of the Community Facilities District approved by the qualified electors and by the Board of Education (the “Board”) of the Tustin Unified School District (the “School District”), acting as the Legislative Body of the Community Facilities District (the “Legislative Body”), and subsequent proceedings of the Legislative Body as more fully described herein.

The Bonds are being issued (i) to defease and refund the outstanding special tax bonds of the Community Facilities District captioned “Community Facilities District No. 97-1 of the Tustin Unified School District 2002 Special Tax Bonds, Series A (Senior Lien Bonds)” and Series B (Junior Lien Bonds)” (collectively, the “Prior Bonds”), (ii) to fund the reserve fund in an amount equal to 50% of the Reserve Requirement (as defined in the Fiscal Agent Agreement) and to provide a debt service reserve insurance policy for the Bonds in an amount equal to 50% of the Reserve Requirement, and (iii) to pay certain costs of issuing the Bonds, including the premiums for a municipal bond insurance policy and debt service reserve insurance policy. See “ESTIMATED SOURCES AND USES OF FUNDS,” herein.

Interest on the Bonds is payable on September 1, 2015, and semi-annually thereafter on each March 1 and September 1. 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”). DTC will act as securities depository for the Bonds. See “THE BONDS – Book-Entry and DTC” and “APPENDIX F – Book-Entry System.”

The scheduled payment of principal of and interest on the 2015 Series A Bonds maturing on September 1 of the years 2032 through 2038, inclusive, with CUSIP Nos. 901073GY6 through 901073GL4 (collectively, the “Insured 2015 Series A Bonds”) and the scheduled payment of principal of and interest on the 2015 Series B Bonds (collectively with the Insured 2015 Series A Bonds, the “Insured Bonds”), when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Insured Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY.

The 2015 Series A Bonds are subject to optional redemption, the 2015 Series A Bonds are subject to mandatory redemption from Special Tax prepayments and the 2015 Series A Bonds are subject to mandatory sinking fund redemption as described herein. The Series B Bonds are not subject to redemption prior to their stated maturities. See “THE BONDS – Redemption.”

MATURITY SCHEDULE

(See Inside Cover)

Please refer to the inside cover page for a summary of the principal amounts, interest rates and reoffering yields for the Bonds.

THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOL DISTRICT, THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXES LEVIED IN THE COMMUNITY FACILITIES DISTRICT, 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. Investment in the Bonds involves risks which may not be appropriate for some investors. See “BONDOWNERS’ RISKS” 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 accepted by the Underwriter, subject to approval as to their legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the School District and the Community Facilities District by Bowie, Arneson, Wiles & Giannone and by McFarlin & Anderson LLP, Laguna Hills, California, Disclosure Counsel. Nossaman LLP, Irvine, California, is serving as counsel to the Underwriter. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about June 3, 2015.

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2015-0539 & 2015-0540

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2015-0540

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2015-0539

MATURITY SCHEDULE

$92,455,000COMMUNITY FACILITIES DISTRICT NO. 97-1OF THE TUSTIN UNIFIED SCHOOL DISTRICT

2015 SPECIAL TAX REFUNDING BONDS,SERIES A

(Federally Tax-Exempt)$41,290,000 Serial BondsBase CUSIP® No. 901073†

Maturity(September 1)

PrincipalAmount

InterestRate Yield Price

CUSIP®

No.†Maturity

(September 1)PrincipalAmount


CUSIP®

No.†

2015 $2,820,000 2.00% 0.60% 100.340 FS0 2026 $3,585,000 5.00% 3.15% 116.086 C GD2

2021 200,000 3.00 2.31 103.988 FY7 2027 3,915,000 5.00 3.27 114.952 C GE0

2022 2,390,000 5.00 2.49 116.540 FZ4 2028 4,265,000 5.00 3.41 113.645 C GF7

2023 2,710,000 5.00 2.67 117.136 GA8 2029 4,640,000 5.00 3.51 112.723 C GG5

2024 3,010,000 5.00 2.88 117.094 GB6 2030 5,035,000 5.00 3.60 111.900 C GH3

2025 3,270,000 5.00 3.00 117.522 GC4 2031 5,450,000 5.00 3.67 111.266 C GJ9

$21,875,000 Insured Serial BondsBase CUSIP® No. 901073†


PrincipalAmount


CUSIP®

No. †

2032 $5,890,000 5.00% 3.63% 111.628 C GY62033 4,945,000 5.00 3.67 111.266 C GZ32034 5,340,000 4.00 4.09 98.804 HA72035 5,700,000 4.00 4.11 98.493 GK6

$19,655,000 5.000% 2015 Insured Term Bonds due September 1, 2038, Yield 3.840% Price 109.742C CUSIP® No. 901073 GL4

C Priced to optional call date of September 1, 2025.

2015 SPECIAL TAX REFUNDING BONDS,SERIES B

(Federally Taxable)$9,635,000 Insured Serial Bonds

Base CUSIP® No. 901073


PrincipalAmount

InterestRate Yield

CUSIP®

No.†Maturity

(September 1)PrincipalAmount

InterestRate Yield

CUSIP®

No.†

2016 $1,255,000 2.000% 1.500% GM2 2019 $1,690,000 3.000% 2.750% GQ3

2017 1,365,000 2.500 2.000 GN0 2020 1,885,000 5.000 3.000 GR1

2018 1,515,000 2.500 2.300 GP5 2021 1,925,000 3.350 3.350 GS9

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data is provided by CUSIP Global Services (CGS) which ismanaged on behalf of the American Bankers Association by S&P Capital IQ. CUSIP® data is not intended to create a database and does notserve in any way as a substitute for the CUSIP® Service Bureau. CUSIP® numbers are provided for convenience of reference only. TheCommunity Facilities District, the School District and the Underwriter take no responsibility for the accuracy of such numbers.

TUSTIN UNIFIED SCHOOL DISTRICT

BOARD OF EDUCATION

Francine Scinto, PresidentLynn Davis, Vice President

Jonathan Abelove, ClerkTammie Bullard, Member

James Laird, Member

SCHOOL DISTRICT CHIEF ADMINISTRATORS

Gregory A. Franklin, Ed.D., SuperintendentAnthony Soria, Chief Financial Officer

Charles Lewis, Ed.D., Chief Personnel OfficerKathie Nielsen, Chief Academic Officer

Crystal Turner, Ed.D., Assistant Superintendent, Administrative ServicesLori Stillings, Ed.D., Assistant Superintendent, Special Education

___________________

PROFESSIONAL SERVICES

BOND COUNSEL/SCHOOL DISTRICT COUNSEL

Bowie, Arneson, Wiles & GiannoneNewport Beach, California

DISCLOSURE COUNSEL

McFarlin & Anderson LLPLaguna Hills, California

FINANCIAL ADVISOR

RBC Capital Markets, LLCLos Angeles, California

FISCAL AGENT/ESCROW AGENT

U.S. Bank National AssociationLos Angeles, California

SPECIAL TAX CONSULTANT AND CFD ADMINISTRATOR

Special District Financing & Administration, LLCEscondido, California

VERIFICATION AGENT

Grant Thornton LLPMinneapolis, Minnesota

GENERAL INFORMATION ABOUT THE OFFICIAL STATEMENT

Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of theBonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This OfficialStatement is not to be construed as a contract with the purchasers of the Bonds. While the School District maintains aninternet website for various purposes, none of the information on such website is intended to assist investors in makingany investment decision or to provide any continuing information with respect to the Bonds or any bonds or obligations ofthe School District.

Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by theCommunity Facilities District, in any press release and in any oral statement made with the approval of an authorizedofficer of the School District or the Community Facilities District or any other entity described or referenced herein, thewords or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,”“expect,” “intend,” and similar expressions identify “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended,and Section 27A of the United States Securities Act of 1933, as amended. Such statements are subject to risks anduncertainties that could cause actual results to differ materially from those contemplated in such forward-lookingstatements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts willnot be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differencesbetween forecasts and actual results and those differences may be material. The information and expressions of opinionherein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereundershall, under any circumstances, give rise to any implication that there has been no change in the affairs of the SchoolDistrict or the Community Facilities District or any other entity described or referenced herein since the date hereof. TheSchool District and the Community Facilities District do not plan to issue any updates or revisions to the forward-lookingstatements set forth in this Official Statement.

Limited Offering. No dealer, broker, salesperson or other person has been authorized by the School District orthe Community Facilities District to give any information or to make any representations in connection with the offer orsale of the Bonds other than those contained herein and if given or made, such other information or representation mustnot be relied upon as having been authorized by the School District, the Community Facilities District 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 saleof the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation orsale.

Involvement of Underwriter. The Underwriter has submitted the following statement for inclusion in thisOfficial Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as apart of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of thistransaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

Information Subject to Change. The information and expressions of opinions herein are subject to changewithout notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances,create any implication that there has been no change in the affairs of the School District, the Community Facilities Districtor any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in thisOfficial Statement are made subject to the provisions of such documents, respectively, and do not purport to be completestatements of any or all of such provisions.

Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactionswhich stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the openmarket. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bondsto certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof andsaid public offering prices may be changed from time to time by the Underwriter.

Bond Insurer. Build America Mutual Assurance Company (“BAM”) makes no representation regarding theInsured Bonds or the advisability of investing in the Insured Bonds. In addition, BAM has not independently verified,makes no representation regarding, and does not accept responsibility for the accuracy or completeness of this OfficialStatement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracyof the information regarding BAM, supplied by BAM and presented under the heading “BOND INSURANCE” andAPPENDIX G – “SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCHACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANYSTATE.

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TABLE OF CONTENTS

INTRODUCTION .............................................1General ..........................................................1The School District........................................1The Community Facilities District ................1Special Tax Requirement...............................2Municipal Bond Insurance.............................3Purpose of the Bonds.....................................3Sources of Payment for the Bonds.................3Tax Exemption ..............................................5Risk Factors Associated with Purchasing theBonds.............................................................5Forward Looking Statements.........................5Professionals Involved in the Offering ..........6Other Information..........................................6

CONTINUING DISCLOSURE.........................7

THE FINANCING PLAN .................................8

ESTIMATED SOURCES AND USES OFFUNDS ..............................................................9

THE BONDS ...................................................10Authority for Issuance .................................10General Provisions.......................................10Debt Service Schedule.................................11Redemption..................................................11Registration, Transfer and Exchange...........13Book-Entry and DTC...................................14

SECURITY FOR THE BONDS......................14General ........................................................14Special Taxes...............................................15Rate and Method..........................................16Proceeds of Foreclosure Sales .....................17Special Tax Fund.........................................19Bond Fund ...................................................21Reserve Fund ...............................................21Prepaid Special Taxes..................................24Administrative Expense Fund .....................24Residual Fund..............................................24Investment of Moneys in Funds ..................25The Teeter Plan............................................25Payment of Rebate Obligation.....................26Additional Bonds for Refunding PurposesOnly .............................................................27

BOND INSURANCE ......................................27Bond Insurance Policy.................................27Build America Mutual AssuranceCompany......................................................27

COMMUNITY FACILITIES DISTRICT NO.97-1 ..................................................................29

General Information ....................................29Summary of Proceedings.............................29

Special Taxes – Developed Property........... 31Special Tax Levy in Relation to ScheduledDebt Service ................................................ 31Concentration of Special Tax Obligations .. 34Direct and Overlapping Debt ...................... 38Overlapping Assessment and CommunityFacilities Districts........................................ 39Other Potential Debt.................................... 40Historical and Current Assessed Values;Value to Lien Ratios.................................... 41Estimated Overall Tax Rates....................... 43Delinquency History; School DistrictCommunity Facilities District Special TaxDelinquencies .............................................. 44

BONDOWNERS’ RISKS ............................... 45Risks of Real Estate Secured InvestmentsGenerally ..................................................... 45Property Tax Delinquencies ........................ 45Economic Uncertainty................................. 46Concentration of Ownership ....................... 46Special Taxes Are Not PersonalObligations .................................................. 46Assessed Values; Value-to-Lien Ratios ...... 46The Bonds Are Limited Obligations of theCommunity Facilities District ..................... 47Burden of Parity Liens, Taxes and OtherSpecial Assessments on the TaxableProperty ....................................................... 47Disclosure to Future Purchasers .................. 48Insufficiency of the Special Tax.................. 48Exempt Properties ....................................... 49Depletion of Reserve Fund.......................... 50Potential Delay and Limitations inForeclosure Proceedings ............................. 51Bankruptcy and Foreclosure Delay ............. 52Payments by FDIC and Other FederalAgencies ...................................................... 54Factors Affecting Parcel Values andAggregate Value.......................................... 55No Acceleration Provisions......................... 57Teeter Plan Termination.............................. 57Community Facilities District Formation.... 57Billing of Special Taxes .............................. 57Inability to Collect Special Taxes ............... 58Right to Vote on Taxes Act......................... 58Ballot Initiatives and Legislative Measures 60Limited Secondary Market.......................... 60Loss of Tax Exemption ............................... 61IRS Audit of Tax-Exempt Bond Issues....... 61

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Impact of Legislative Proposals,Clarifications of the Code and CourtDecisions on Tax Exemption.......................61Backup Withholding....................................62Limitations on Remedies .............................62

LEGAL MATTERS.........................................62Legal Opinion..............................................62Tax Exemption ............................................62

Absence of Litigation .................................. 64No General Obligation of School District orCommunity Facilities District ..................... 65

RATINGS........................................................ 65

UNDERWRITING .......................................... 66

PROFESSIONAL FEES.................................. 66

MISCELLANEOUS........................................ 67

APPENDIX A – GENERAL INFORMATION ABOUT THE TUSTIN UNIFIED

SCHOOL DISTRICT....................................................................................................................A-1

APPENDIX B – SPECIAL TAX FORMULA........................................................................................................ B-1

APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT

AGREEMENT..............................................................................................................................C-1

APPENDIX D – FORM OF COMMUNITY FACILITIES DISTRICT CONTINUING

DISCLOSURE AGREEMENT ....................................................................................................D-1

APPENDIX E – FORMS OF OPINIONS OF BOND COUNSEL.......................................................................... E-1

APPENDIX F – BOOK-ENTRY SYSTEM............................................................................................................ F-1

APPENDIX G – SPECIMEN MUNICIPAL BOND INSURANCE POLICY ........................................................G-1

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OFFICIAL STATEMENT

$92,455,000COMMUNITY FACILITIES DISTRICT NO. 97-1OF THE TUSTIN UNIFIED SCHOOL DISTRICT

Comprised of

$82,820,0002015 Special Tax Refunding Bonds, Series A


$9,635,0002015 Special Tax Refunding Bonds, Series B

(Federally Taxable)

INTRODUCTION

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

General

This Official Statement, including the cover page and appendices hereto, is provided to furnishinformation regarding the Community Facilities District No. 97-1 of the Tustin Unified School District2015 Special Tax Refunding Bonds, Series A (Federally Tax-Exempt) (the “2015 Series A Bonds”) and2015 Special Tax Refunding Bonds, Series B (Federally Taxable) (the “2015 Series B Bonds” andtogether with the 2015 Series A Bonds, the “Bonds,” each a “Series of Bonds”).

The Bonds are issued pursuant to the Act (as defined below) and the Fiscal Agent Agreement,dated as of June 1, 2015 (the “Fiscal Agent Agreement”), by and between Community Facilities DistrictNo. 97-1 of the Tustin Unified School District (the “Community Facilities District”) and U.S. BankNational Association, as fiscal agent (the “Fiscal Agent”). See “THE BONDS – Authority for Issuance”herein. The Community Facilities District may issue additional bonds payable on a parity with the Bondsfor refunding purposes only.

The School District

The Tustin Unified School District (the “School District”) was established July 1, 1972. TheSchool District currently encompasses approximately 24 square miles in the central portion of the Countyof Orange (the “County”) and includes the City of Tustin, easterly portions of the City of Santa Ana, theFoothills portion of the unincorporated area of the County (North Tustin) and portions of the City ofIrvine (West Irvine, Northpark and Orchard Hills). The School District currently operates eighteen (18)elementary schools, one (1) grades 5-8 middle school, five (5) grades 6-8 middle schools, three (3)comprehensive high schools, a continuation high school and alternative and adult education programs.The School District’s projected average daily attendance for Fiscal Year 2014-15 is approximately23,346.

The Community Facilities District

The Community Facilities District was formed and established by the School District on April 14,1997, pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq.of the California Government Code (the “Act”), following a public hearing and subsequent landownerelection at which the qualified electors of the Community Facilities District, by more than a two-thirdsvote, authorized the Community Facilities District to levy special taxes and to incur a bonded

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indebtedness of the Community Facilities District to finance the acquisition of certain schoolimprovements (the “Facilities”) of the School District. The qualified electors authorized bondedindebtedness in the aggregate not-to-exceed amount of $110,000,000 and approved the levy of specialtaxes (the “Special Taxes”). On April 27, 1998, the Community Facilities District annexed theAnnexation No. 1 Territory (herein defined) to the Community Facilities District and called a specialelection. At the special election, the electors within the boundaries of Annexation No. 1 Territoryauthorized the Community Facilities District to incur bonded indebtedness to finance the acquisition,design, construction, lease equipping and/or improvement of educational sites and facilities and approvethe levy of a special tax pursuant to the Special Tax Formula.

Once duly established, a community facilities district is a legally constituted governmental entityestablished for the purpose of financing specific facilities and services within defined boundaries. Subjectto approval by a two-thirds vote of the qualified voters within a community facilities and compliance withthe provisions of the Act, a community facilities district may issue bonds and may levy and collect specialtaxes to repay such bonded indebtedness, including interest thereon.

On August 29, 2002, the Community Facilities District issued its Community Facilities DistrictNo. 97-1 of the Tustin Unified School District 2002 Special Tax Bonds, Series A (Senior Lien Bonds)(the “2002 Series A Bonds”) in the aggregate principal amount of $87,697,674.90 and its Series B (JuniorLien Bonds) (the “2002 Series B Bonds” and together with the 2002 Series A Bonds, the “Prior Bonds”),in the aggregate principal amount of $14,090,000. Proceeds of the Prior Bonds were used (i) to payoutstanding obligations of the Community Facilities District, (ii) to finance school facilities and (iii) topay costs of issuance of the Prior Bonds. As of April 1, 2015, $76,530,000 aggregate principal amount ofcurrent interest 2002 Series A Bonds were outstanding, $11,445,000 aggregate maturity amount of capitalappreciation 2002 Series A Bonds were outstanding and $12,760,000 aggregate principal amount of the2002 Series B Bonds were outstanding. The remaining outstanding 2002 Series A Bonds capitalappreciation bonds will also be refunded but not paid until their scheduled maturities on September 1,2015, through September 1, 2021, inclusive (with a final maturity value of $10,130,000).

The Community Facilities District is approximately 921 net acres located in the central part of theCounty. The Community Facilities District lies within the geographic boundaries of the City of Irvineand consists of approximately 4,620 individual parcels of Developed Property (as defined in the SpecialTax Formula), with approximately 7,764 residential dwelling units comprised of 3,080 single familydetached homes, 1,528 attached homes and 3,156 apartment units. The Community Facilities District hasbeen completely built out for many years.

See “COMMUNITY FACILITIES DISTRICT NO. 97-1” for additional information regardingdevelopment within the Community Facilities District and APPENDIX B – “SPECIAL TAXFORMULA” for a description of the “Special Tax Formula Rate and Method of Apportionment ofSpecial Tax for Community Facilities District No. 97-1 of Tustin Unified School District” (the “SpecialTax Formula” or “Rate and Method”).

Special Tax Requirement

Pursuant to the Special Tax Formula, the Board shall levy the Special Tax Proportionately (asdefined in the Special Tax Formula) on each Assessor’s Parcel of Residential Developed Property (asdefined in the Special Tax Formula), in an amount not in excess of the applicable Maximum Special Tax(as defined in the Special Tax Formula) for that Fiscal Year, such that the aggregate amount so leviedequals, but does not exceed, the then applicable Debt Service Requirement (as defined herein).

In the Fiscal Agent Agreement, the Community Facilities District covenants to fix and levy theamount of Special Taxes within the Community Facilities District required for the payment of principal ofand interest on Outstanding Bonds becoming due and payable during the ensuing year, including anynecessary replenishment or expenditure of the Reserve Fund (as defined in the Fiscal Agent Agreement)

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for the Bonds, an amount equal to the Administrative Expense Requirement (as defined in the FiscalAgent Agreement and as described below) (including amounts to pay insurance policy costs with respectto the Reserve Policy (as defined below), if any) and any additional amounts necessary for expensesincurred in connection with administration or enforcement of delinquent Special Taxes.

Municipal Bond Insurance

The scheduled payment of principal of and interest on the 2015 Series A Bonds maturing onSeptember 1 of the years 2032 through 2038, inclusive, with CUSIP Nos. 901073GY6 through901073GL4 (collectively, the “Insured 2015 Series A Bonds”) and the scheduled payment of principal ofand interest on the 2015 Series B Bonds (collectively, with the Insured 2015 Series A Bonds, the “InsuredBonds”), when due will be guaranteed under a municipal bond insurance policy to be issued concurrentlywith the delivery of the Insured Bonds by Build America Mutual Assurance Company (“BAM” or the“Bond Insurer”). See “BOND INSURANCE” below.

Purpose of the Bonds

The Bonds are being issued (i) to defease and refund the Prior Bonds, (ii) to fund the 2015Series A Reserve Account in an amount equal to 50% of the Reserve Requirement (as defined in theFiscal Agent Agreement) applicable to Series A Bonds and the Series B Reserve Account of the ReserveFund in an amount equal to 50% of the Reserve Requirement applicable to the 2015 Series B Bonds andto provide the Reserve Policy for the Series A Bonds and the Series B Bonds in an amount equal to 50%of the applicable Reserve Requirement applicable to the 2015 Series A Bonds and the 2015 Series BBonds, respectively, and (iii) to pay certain costs of issuing the Bonds, including the premiums for thePolicy and the Reserve Policy. See “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Sources of Payment for the Bonds

The Bonds are secured by and payable from a first pledge of “Net Taxes,” which is definedwithin the Fiscal Agent Agreement as Gross Taxes less Administrative Expenses up to the AdministrativeExpense Requirement of $80,000 in Fiscal Year 2015-16, escalating at 2.00% each Fiscal Year thereafter.“Gross Taxes” are defined in the Fiscal Agent Agreement as the amount of all Special Taxes collectedwithin the Community Facilities District as set out in the Rate and Method and proceeds from the sale ofproperty collected pursuant to the foreclosure provisions of the Fiscal Agent Agreement for thedelinquency of such Special Taxes.”

“Administrative Expenses” are defined as administrative costs with respect to the calculation andcollection of the Special Taxes and any other costs related to the Bonds and the Fiscal Agent Agreement,including the fees and expenses of the Fiscal Agent and any persons, parties, consultants or attorneysemployed pursuant to the Fiscal Agent Agreement, costs and legal expenses of foreclosure actionsundertaken pursuant to the terms of the Fiscal Agent Agreement to the extent not recovered pursuant tostatutory authorization, costs otherwise incurred by the Community Facilities District in order to carry outthe authorized purposes of the Bonds, including statutory disclosure, for the Community Facilities DistrictContinuing Disclosure obligations and reporting requirements and rebate compliance and foradministrative and legal costs as set out in the Special Tax Formula.

Pursuant to the Act, the Special Tax Formula, the Resolution of Formation (as defined below),Resolution and Ordinance No. 05-31-97, adopted by the Legislative Body of the Community FacilitiesDistrict on May 27, 1997, providing for the levy of the Special Taxes and the voter approvals obtained atthe April 25, 1997, special election held within the Community Facilities District and the Fiscal AgentAgreement, and proceedings in 1998 relating to the annexation of territory to the Community FacilitiesDistrict, so long as the Bonds are outstanding, the Community Facilities District will, subject to themaximum annual Special Tax provided for in the Special Tax Formula, annually fix and levy the amountof Special Taxes within the Community Facilities District required for the payment of principal of and

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interest on outstanding Bonds becoming due and payable during the ensuing year, including anynecessary replenishment or expenditure of the Reserve Fund for the Bonds, an amount equal to theAdministrative Expense Requirement and any additional amounts necessary for expenses incurred inconnection with administration or enforcement of delinquent Special Taxes. See “SECURITY FOR THEBONDS – Special Taxes” herein.

Pursuant to the Act, all lands owned by a public entity within the Community Facilities Districtare exempt from the levy of the Special Tax, unless the public entity acquires the property after therecordation of the Notice of Special Tax Lien, in which case the public entity will be obligated to pay theSpecial Tax, subject to certain limitations. The Special Tax Formula provides that the Special Tax shallnot be levied on parks, public properties classified as Undeveloped Property, utility properties belongingto public or private utilities, and properties exempt from general ad valorem property taxes. See“SECURITY FOR THE BONDS – Rate and Method” and “BONDOWNERS’ RISKS – ExemptProperties.”

Each Series of the Bonds are further secured by a first pledge of all moneys deposited incorresponding Reserve Account in the Reserve Fund and by the Reserve Policy. See “SECURITY FORTHE BONDS.” A Reserve Account in the Reserve Fund will be established out of the proceeds of thesale of the Bonds in an amount equal to 50% of the Reserve Requirement applicable to the 2015 Series ABonds and the 2015 Series B Bonds, respectively, and the Community Facilities District has acquired theReserve Policy in an amount equal to 50% of the Reserve Requirement applicable to the 2015 Series ABonds and the 2015 Series B Bonds, respectively, such that there is an aggregate amount available equalto the 2015 Series A Bonds Reserve Requirement and the 2015 Series B Bonds Reserve Requirement.The Fiscal Agent Agreement defines the Reserve Requirement, with respect to each Series of Bonds as anamount, as of any date of calculation, equal to the least of (i) 10% of the original principal amount of thecorresponding Series of Bonds, less original issue discount, if any, plus original issue premium, if any, (ii)Maximum Annual Debt Service (as defined in the Fiscal Agent Agreement) on the applicable Series ofBonds, or (iii) 125% of the average annual debt service on the corresponding Series of Bonds.

The ability of the Board, in its capacity as Legislative Body of the Community Facilities District,to increase the Annual Special Taxes levied to replenish the Reserve Fund is subject to the maximumannual amount of Annual Special Taxes authorized by the qualified voters of the Community FacilitiesDistrict. The Community Facilities District is also subject to Section 53321 of the Act which imposes alimitation on the increase in the amount of the Special Tax levied against any parcel used for privateresidential purposes as a consequence of delinquency or default by the owner of any other parcel orparcels with the Community Facilities District. The moneys in each Reserve Account of the ReserveFund will only be used for payment of principal of, interest and any redemption premium on thecorresponding Series of Bonds and, at the direction of the Community Facilities District, for payment ofrebate obligations related to the Bonds. See “SECURITY FOR THE BONDS – Reserve Fund.”

The Community Facilities District has also covenanted in the Fiscal Agent Agreement to causeforeclosure proceedings to be commenced and prosecuted against certain parcels with delinquentinstallments of the Special Taxes. For a more detailed description of the foreclosure covenant, see“SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales.”

THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THEREDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOLDISTRICT, THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICALSUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIESDISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE STATE NORANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE BONDS. NEITHER THEFAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THECOMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBEDHEREIN) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO

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THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OFTHE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THECOMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXESLEVIED IN THE COMMUNITY FACILITIES DISTRICT, AS MORE FULLY DESCRIBEDHEREIN.

Tax Exemption

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel(“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 certainrepresentations and compliance with certain covenants, interest on the 2015 Series A Bonds is excludedfrom gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of1986, as amended (the “Code”). In the further opinion of Bond Counsel, interest on the 2015 Series ABonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed onindividuals and corporations, although Bond Counsel observes that such interest is included as anadjustment in the calculation of federal corporate alternative minimum taxable liabilities.

In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of Californiapersonal income taxes. Bond Counsel expresses no other opinion regarding or concerning any other taxconsequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.See “LEGAL MATTERS – Tax Exemption” herein.

Risk Factors Associated with Purchasing the Bonds

Investment in the Bonds involves risks that may not be appropriate for some investors. See thesection of this Official Statement entitled “BONDOWNERS’ RISKS” for a discussion of certain riskfactors which should be considered, in addition to the other matters set forth herein, in considering theinvestment quality of the Bonds.

Forward Looking Statements

Certain statements included or incorporated by reference in this Official Statement constitute“forward-looking statements” within the meaning of the United States Private Securities LitigationReform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, andSection 27A of the United States Securities Act of 1933, as amended. Such statements are generallyidentifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or similarwords. Such forward-looking statements include, but are not limited to certain statements contained inthe information under the caption “COMMUNITY FACILITIES DISTRICT NO. 97-1” herein.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINEDIN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROMANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BYSUCH FORWARD-LOOKING STATEMENTS. THE COMMUNITY FACILITIES DISTRICT DOESNOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKINGSTATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

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Professionals Involved in the Offering

U.S. Bank National Association, Los Angeles, California, will serve as the fiscal agent, escrowagent, registrar, authentication and transfer agent for the Bonds and will perform the functions required ofit under the Fiscal Agent Agreement for the payment of the principal of and interest and any premium onthe Bonds and all activities related to the redemption of the Bonds. Bowie, Arneson, Wiles & Giannone,Newport Beach, California, is serving as Bond Counsel to the Community Facilities District and asgeneral counsel to the School District. McFarlin & Anderson LLP, Laguna Hills, California, is acting asDisclosure Counsel (“Disclosure Counsel”). From time to time, Disclosure Counsel represents theUnderwriter on matters unrelated to the Bonds. RBC Capital Markets, LLC, Los Angeles, California, isacting as Financial Advisor. Piper Jaffray & Co., Laguna Beach, California, is acting as Underwriter inconnection with the issuance and delivery of the Bonds. Nossaman LLP, Irvine, California, is acting asUnderwriter’s Counsel. Special District Financing & Administration, LLC, Escondido, California, isacting as special tax consultant, CFD administrator and dissemination agent to the Community FacilitiesDistrict. Grant Thornton LLP, Minneapolis, Minnesota, is acting as Verification Agent.

Payment of the fees and expenses of Bond Counsel, District Counsel, Disclosure Counsel, theFinancial Advisor, the Underwriter, Underwriter’s Counsel, the Fiscal Agent and the Escrow Agent iscontingent upon the sale and delivery of the Bonds.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subjectto change. Brief descriptions of the Bonds, certain sections of the Fiscal Agent Agreement, security forthe Bonds, special risk factors, the Community Facilities District, the School District, various propertyowners and other information are included in this Official Statement. Such descriptions and informationdo not purport to be comprehensive or definitive. The descriptions herein of the Bonds, the Fiscal AgentAgreement, and other resolutions and documents are qualified in their entirety by reference to the formsthereof and the information with respect thereto included in the Bonds, the Fiscal Agent Agreement, suchresolutions and other documents. All such descriptions are further qualified in their entirety by referenceto laws and to principles of equity relating to or affecting generally the enforcement of creditors’ rights.Copies of such documents may be obtained from the Office of the Clerk of the Board of Education of theTustin Unified School District, 300 South C Street, Tustin, California 92780.

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CONTINUING DISCLOSURE

The Community Facilities District. The Community Facilities District has covenanted in theCommunity Facilities District Continuing Disclosure Agreement, the form of which is set forth inAPPENDIX D – “FORM OF COMMUNITY FACILITIES DISTRICT CONTINUING DISCLOSUREAGREEMENT” (the “Community Facilities District Continuing Disclosure Agreement”), for the benefitof owners and beneficial owners of the Bonds, to provide certain financial information and operating datarelating to the Community Facilities District and the Bonds by not later than March 1 in each year,commencing on March 1, 2016 (the “Community Facilities District Annual Report”), and to providenotices upon the occurrence of certain listed events.

The Annual Report will be filed by the Community Facilities District with the MunicipalSecurities Rulemaking Board (“MSRB”) through the Electronic Municipal Market Access System(“EMMA”) in an electronic format and accompanied by identifying information as prescribed by theMSRB. Any notice of a significant event will be filed by the Community Facilities District with theMSRB through the EMMA System. The specific nature of the information to be made available and to becontained in the notices of significant events is set forth in the Continuing Disclosure Agreement. SeeAPPENDIX D – “FORM OF COMMUNITY FACILITIES DISTRICT CONTINUING DISCLOSUREAGREEMENT.” These covenants have been made in order to assist the Underwriter in complying withS.E.C. Rule 15c2-12(b)(5) (the “Rule”).

Prior Disclosure Compliance by the Community Facilities District. The Community FacilitiesDistrict is the obligated person under the Community Facilities District Continuing DisclosureAgreement. Since May 1, 2010, the Community Facilities District has been, and currently is, in materialcompliance with the annual report and material event notices required in its continuing disclosureundertakings provided in connection with the Prior Bonds.

Prior Disclosure Compliance by the School District and Other Community Facilities Districtsformed by the School District. A review of compliance with disclosure undertakings for filings requiredsince May 1, 2010, indicates that the School District or community facilities districts formed by theSchool District, other than the Community Facilities District, may not have fully complied with their priorcontinuing disclosure undertakings under the Rule. Identification of the below described events does notconstitute a representation by the School District or any community facilities district formed by theSchool District that any such late filings were material or that the School District or that communityfacilities districts formed by the School District, other than the Community Facilities District, is anobligated person under the Rule with respect to the Bonds. For example, a notice of a rating change in2013 with respect to School Facilities Improvement District No. 2002-1 of the Tustin Unified SchoolDistrict General Obligation Bonds Series B, Series 2006 Refunding, Series C and Series D, and SchoolFacilities Improvement District No. 2008-1 of the Tustin Unified School District, Series A occurredapproximately 73 days after the rating changes and notice of rating changes with the respect toCommunity Facilities District No. 07-1 of the Tustin Unified School District, Series 2010 Special TaxBonds (Adjustable Rate Bonds) occurred approximately six months after such rating change occurred.

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THE FINANCING PLAN

The Bonds are being issued for the primary purpose of providing funds to the CommunityFacilities District to defease and refund (i) on a current basis (a) the portion of the 2002 Series A Bondsissued as current interest bonds (currently outstanding in the aggregate principal amount of $76,530,000),(b) the September 1, 2015, 2002 Series A Bonds capital appreciation bond in the maturity amount of$1,315,000 and (c) all of the 2002 Series B Bonds (currently outstanding in the aggregate principalamount of $12,760,000)(the 2002 Series A Bonds and the 2002 Series B Bonds referred to in clauses(i)(a), (b) and (c), are referred to as the “Currently Refunded Prior Bonds”) and (ii) on an advance basisthe remaining outstanding 2002 Series A Bonds capital appreciation bonds which will be paid on theirscheduled maturities on September 1, 2016, through September 1, 2021, inclusive (with an aggregate finalmaturity value of $10,130,000 with respect to the portion of the 2002 Series A Bonds which are capitalappreciation bonds, such bonds referred to in clause (ii) being referred to as the “Advance RefundedBonds”).

Refunding Plan. The net proceeds of the Bonds will be transferred to U.S. Bank NationalAssociation (the “Escrow Agent”) for deposit in an escrow fund to be established under an EscrowAgreement, dated as of the Closing Date (the “Escrow Agreement”), by and between the School Districtand the Escrow Agent, with separate accounts with respect to the Currently Refunded Prior Bonds beingredeemed on September 1, 2015, and the Advance Refunded Prior Bonds being paid on their scheduledmaturities on September 1, 2016, and later.

The Escrow Agent will invest the net proceeds of the Bonds in the “Escrow Investments”specified under the Escrow Agreement that mature no later than September 1, 2021. The Escrow Agentwill invest the net proceeds of the Bonds in certain federal securities as specified in the EscrowAgreement. These funds will be sufficient to pay (i) the principal of and interest on the Refunded Bondsbeing paid on September 1, 2015, (ii) the maturity value of the 2002 Series A Bonds which are capitalappreciation bonds maturing on September 1, 2015, (iii) the redemption price of the Prior Bonds beingredeemed on September 1, 2015, together with interest due thereon and (iv) the maturity value of the2002 Series A Bonds which are capital appreciation bonds and which are paid at maturity fromSeptember 1, 2016, through September 1, 2021, inclusive.

Sufficiency of the deposits in the Escrow Fund for those purposes will be verified by GrantThornton LLP, Minneapolis, Minnesota. Assuming the accuracy of the Verification Agent’scomputations, as a result of the deposit and application of funds as provided in the Escrow Agreement,the Prior Bonds will be defeased under the provisions of the fiscal agent agreement under which theywere issued, as of the date of issuance of the Bonds.

Other Uses of Bonds Proceeds. The remaining proceeds of the Bonds will be used to fund aReserve Fund (to the extent applicable Reserve Requirement is not satisfied with a Reserve Policy) andpay certain costs of issuance of the Bonds, including, but not limited to, the fees and expenses of BondCounsel, District Counsel, Disclosure Counsel, rating fees, Policy premium and Reserve Policy premium,the cost of printing the preliminary and final Official Statements, fees and expenses of the Fiscal Agent,the fees of the Special Tax Consultant and Financial Advisor, the Verification Agent and other relatedcosts of issuance.

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ESTIMATED SOURCES AND USES OF FUNDS

The proceeds from the sale of the Bonds and funds relating to the Prior Bonds will be depositedinto the following respective accounts and funds established by the Community Facilities District underthe Fiscal Agent Agreement and the Escrow Agreement, as follows:

Sources: 2015 Series A Bonds 2015 Series B Bonds Total

Principal Amount of Bonds $82,820,000.00 $9,635,000.00 $92,455,000.00Plus: Net Original Issue Premium 8,519,294.35 230,330.35 8,749,624.70Less: Underwriter’s Discount 414,100.00 48,175.00 462,275.00Funds relating to Prior Bonds 6,357,556.61 271,449.06 6,629,005.67

Total Sources $97,282,750.96 $10,088,604.41 $107,371,355.37

Uses:Deposit into Accounts in the Escrow Fund $92,870,535.00 $9,566,107.71 $102,436,642.71Deposit into the Reserve Fund(1) 3,518,696.68 409,353.32 3,928,050.00Deposit into the Costs of Issuance Fund(2) 893,519.28 113,143.38 1,006,662.66

Total Uses $97,282,750.96 $10,088,604.41 $107,371,355.37(1) Equal to 50% of the Reserve Requirement with respect to each Series of Bonds as of the date of delivery of the Bonds. 50% of the Reserve

Requirement with respect to each Series of Bonds being satisfied through the acquisition of the Reserve Policy.(2) Includes, among other things, the fees and expenses of Bond Counsel, District Counsel, Disclosure Counsel, rating fees, Policy premium and

Reserve Policy premium, the cost of printing the preliminary and final Official Statements, fees and expenses of the Fiscal Agent, the fees ofthe Special Tax Consultant and Financial Advisor, the Verification Agent and other related costs of issuance.

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THE BONDS

Authority for Issuance

The Bonds are authorized to be issued in accordance with the Act and the Fiscal AgentAgreement.

General Provisions

The Bonds will be dated their date of delivery and will bear interest at the rates per annum setforth on the inside cover page hereof, payable semi-annually on each March 1 and September 1,commencing on September 1, 2015 (each, an “Interest Payment Date”), and will mature in the amountsand on the dates set forth on the inside cover page hereof. The Bonds will be issued in fully registeredform in denominations of $5,000 each or any integral multiple thereof. When issued, the Bonds will beregistered in the name of Cede & Co., as nominee of DTC. See APPENDIX F – “BOOK-ENTRYSYSTEM.” So long as the Bonds are in book-entry only form, “Bond Owners” or “Owners” means DTCand not the Beneficial Owners of the Bonds.

The Bonds will bear interest at the rates set forth on the inside cover hereof payable on theInterest Payment Dates in each year. Interest will be computed on the basis of a 360-day year comprisedof twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding thedate of authentication unless (i) such date of authentication is an Interest Payment Date, in which eventinterest shall be payable from such date of authentication, (ii) the date of authentication is after a RecordDate (as defined below) but prior to the immediately succeeding Interest Payment Date, in which eventinterest will be payable from such Interest Payment Date, or (iii) the date of authentication is prior to theclose of business on the first Record Date, in which event interest will be payable from the dated date ofsuch Bond; 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 madeavailable for payment, or if no interest has been paid or made available for payment, interest shall bepayable from the dated date of such Bond. “Record Date” means the 15th day of the calendar monthpreceding an Interest Payment Date whether or not such day is a business day.

Interest on the Bonds shall be paid by check of the Fiscal Agent mailed to the registered ownersof the Bonds (the “Bondowners” or “Owners”), by first-class mail at his or her address as it appears onthe Bond Register as of the Record Date; provided that, in the case of an Owner of $1,000,000 or more inaggregate principal amount of the Bonds, upon the Fiscal Agent’s receipt of written request of suchOwner prior to the Record Date accompanied by wire transfer instructions, such interest shall be paid onthe Interest Payment Date in immediately available funds by wire transfer to an account in the UnitedStates of America. The principal of the Bonds and any premium due upon redemption of the Bonds arepayable by check in lawful money of the United States of America upon presentation of the Bonds at theprincipal corporate trust office of the Fiscal Agent (currently in Los Angeles, California).

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Debt Service Schedule

The following table presents the annual debt service on the each Series of Bonds, assuming thatthere are no optional redemptions.

BONDS

2015 Series A Bonds 2015 Series B Bonds

Year EndingSeptember 1 Principal Interest

Total 2015Series ABonds

Debt Service Principal Interest

Total 2015Series B BondsDebt Service

AggregateBonds Debt

Service

2015 $2,820,000 $963,600 $3,783,600 – $74,931.39 $74,931.39 $3,858,531.392016 – 3,885,600 3,885,600 $1,255,000 306,537.50 1,561,537.50 5,447,137.502017 – 3,885,600 3,885,600 1,365,000 281,437.50 1,646,437.50 5,532,037.502018 – 3,885,600 3,885,600 1,515,000 247,312.50 1,762,312.50 5,647,912.502019 – 3,885,600 3,885,600 1,690,000 209,437.50 1,899,437.50 5,785,037.502020 – 3,885,600 3,885,600 1,885,000 158,737.50 2,043,737.50 5,929,337.502021 200,000 3,885,600 4,085,600 1,925,000 64,487.50 1,989,487.50 6,075,087.502022 2,390,000 3,879,600 6,269,600 – – – 6,269,600.002023 2,710,000 3,760,100 6,470,100 – – – 6,470,100.002024 3,010,000 3,624,600 6,634,600 – – – 6,634,600.002025 3,270,000 3,474,100 6,744,100 – – – 6,744,100.002026 3,585,000 3,310,600 6,895,600 – – – 6,895,600.002027 3,915,000 3,131,350 7,046,350 – – – 7,046,350.002028 4,265,000 2,935,600 7,200,600 – – – 7,200,600.002029 4,640,000 2,722,350 7,362,350 – – – 7,362,350.002030 5,035,000 2,490,350 7,525,350 – – – 7,525,350.002031 5,450,000 2,238,600 7,688,600 – – – 7,688,600.002032 5,890,000 1,966,100 7,856,100 – – – 7,856,100.002033 4,945,000 1,671,600 6,616,600 – – – 6,616,600.002034 5,340,000 1,424,350 6,764,350 – – – 6,764,350.002035 5,700,000 1,210,750 6,910,750 – – – 6,910,750.002036 6,085,000 982,750 7,067,750 – – – 7,067,750.002037 6,540,000 678,500 7,218,500 – – – 7,218,500.002038 7,030,000 351,500 7,381,500 – – – 7,381,500.00Total $82,820,000 $64,130,000 $146,950,000 $9,635,000 $1,342,881.39 $10,977,881.39 $157,927,881.39

Redemption

Optional Redemption of 2015 Series A Bonds. The 2015 Series A Bonds maturing on or afterSeptember 1, 2026, may be redeemed prior to maturity at the option of the Community Facilities Districton any date from any source of available funds, on any date on or after September 1, 2025, in whole, or inpart in the order of maturity as selected by the Community Facilities District and by lot within a maturity,at a redemption price equal to the principal amount thereof, without premium, together with accruedinterest to the date set for redemption.

The 2015 Series B Bonds are not subject to optional redemption prior to maturity.

Mandatory Redemption from Special Tax Prepayments. The 2015 Series A Bonds are subject tomandatory redemption, in whole, or in part, in the order of maturity selected by the Community FacilitiesDistrict and by lot within a maturity, on any Interest Payment Date from and to the extent of anyprepayment of special taxes at the following redemption prices (expressed as percentages of principalamount of the 2015 Series A Bonds to be redeemed), together with accrued interest to the date ofredemption:

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Redemption Dates Redemption Prices

Any Interest Payment Date through September 1, 2022 103%March 1, 2023 and September 1, 2023 102March 1, 2024 and September 1, 2024 101March 1, 2025 and any Interest Payment Date thereafter 100

The 2015 Series B Bonds are not subject to mandatory redemption from Special Taxprepayments.

Mandatory Sinking Fund Redemption. The Outstanding Series A Term Bonds maturing onSeptember 1, 2038, are subject to mandatory redemption before maturity on September 1, 2036, and oneach September 1 thereafter to and including September 1, 2038. Such Series A Term Bonds shall beredeemed from Mandatory Sinking Payments that have been deposited on each September 1,commencing September 1, 2036, into the Series A Sinking Fund Redemption Account of the RedemptionFund pursuant to the Fiscal Agent Agreement, plus accrued interest to the redemption date, withoutpremium, as follows:

BONDS MATURING SEPTEMBER 1, 2038

Sinking Fund Redemption Date(September 1) Sinking Fund Payments

2036 $6,085,0002037 6,540,0002038 (maturity) 7,030,000

Purchase In Lieu of Redemption. In lieu of, or partially in lieu of, any optional redemption ormandatory sinking fund redemption, moneys deposited in an account of the Redemption Fund (as definedin the Fiscal Agent Agreement) may be used to purchase the Outstanding Bonds that were to be redeemedwith such funds. Purchases of Outstanding Bonds may be made by the Community Facilities Districtprior to the selection of Bonds for redemption by the Fiscal Agent, at public or private sale as and whenand at such prices as the Community Facilities 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 fundsin the Optional Redemption Account, the applicable premium, if any, to be paid in connection with theproposed redemption.

Notice of Redemption. The Fiscal Agent shall give notice of any redemption by first-class mail,postage prepaid, at least 30 days but no more than 90 days prior to the redemption date, to the respectiveregistered Owners of any Bonds designated for redemption, at their addresses appearing on the Bondregistration books of the Fiscal Agent. The actual receipt by the owner of any Bond of notice of suchredemption shall not be a condition precedent to such redemption, and neither failure to receive any suchnotice 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.

Such notice shall (i) specify the CUSIP® numbers and serial numbers of the Bonds selected forredemption, except that where all the Bonds or all Bonds of a single maturity are subject to redemption,the serial numbers thereof need not be specified; (ii) state the original issue date, the interest rate and thematurity date of the Bond selected for redemption; (iii) state the date fixed for redemption; (iv) state theredemption price; (v) state the place or places where the Bonds are to be redeemed; and (vi) in the case ofBonds to be redeemed only in part, state the portion of such Bond which is to be redeemed.

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Partial Redemption. If less than all of the outstanding Bonds are to be redeemed, the CommunityFacilities District shall direct the Fiscal Agent as to which maturities of Bonds shall be redeemed and ifnot so directed, the Fiscal Agent shall select the Bonds to be redeemed pro rata among maturities and bylot within a single maturity, and in the case of mandatory redemption from sinking fund payments, by lotwithin the maturity being called for redemption.

Contingent Redemption; Rescission of Redemption. Any optional redemption notice may specifythat redemption of the Bonds designated for redemption on the specified date will be subject to the receiptby the Community Facilities District and/or the Fiscal Agent, as applicable, of moneys sufficient to causesuch redemption (and will specify the proposed source of such moneys), and neither the CommunityFacilities District nor the Fiscal Agent will have any liability to the Owners of any Bonds, or any otherparty, as a result of the Community Facilities District’s failure to redeem the Bonds designated forredemption as a result of insufficient moneys therefor.

Additionally, the Community Facilities District may rescind any optional redemption of theBonds, and notice thereof, for any reason on any date prior to the date fixed for such redemption bycausing 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 wasoriginally given. The actual receipt by the Owner of any Bond of notice of such rescission shall not be acondition precedent to rescission, and failure to receive such notice or any defect in such notice shall notaffect the validity of the rescission. Neither the Community Facilities District nor the Fiscal Agent willhave any liability to the Owners of any Bonds, or any other party, as a result of the Community FacilitiesDistrict’s decision to rescind a redemption of any Bonds pursuant to the provisions of the Fiscal AgentAgreement.

Effect of Redemption. From and after the date fixed for redemption, if the amount necessary forthe redemption has been made available for that purpose, the Bonds or portions thereof designated forredemption shall be deemed to be no longer Outstanding and such Bonds or portions thereof shall cease tobear further interest. No Owner of any of the Bonds or portions thereof so designated for redemptionshall be entitled to any of the benefits of the Fiscal Agent Agreement, or to any other rights, except withrespect to payment of the redemption price and interest accrued to the redemption date from the amountsso made available.

Registration, Transfer and Exchange

Registration. Subject to the provisions relating to book-entry bonds, the Fiscal Agent will keepor cause to be kept, at its principal corporate trust office, sufficient records for the registration and transferof ownership of the Bonds, which shall be open to inspection during regular business hours and uponreasonable notice by the Community Facilities District; and, upon presentation for such purpose, theFiscal Agent shall, under reasonable regulations as it may prescribe, register or transfer or cause to beregistered or transferred, on such records, the ownership of the Bonds. The Community Facilities Districtand the Fiscal Agent may treat and consider the person in whose name each Bond is registered in theBond Register as the holder and absolute Owner of such Bond for the purpose of payment of principaland interest with respect to such Bond, for the purpose of giving notices of redemption, if applicable, andother matters with respect to such Bond, for the purpose of registering transfers with respect to suchBond, and for all other purposes whatsoever.

Registration of Exchange or Transfer. Subject to the provisions relating to book-entry bonds, theregistration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by theperson in whose name it is registered, in person or by his duly authorized attorney, upon surrender of suchBond for cancellation at the principal corporate trust office of the Fiscal Agent, accompanied by deliveryof a written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the

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Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the principal corporatetrust office of the Fiscal Agent for a like aggregate principal amount and maturity of the correspondingSeries of Bonds of other authorized denominations. The Fiscal Agent may charge the Bondowner any taxor other governmental charge required with respect to such transfer or exchange and may charge areasonable fee for the costs of any such transfer or exchange. Whenever any Bonds shall be surrenderedfor registration of transfer or exchange, the Community Facilities District shall execute, and the FiscalAgent shall authenticate and deliver, a new Bond, for like aggregate principal amount and maturity;provided, that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bondsfor a period of 15 days next preceding the date established by the Fiscal Agent for selection of the Bondsto be redeemed or (ii) any Bonds chosen for redemption. Notwithstanding any provision herein, the2015 Series A Bonds may only be exchanged for new 2015 Series A Bonds, and the 2015 Series BBonds may only be exchanged for new 2015 Series B Bonds.

Book-Entry and DTC

The Depository Trust Company (“DTC”) will act as securities depository for the Bonds. TheBonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’spartnership nominee) or such other name as may be requested by an authorized representative of DTC.One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregateprincipal amount of such maturity, and will be deposited with DTC. See APPENDIX F – “BOOK-ENTRY SYSTEM.”

SECURITY FOR THE BONDS

General

The Bonds are secured by a first pledge of all of the Net Taxes collected within the CommunityFacilities District and all moneys deposited in the accounts in the Special Tax Fund, the Bond Fund, theRedemption Fund and the Reserve Accounts of the Reserve Fund (as such terms are defined in the FiscalAgent Agreement) until disbursed as provided in the Fiscal Agent Agreement. Pursuant to the Act andthe Fiscal Agent Agreement, the Community Facilities District will annually levy the Special Taxes ontaxable property within the Community Facilities District in an amount required for the payment ofprincipal of and interest on any outstanding Bonds becoming due and payable during the ensuing year,including any necessary replenishment or expenditure of the Reserve Accounts of the Reserve Fund forthe Bonds and an amount estimated to be sufficient to pay corresponding Administrative Expenses duringsuch year. The Net Taxes and all moneys deposited into the applicable accounts in said funds (untildisbursed as provided in the Fiscal Agent Agreement) are pledged to the payment of the principal of, andinterest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act untilall of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the FiscalAgent Agreement) have been set aside irrevocably for that purpose. Moneys deposited in the ResidualFund (as defined in the Fiscal Agent Agreement) and used in accordance with the Fiscal AgentAgreement shall be free and clear of any lien thereon or pledge under the Fiscal Agent Agreement.

The Rate and Method provides that the Board shall levy the Special Tax Proportionately on eachAssessor's Parcel of Residential Developed Property, in an amount not in excess of the applicableMaximum Special Tax for that Fiscal Year, such that the aggregate amount so levied equals, but does notexceed, the then applicable Debt Service Requirement. “Debt Service Requirement” means for eachFiscal Year the sum of (a) one hundred percent (100%) of the principal of and interest on the bonds ofCommunity Facilities District coming due in the bond year which ends in the next subsequent FiscalYear, except to the extent such principal or interest is expected to be paid from proceeds from the sale ofbonds or other amounts then available in the applicable debt service fund for such purpose, (b) the

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product of the amount described in clause (a) times the larger of (i) the rate of delinquency in the paymentof the special tax during the Fiscal Year immediately preceding the Fiscal Year for which the DebtService Requirement is being determined or (ii) ten percent (10%), (c) the sum of all deposits thenrequired to be made into any reserve fund established with respect to any bonds of the CommunityFacilities District, and (d) the reasonably estimated administrative expenses for the bond year referred toin clause (a). See “ – Special Taxes” and “ – Rate and Method” below.

Notwithstanding any provision contained in the Fiscal Agent Agreement to the contrary, NetTaxes deposited in the Administrative Expense Fund, the Residual Fund and the Rebate Fund shall nolonger be considered to be pledged to the Bonds and the Residual Fund, the Administrative Expense Fundand the Rebate Fund shall not be construed as trust funds held for the benefit of the Bondowners.

Special Taxes

The Community Facilities District has covenanted in the Fiscal Agent Agreement to comply withall requirements of the Act so as to assure the timely collection of Special Taxes, including, withoutlimitation, the enforcement of delinquent Special Taxes. The Fiscal Agent Agreement provides that theSpecial Taxes are payable and will be collected in the same manner and at the same time and in the sameinstallment as the general taxes on real property, and will have the same priority, become delinquent atthe same times and in the same proportionate amounts and bear the same proportionate penalties andinterest after delinquency as do the general taxes on real property; provided the Community FacilitiesDistrict may provide for direct collection of the Special Taxes in certain circumstances.

The Special Tax levy is limited to the Special Tax rates determined as set forth in the Rateand Method and by the Resolution of Intention (as defined below). See “SECURITY FOR THEBONDS – Rate and Method” and Table 3 in COMMUNITY FACILITIES DISTRICT NO. 97-1 –Special Tax Levy in Relation to Scheduled Debt Service.” No assurance can be given that, in theevent of Special Tax delinquencies in the Community Facilities District, the receipt of Special Taxeswill, in fact, be collected in sufficient amounts in any given year to pay debt service on the Bonds.

Although the Special Taxes, when levied, will constitute a lien on parcels subject to taxationwithin the Community Facilities District, it does not constitute a personal indebtedness of the owners ofproperty within the Community Facilities District. There is no assurance that the owners of real propertyin the Community Facilities District will be financially able to pay the annual Special Tax or that theywill pay such tax even if financially able to do so. See “BONDOWNERS’ RISKS” herein.

THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THEREDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOLDISTRICT, THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICALSUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIESDISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THE STATE NORANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE BONDS. NEITHER THEFAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THECOMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBEDHEREIN) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TOTHE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OFTHE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THECOMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXESLEVIED IN THE COMMUNITY FACILITIES DISTRICT, AS MORE FULLY DESCRIBEDHEREIN.

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Rate and Method

General. On April 14, 1997, pursuant to a resolution and the provisions of the Act, the SchoolDistrict established the Community Facilities District. The qualified electors of the Community FacilitiesDistrict approved the issuance of special tax bonds and the Rate and Method to be levied within theCommunity Facilities District on April 25, 1997. In 1998, proceedings were conducted to annexadditional territory into the Community Facilities District. Capitalized terms used in the followingparagraphs, but not defined herein, have the meaning(s) given to them in the Rate and Method.

The Community Facilities District was authorized to issue up to $110,000,000 aggregate principalamount of bonded indebtedness and to levy Special Taxes within the Community Facilities District to paydebt service on the bonds issued by the Community Facilities District and to fund school facilities.Pursuant to such proceedings, the Special Tax may be levied and collected against all Taxable Property(as defined below) within the Community Facilities District for school facilities costs according to the“Special Tax Formula Rate and Method of Apportionment of Special Tax for Community FacilitiesDistrict No. 97-1 of Tustin Unified School District” (defined above as the “Special Tax Formula” or“Rate and Method”), a copy of which is set forth in APPENDIX B – “SPECIAL TAX FORMULA.”

The Special Tax Formula provides that the Board shall levy the Special Tax Proportionately oneach Assessor's Parcel of Residential Developed Property, in an amount not in excess of the applicableMaximum Special Tax for that Fiscal Year, such that the aggregate amount so levied equals, but does notexceed, the then applicable Debt Service Requirement. “Debt Service Requirement” means for eachFiscal Year the sum of (a) one hundred percent (100%) of the principal of and interest on the bonds ofCommunity Facilities District coming due in the bond year which ends in the next subsequent FiscalYear, except to the extent such principal or interest is expected to be paid from proceeds from the sale ofbonds or other amounts then available in the applicable debt service fund for such purpose, (b) theproduct of the amount described in clause (a) times the larger of (i) the rate of delinquency in the paymentof the special tax during the Fiscal Year immediately preceding the Fiscal Year for which the DebtService Requirement is being determined or (ii) ten percent (10%), (c) the sum of all deposits thenrequired to be made into any reserve fund established with respect to any bonds of the CommunityFacilities District, and (d) the reasonably estimated administrative expenses for the bond year referred toin clause (a).

Pursuant to the Special Tax Formula, the Special Tax shall not be imposed on parks, publicproperties classified as Undeveloped Property, utility properties belonging to public or private utilities,Seniors Housing Developed Property (defined as Assessor’s Parcels of Developed Property for which abuilding permit has been issued for purposes of constructing one or more residential dwellings, theoccupancy of which is restrict to seniors as described in Government Code Section 65955.1) andproperties exempt from general ad valorem property taxes. The Special Tax Formula refers to anexemption for Seniors Housing Developed Property, but there are no residential dwellings, the occupancyof which is restricted to seniors as described in Government Code Section 65955.1 currently within theboundaries of the Community Facilities District. See APPENDIX B – “SPECIAL TAX FORMULA” and“BONDOWNERS’ RISKS.”

The Rate and Method provides that the Annual Special Tax shall be levied for a period necessaryto pay debt service on the Bonds. The Bonds mature through September 1, 2038. A copy of the SpecialTax Formula is included in APPENDIX B hereto.

The Community Facilities District is subject to Section 53321 of the Act which at the time offormation of the Community Facilities District limited the levy of Special Taxes against any Assessor’sParcel for which an occupancy permit for private residential use has been issued from being increased bymore than 10% as a consequence of delinquency or default by the owner of any other Assessor’s Parcel.

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The Resolution of Intention provided that the Special Tax shall not be increased by more than 10% as aresult of delinquencies of other property owners.

Prepayment of Annual Special Taxes. Although the Special Tax Formula references a process inwhich a property owner may make a written request to the Board of Education of the School District toprepay and permanently satisfy his obligation to pay the Special Tax, thereby releasing such owner’sproperty from any further obligation to pay the Special Tax in accordance with the Special Tax Formula,to date, no property owners have made such a request and the Board has conducted no proceedingsregarding the conditions to apply to the prepayment of such obligation. The Fiscal Agent Agreementdoes contain provisions for the prepayment of the Bonds from the prepayment of Special Taxes should aproperty owner make a written request to the Board of Education.

Proceeds of Foreclosure Sales

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of theSpecial Tax, the Community Facilities District may order the institution of a superior court action toforeclose the lien therefor within specified time limits. In such an action, the real property subject to theunpaid amount may be sold at judicial foreclosure sale. Under the provisions of the Act, such judicialforeclosure action is not mandatory.

Under the Fiscal Agent Agreement, on or about March 1 and July 1 of each Fiscal Year, theCommunity Facilities District will compare the amount of Special Taxes theretofore levied in theCommunity Facilities District to the amount of Special Taxes theretofore received by the CommunityFacilities District and:

Individual Delinquencies. If the Community Facilities District determines that any singleparcel within the Community Facilities District is delinquent in the payment of five (5) or moreinstallments of the Special Taxes, then the Community Facilities District shall send, or cause tobe sent, a notice of delinquency (and a demand for immediate payment thereof) to the propertyowner within 45 days of such determination, and (if the delinquency remains uncured) theCommunity Facilities District shall take action to authorize the commencement of foreclosureproceedings within 90 days of the July 1 determination, to the extent permissible under applicablelaw and shall thereafter diligently prosecute such proceedings in superior court to the extentpermitted by law.

Aggregate Delinquencies. If the Community Facilities District determines that the totalamount of delinquent Special Taxes for the prior Fiscal Year for the Community FacilitiesDistrict (including the total of delinquencies described above) exceeds 5% of the total SpecialTaxes due and payable for the prior Fiscal Year, the Community Facilities District shall notify, orcause 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(to the extent such delinquencies remain uncured), the Community Facilities District shall takeaction to authorize the commencement of foreclosure proceedings within 90 days of suchdetermination against each parcel of land within the Community Facilities District with a SpecialTax delinquency to the extent permissible under applicable law.

Notwithstanding the foregoing, however, the Community Facilities District shall not be requiredto order, or take action upon, the commencement of foreclosure proceedings under “AggregateDelinquencies” above, if such delinquencies, if not remedied, will not result in a draw on the ReserveFund such that the Reserve Fund will fall below the Reserve Requirement and no draw has been made onthe Reserve Fund, which has not been restored, such that the Reserve Fund shall be funded to at least theReserve Requirement. See “SECURITY FOR THE BONDS – The Teeter Plan.”

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In the Fiscal Agent Agreement, the Community Facilities District reserves the right to elect toaccept payment from a property owner of at least the enrolled amount of the Special Taxes for a parcel(s)but less than the full amount of the penalties, interest, costs and attorneys’ fees related to the Special Taxdelinquency for such parcel(s). The Bondowners are deemed to have consented to the foregoing reservedright of the Community Facilities District, notwithstanding any provision of the Act or other law of theState, or any other term set forth in the Fiscal Agent Agreement to the contrary. The Bondowners, by theiracceptance of the Bonds, consent to such payment for such lesser amounts.

Further, notwithstanding any provision of the Act or other law of the State, or any other term setforth in the Fiscal Agent Agreement to the contrary, in connection with any judicial foreclosureproceeding related to delinquent Special Taxes:

(i) The Community Facilities District is expressly authorized to credit bid at any foreclosuresale, without any requirement that funds be set aside in the amount so credit bid, in theamount specified in Section 53356.5 of the Act, or such lesser amount as determinedunder clause (ii) below or otherwise under Section 53356.6 of the Act.

(ii) The Community Facilities District may permit, in its sole and absolute discretion,property with delinquent Special Tax payments to be sold for less than the amountspecified in Section 53356.5 of the Act, if it determines that such sale is in the interest ofthe Bondowners. The Bondowners, by their acceptance of the Bonds, consent to suchsale for such lesser amounts (as such consent is described in Section 53356.6 of the Act),and release the Community Facilities District and the School District, and their respectiveofficers and agents, from any liability in connection therewith. If such sale for lesseramounts would result in less than full payment of principal of and interest on the Bonds,the Community Facilities District will use its best efforts to seek approval of theBondowners.

It should be noted that any foreclosure proceedings commenced as described above could bestayed by the commencement of bankruptcy proceedings by or against the owner of the delinquentproperty. See “BONDOWNERS’ RISKS – Bankruptcy and Foreclosure Delay.”

No assurances can be given that a judicial foreclosure action, once commenced, will becompleted or that it will be completed in a timely manner. See “BONDOWNERS’ RISKS – PotentialDelay and Limitations in Foreclosure Proceedings.” If a judgment of foreclosure and order of sale isobtained, the judgment creditor (the Community Facilities District) must cause a Notice of Levy to beissued. Under current law, a judgment debtor (property owner) has 120 days (or in some cases a shorterperiod) from the date of service of the Notice of Levy and 20 days from the subsequent notice of sale inwhich 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 ofsale. If, as a result of such action, a foreclosure sale is set aside, the judgment is revived and the judgmentcreditor is entitled to interest on the revived judgment as if the sale had not been made. Theconstitutionality of the aforementioned legislation, which repeals the former one-year redemption period,has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Anyparcel subject to foreclosure sale must be sold at the minimum bid price unless a lesser minimum bidprice is authorized by the Owners of 75% of the principal amount of the Bonds outstanding.

No assurances can be given that the real property subject to sale or foreclosure will be soldor, 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 Community Facilities District to purchase orotherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is

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no other purchaser at such sale. The Act does specify that the Special Tax will have the same lienpriority in the case of delinquency as for ad valorem property taxes.

If the Reserve Fund is depleted and delinquencies in the payment of Special Taxes exist, therecould be a default or delay in payments to the Bondowners pending prosecution of foreclosureproceedings and receipt by the Community Facilities District of foreclosure sale proceeds, if any.However, within the limits of the Rate and Method, the Act and the Resolution of Intention, theCommunity Facilities District may adjust the Special Taxes levied on all property within the CommunityFacilities District in future fiscal years to provide an amount, taking into account such delinquencies,required to pay debt service on the Bonds and to replenish the Reserve Fund. There is, however, noassurance that the Special Tax rates levied pursuant to the Rate and Method, the Act and the Resolution ofIntention will be at all times sufficient to pay the amounts required to be paid on the Bonds by the FiscalAgent Agreement.

Special Tax Fund

(a) The Community Facilities District shall establish and maintain the Special Tax Fund(including the Prepayment Account (which shall be held by the Fiscal Agent).

(b) Moneys in the Special Tax Fund are subject to the pledge for payment of principal andinterest on the Bonds as set forth in the Fiscal Agent Agreement, subject to the terms thereof. Uponreceipt thereof, from the County, the Community Facilities District shall deposit all Gross Taxes into theSpecial Tax Fund. All moneys in the Special Tax Fund, including the accounts thereof (exclusive ofPrepaid Special Taxes), shall be held by the County Treasurer of the County on behalf of the CommunityFacilities District.

(c) Moneys in the Special Tax Fund (exclusive of Prepaid Special Taxes) shall be transferredby the Community Facilities District to the Fiscal Agent to the Administrative Expense Fund (as providedfor in the Fiscal Agent Agreement) in an amount equal to the Administrative Expense Requirement.

(d) Net Taxes in the Special Tax Fund (exclusive of Prepaid Special Taxes) shall be appliedby the Community Facilities District as follows and in the following order of priority:

(i) To the Series A Interest Account and the Series B Interest Account of the BondFund, an amount such that the balance in each Interest Account, as applicable, one business dayprior to each Interest Payment Date, shall be equal to the installment of interest due on thecorresponding Series of Bonds on each Interest Payment Date. Moneys in the Interest Accountshall be used for the payment of interest on the corresponding Series of Bonds as the samebecome due.

(ii) To the Series A Principal Account and Series B Principal Account of the BondFund, an amount up to the amount needed to make the principal payment due on thecorresponding Series of Bond, as applicable, during the current Bond Year.

(iii) To the Sinking Fund Redemption Accounts (or subaccounts) of the RedemptionFund, an amount up to the amount needed to make the Mandatory Sinking Payments due on theBonds (of either Series) during the current Bond Year.

(iv) To the Series A Reserve Account and/or the Series B Reserve Account, theamounts, if any, necessary to replenish each Reserve Fund Account to the applicable ReserveRequirement, including the reimbursement to the Bond Insurer for all amounts due and payable to

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the Bond Insurer in connection with the Reserve Policy and to pay Reserve Policyreimbursements due to the Bond Insurer pursuant to the terms of the Reserve Policy.

(v) To the extent that Administrative Expenses are not fully satisfied in (i) above, tothe Administrative Expense Fund in the amount(s) required to bring the balance therein to theamount identified by the Community Facilities District to the Fiscal Agent to meet suchadditional Administrative Expenses (over and above the Administrative Expense Requirement) inthe coming Fiscal Year or Administrative Expenses from a prior Fiscal Year which remainunpaid.

(vi) To the Redemption Fund, the amount(s), if any, that the Community FacilitiesDistrict directs the Fiscal Agent to transfer pursuant to an optional redemption of Bonds, as setforth in the Fiscal Agent Agreement.

(vii) Any remaining Special Taxes and other amounts constituting Net Taxes shallremain in the Special Tax Fund subject to the provisions of (viii) below.

(viii) Any remaining Special Taxes and other amounts constituting Net Taxes, if any,shall remain in the Special Tax Fund until the end of the Bond Year. At the end of the Bond Yearany remaining funds in the Special Tax Fund, which are not required to cure a delinquency in thepayment of principal and interest on any Series of Bonds (including payment of MandatorySinking Fund Payments due during the current Bond Year), to restore the Reserve Accounts ofthe Reserve Fund as provided for in (e)(iv), above (or provide for required payment to the BondInsurer for draws on the Reserve Policy), or to pay current or pending Administrative Expenses asprovided for in (d) or (e)(v) above, shall, without any further action by any party, be transferredby the Fiscal Agent on September 15 of each year into the Residual Fund and shall thereafter beused for the purposes applicable to the Residual Fund and shall be free and clear of any lienthereon or pledge under the Fiscal Agent Agreement; provided, any funds which are required tocure any such delinquency described above shall be retained in the Special Tax Fund andexpended or transferred, at the earliest possible date, for such purpose.

At the date of the redemption, defeasance or maturity of the last Bond and after all principal andinterest then due on any Bond has been paid or provided for, all other covenants are complied with and allfees and expenses of the Fiscal Agent have been paid, moneys in the Special Tax Fund may be used bythe Community Facilities District for any lawful purpose. Funds in the Special Tax Fund shall beinvested in accordance with the investment provisions of the Fiscal Agent Agreement. Investmentearnings on amounts in the Special Tax Fund, if any, shall be retained therein.

Investment. Moneys in each Account in the Special Tax Fund will be invested and deposited bythe Community Facilities District as described in “Investment of Moneys in Funds” below.

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Bond Fund

(a) One business day prior to each Interest Payment Date, the Fiscal Agent shall withdrawfrom the Special Tax Fund, or the corresponding Reserve Account of the Reserve Fund in the event thatsufficient moneys are unavailable in the Special Tax Fund, and deposit in the Principal Accounts and theInterest Accounts of the Bond Fund established for each Series of Bonds in an amount equal to all of theprincipal and all of the interest due and payable on the corresponding Series of Bonds on the ensuingInterest Payment Date, less amounts on hand in the corresponding Accounts of the Bond Fund availableto pay principal and/or interest on the applicable Series of Bonds. The Fiscal Agent shall apply moneysin the Series A Interest Account and the Series A Principal Account to the payment of interest andprincipal, respectively, on the 2015 Series A Bonds on each Interest Payment Date. The Fiscal Agentshall apply moneys in the Series B Interest Account and the Series B Principal Account to the payment ofinterest and principal, respectively, on the 2015 Series B Bonds on each Interest Payment Date

(b) Moneys in the Bond Fund, and Accounts thereof, shall be invested in accordance with theFiscal Agent Agreement. All investment earnings and profits resulting from such investment shall beretained in the accounts established for the corresponding Series of Bonds in the Bond Fund and used topay principal of and interest on the corresponding Series of Bonds. Upon final maturity of each Series ofBonds and the payment of all principal of and interest on the corresponding Series of Bonds, any moneysthereafter 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, certain proceedsof the Bonds will be deposited into the Series A Reserve Account and the Series B Reserve Account ofthe Reserve Fund in an amount equal to 50% of the Reserve Requirement for the corresponding Series ofBonds, and the Reserve Policy will be acquired for such Series of Bonds, in an amount equal to 50% ofthe Reserve Requirement for the corresponding Series of Bonds (see “ESTIMATED SOURCES ANDUSES OF FUNDS” herein). The Reserve Requirement is defined in the Fiscal Agent Agreement tomean, with respect to each Series of Bonds, an amount, as of any date of calculation, equal to the least of(i) 10% of the original principal amount of the corresponding Series of Bonds, less original issuediscount, if any, plus original issue premium, if any, (ii) Maximum Annual Debt Service on the applicableSeries of Bonds, or (iii) 125% of average annual debt service on the corresponding Series of Bonds.

A draw on the Reserve Accounts of the Reserve Fund could occur as a result of Special Taxdelinquencies. However, the Special Tax levy on Developed Property can be increased in order toreplenish the Reserve Accounts of the Reserve Fund, subject to the limitation of the Special Tax Formulaand the Act. See “SECURITY FOR THE BONDS – Rate and Method.”

2015 Series A Bonds. Moneys in the Series A Reserve Account of the Reserve Fund shall beused solely for the purpose of (i) making transfers to the Series A Interest Account and/or the Series APrincipal Account of Bond Fund or the applicable Account of the Redemption Fund to pay the principalof, and interest and premium, if any, on 2015 Series A Bonds when due to the extent that moneys in theSeries A Interest Account and the Series A Principal Account of the Bond Fund are insufficient therefor(or provide for required payment to the Bond Insurer for draws on the Reserve Policy); (ii) making anyrequired transfer to the Rebate Fund pursuant to the Fiscal Agent Agreement upon written direction fromthe Community Facilities District; (iii) paying the principal and interest due on 2015 Series A Bonds inthe final Bond Year applicable to the 2015 Series A Bonds; and (iv) application to the defeasance of such2015 Series A Bonds in accordance with the Fiscal Agent Agreement.

If the amounts in the Series A Interest Account or the Series A Principal Account of the BondFund and the Sinking Fund Redemption Account of the Redemption Fund are insufficient to pay the

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principal of, including Mandatory Sinking Payments, or interest on the 2015 Series A Bonds when due,the Fiscal Agent shall, one Business Day prior to an Interest Payment Date, withdraw from the Series AReserve Account of the Reserve Fund for deposit in the Series A Interest Account and the Series APrincipal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund,moneys necessary for such purpose. Following any transfer to the Series A Interest Account or the SeriesA Principal Account of the Bond Fund, or the Sinking Fund Payment Account of the Redemption Fund,the Fiscal Agent shall notify the Community Facilities District of the amount needed to replenish theSeries A Account of the Reserve Fund to the Reserve Requirement applicable to the 2015 Series ABonds, and the Community Facilities District shall include such amount, as is required at that time, tocorrect such deficiency to the next Special Tax levy in the extent of the permitted Special Tax rates.

The Reserve Requirement for the 2015 Series A Bonds, or any portion thereof, may, with theprior written consent of the Bond Insurer, if any, be satisfied by crediting to the Series A Reserve Accountof the Reserve Fund moneys, a letter of credit, a bond insurance policy, or any other comparable creditfacility or any combination thereof, which in the aggregate make funds available in the Series A Accountof the Reserve Fund in an amount equal to the Reserve Requirement applicable to the 2015 Series ABonds; however, the long-term unsecured debt or claim-paying ability, as the case may be, of the providerof such letter of credit, bond insurance policy or any other comparable credit facility, must have a ratingof at least “A1” from Moody’s Investors Service, Inc., if Moody’s shall then be rating the Bonds and“A+” from Standard & Poor’s Ratings Services, if Standard & Poor’s shall then be rating the Bonds(provided, that the Fiscal Agent shall be under no obligation and have no responsibility whatsoever toindependently determine or verify such rating other than at the time of delivery). In the event of the useof such a surety, the Fiscal Agent shall be provided with copies of all documents in regard thereto andshall, to the extent not in conflict with the provisions of the Fiscal Agent Agreement, conform to theforms thereof for purposes of submitting draws, and making reimbursements thereon. The ReserveRequirement is initially partially satisfied with the Reserve Policy.

2015 Series B Bonds. Moneys in the Series B Reserve Account of the Reserve Fund shall beused solely for the purpose of (i) making transfers to the Series B Interest Account and/or the Series BPrincipal Account of Bond Fund or the applicable Account of the Redemption Fund to pay the principalof, and interest and premium, if any, on 2015 Series B Bonds when due to the extent that moneys in theSeries B Interest Account and the Series B Principal Account of the Bond Fund are insufficient therefor(or provide for required payment to the Bond Insurer for draws on the Reserve Policy); (ii) making anyrequired transfer to the Rebate Fund pursuant to the Fiscal Agent Agreement upon written direction fromthe Community Facilities District; (iii) paying the principal and interest due on 2015 Series B Bonds inthe final Bond Year applicable to the 2015 Series B Bonds; and (iv) application to the defeasance of such2015 Series B Bonds in accordance with the Fiscal Agent Agreement.

If the amounts in the Series B Interest Account or the Series B Principal Account of the BondFund are insufficient to pay the principal of, or interest on the 2015 Series B Bonds when due, the FiscalAgent shall, one Business Day prior to an Interest Payment Date, withdraw from the Series B ReserveAccount of the Reserve Fund for deposit in the Series B Interest Account and the Series B PrincipalAccount of the Bond Fund, moneys necessary for such purpose. Following any transfer to the Series BInterest Account or the Series B Principal Account of the Bond Fund, the Fiscal Agent shall notify theCommunity Facilities District of the amount needed to replenish the Series B Account of the ReserveFund to the Reserve Requirement applicable to the 2015 Series B Bonds, and the Community FacilitiesDistrict shall include such amount, as is required at that time, to correct such deficiency to the nextSpecial Tax levy in the extent of the permitted Special Tax rates.

The Reserve Requirement for the 2015 Series B Bonds, or any portion thereof, may with the priorwritten consent of the Bond Insurer, if any, be satisfied by crediting to the Series B Reserve Account ofthe Reserve Fund moneys, a letter of credit, a bond insurance policy, or any other comparable credit

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facility or any combination thereof, which in the aggregate make funds available in the Series B Accountof the Reserve Fund in an amount equal to the Reserve Requirement applicable to the 2015 Series BBonds; however, the long-term unsecured debt or claim-paying ability, as the case may be, of the providerof such letter of credit, bond insurance policy or any other comparable credit facility, must have a ratingof at least “A1” from Moody’s Investors Service, Inc., if Moody’s shall then be rating the Bonds and“A+” from Standard & Poor’s Ratings Services, if Standard & Poor’s shall then be rating the Bonds(provided, that the Fiscal Agent shall be under no obligation and have no responsibility whatsoever toindependently determine or verify such rating other than at the time of delivery). In the event of the useof such a surety, the Fiscal Agent shall be provided with copies of all documents in regard thereto andshall, to the extent not in conflict with the provisions of the Fiscal Agent Agreement, conform to theforms thereof for purposes of submitting draws, and making reimbursements thereon. The ReserveRequirement is initially partially satisfied with the Reserve Policy.

Investment of Moneys in the Reserve Accounts of the Reserve Fund. Moneys, if any held in theReserve Fund Accounts shall be invested in accordance with the Fiscal Agent Agreement. Any moneysin the Reserve Fund Accounts in excess of the corresponding Reserve Requirement shall be withdrawn bythe Fiscal Agent two (2) Business Days prior to each Interest Payment Date and deposited into theInterest Account of the Bond Fund for the corresponding Series of Bonds and thereafter applied for thepurposes specified for such Account. The Fiscal Agent shall transfer the Rebate Fund Excess InvestmentEarnings from the Series A Reserve Account of the Reserve Fund earnings upon written direction of theCommunity Facilities District, pursuant to the Fiscal Agent Agreement.

Replenishment of each Reserve Fund Account. Notwithstanding anything in the Fiscal AgentAgreement to the contrary, the Fiscal Agent shall transfer to the Reserve Fund Account(s), from availablemoneys in the Special Tax Fund, the amount(s) needed to restore each Reserve Fund Account to thecorresponding Reserve Requirement, as specified in the Fiscal Agent Agreement. Moneys in the SpecialTax Fund shall be deemed available for transfer to the Reserve Fund Account(s) only if such amounts willnot be needed to make the deposit(s) required to be made to the corresponding Interest Account(s) and thecorresponding Principal Account(s) of the Bond Fund or the Sinking Fund Redemption Account of theRedemption Fund (with respect to the 2015 Series A Bonds) for the next applicable Interest PaymentDate.

See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENTAGREEMENT” for a description of the timing, purpose and manner of disbursements from the ReserveFund.

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Prepaid Special Taxes

Prepaid Special Taxes collected by the Community Facilities District (net of any costs ofcollection) shall be transferred, no later than 10 days after receipt thereof, to the Fiscal Agent; and theCommunity Facilities District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in thePrepayment Account of the Special Tax Fund. The Prepaid Special Taxes shall be held into thePrepayment Account for the benefit of the 2015 Series A Bonds and shall be transferred by the FiscalAgent to the 2015 Series A Bonds Mandatory Redemption Account of the Redemption Fund to call 2015Series A Bonds on the next Interest Payment Date for which notice can be given in accordance with thespecial mandatory redemption provisions. The Prepaid Special Taxes shall be transferred to the 2015Series A Bonds Mandatory Redemption Account and applied to call 2015 Series A Bonds on a pro ratabasis.

The 2015 Series B Bonds are not subject to redemption from Prepaid Special Taxes.

Administrative Expense Fund

The Fiscal Agent will receive the transfer of Special Taxes from the Community FacilitiesDistrict from the Special Tax Fund and deposit in the Administrative Expense Fund amounts to payAdministrative Expenses as described above in “ – Special Tax Fund.”

Pursuant to the Fiscal Agent Agreement, moneys in the Administrative Expense Fund will not beconstrued as a trust fund held for the benefit of the Owners of the Bonds and will not be available for thepayment of debt service on the Bonds.

Residual Fund

The Residual Fund shall be funded from remaining Special Taxes transferred to the ResidualFund from the Special Tax Fund as described above.

Unless otherwise directed in writing to the Fiscal Agent by the Community Facilities District, theFiscal Agent shall, without further direction, transfer all funds held in the Residual Fund to theCommunity Facilities District on each September 15 or upon the next Business Day if such September 15is not a Business Day. The Fiscal Agent shall promptly confirm to the Community Facilities District, inwriting, such transfer and the amount thereof.

Moneys held in the Residual Fund, if any, may, at the option of the Community FacilitiesDistrict, be used by the Community Facilities District for (i) acquisition and/or construction of thefacilities as authorized by the Resolution of Formation; (ii) to make deposits for related purposes asrequired under the Tax Certificate provided by the Community Facilities District in connection with theissuance, sale and delivery of the Bonds for the purposes of paying rebatable arbitrage as and when suchis due in accordance with such Tax Certificate and the Regulations; (iii) to pay Administrative Expenses;(iv) at the option of the Community Facilities District, for optional redemption of the then-outstandingBonds under the optional redemption provisions of the Fiscal Agent Agreement; or (v) any lawfulpurpose(s) of such funds as set out in the Act. Amounts on deposit in the Residual Fund, includingany and all accounts therein, if any, and interest earned thereon, are not pledged to the Bonds andsuch fund is not a trust fund held for the benefit of the Bondowners.

Moneys in the Residual Fund shall be invested in accordance with the Fiscal Agent Agreement.Interest earnings and profits from such investment and deposit shall remain therein and be applied in themanner provided above.

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Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held bythe Fiscal Agent will be invested by the Fiscal Agent in Authorized Investments (as defined in the FiscalAgent Agreement), as directed by an Authorized Representative (as defined in the Fiscal AgentAgreement), that mature prior to the date on which such moneys are required to be paid out under theFiscal Agent Agreement. Moneys in the Reserve Accounts of the Reserve Fund, may be invested inAuthorized Investments which provide liquidity needed to satisfy any calls on funds in the ReserveAccounts of the Reserve Fund. Such liquidity shall provide that at least one half of the moneys in theReserve Accounts of the Reserve Fund shall be available for draw in advance of any Interest PaymentDate, except in the case of guaranteed investment contracts which may have a longer term. SuchAuthorized Investments shall not have a final maturity of greater than three years (except for guaranteedinvestments contracts through which moneys in the Reserve Fund may be invested for a longer period).No such investment shall mature later than 15 days prior to the final maturity of the corresponding Seriesof Bonds. In the absence of any direction from the Community Facilities District, and subject to anylimitations on investment yield or other limitations set forth in the Fiscal Agent Agreement, the FiscalAgent will invest moneys in any of the funds or accounts created by the Fiscal Agent Agreement solely inAuthorized Investments described in clause (j) of the definition of Authorized Investments (includingfunds for which the Fiscal Agent or its affiliates or subsidiaries provide investment advisory or othermanagement services). See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THEFISCAL AGENT AGREEMENT” for a definition of “Authorized Investments.”

The Teeter PlanError! Bookmark not defined.

In 1949, the California Legislature enacted an alternative method for the distribution of securedproperty taxes to local agencies. This method, known as the “Teeter Plan,” is now set forth in Sections4701 to 4717 of the California Revenue and Taxation Code. Upon adoption and implementation of thismethod by a county board of supervisors, local agencies for which the county acts as “bank” and certainother public agencies and taxing areas located in the county receive annually the full amount of theirshare of property taxes on the secured roll, including delinquent property taxes which have yet to becollected. While a county benefits from the penalties associated with these delinquent taxes when theyare paid, the Teeter Plan provides participating local agencies with stable cash flow and the elimination ofcollection risk.

To implement a Teeter Plan, the board of supervisors of a county generally must elect to do so byJuly 15 of the fiscal year in which it is to apply. The County Board of Supervisors adopted the TeeterPlan on June 29, 1993. The County’s Teeter Plan applies to the Community Facilities District and to theBonds and the Special Taxes to be levied to pay the principal of and interest on the Bonds are subject tothe Teeter Plan. The Community Facilities District will receive 100% of the Special Taxes levied to paythe Bonds irrespective of actual delinquencies in the collection of the Special Taxes by the County.

Upon making a Teeter Plan election, a county must initially provide a participating local agencywith 95% of the estimated amount of the then-accumulated tax delinquencies (excluding penalties) forthat agency. In the case of the initial year distribution of taxes and assessments (if a county has elected toinclude assessments), 100% of the tax and assessment delinquencies (excluding penalties) are to beapportioned to the participating local agency which levied the tax or assessment. After the initialdistribution, each participating local agency receives annually 100% of the secured property tax levies towhich it is otherwise entitled, regardless of whether the county has actually collected the levies.

If any tax or assessment which was distributed to a Teeter Plan participant is subsequentlychanged by correction, cancellation or refund, a pro rata adjustment for the amount of the change is madeon the records of the treasurer and auditor of the county. Such adjustment for a decrease in the tax or

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assessment is treated by the county as an interest-free offset against future advances of tax levies underthe Teeter Plan.

Once adopted, a county’s Teeter Plan will remain in effect in perpetuity unless the board ofsupervisors orders its discontinuance or unless prior to the commencement of a fiscal year a petition fordiscontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirdsof the participating districts in the county. An electing county may, however, opt to discontinue theTeeter Plan with respect to any levying agency in the county if the board of supervisors, by action takennot later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levyingagency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of alltaxes and assessments levied on the secured roll by that agency. The County has never discontinued theTeeter Plan with respect to any levying agency.

To the extent that the County’s Teeter Plan continues in existence and is carried out as adopted,the County’s Teeter Plan may help protect the Owners of the Bonds from the risk of delinquencies inSpecial Taxes.

On May 20, 2008, the Orange County Board of Supervisors authorized a commercial paper(“CP”) program for the purpose of providing a continuing source of funding for the County's annualobligation to make distributions of ad valorem tax and special tax collections to the participatingagencies. CP will be issued from time to time to mature on business days not to exceed 270 days fromissuance. The CP and its credit enhancement are secured by receipts of certain delinquent tax payments(excluding penalties and interest) and the County General Fund.

Payment of Rebate Obligation

The Community Facilities District is required to calculate excess investment earnings inaccordance with the requirements set forth in the Fiscal Agent Agreement. If necessary, the CommunityFacilities District may use amounts in the Reserve Fund, amounts on deposit in the AdministrativeExpense Fund and other funds available to the Community Facilities District to satisfy rebate obligations,as applicable to the Bonds.

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Additional Bonds for Refunding Purposes Only

The Community Facilities District shall not issue any additional bonds, notes or other similarevidences of indebtedness payable, in whole or in part, out of Net Taxes except bonds issued to fully orpartially refund the Outstanding Bonds.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Insured Bonds, Build America Mutual Assurance Company(“BAM”) will issue its Municipal Bond Insurance Policy (the “Policy”) for the 2015 Series A Bondsmaturing on September 1 of the years 2032 through 2038, inclusive, with CUSIP Nos. 901073GY6through 901073GL4 (collectively, the “Insured 2015 Series A Bonds”) and the 2015 Series B Bonds(collectively with the Insured 2015 Series A Bonds, the “Insured Bonds”). The Policy guarantees thescheduled payment of principal of and interest on the Bonds when due as set forth in the form of thePolicy included as an exhibit to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under NewYork, California, Connecticut or Florida insurance law.

Build America Mutual Assurance Company

BAM is a New York domiciled mutual insurance corporation. BAM provides creditenhancement products solely to issuers in the U.S. public finance markets. BAM will only insureobligations of states, political subdivisions, integral parts of states or political subdivisions or entitiesotherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of1986, as amended. No member of BAM is liable for the obligations of BAM.

The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, NewYork, New York 10281, its telephone number is: 212-235-2500, and its website is located at:www.buildamerica.com.

BAM is licensed and subject to regulation as a financial guaranty insurance corporation under thelaws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.

BAM’s financial strength is rated “AA/Stable” by Standard and Poor’s Ratings Services, aStandard & Poor’s Financial Services LLC business (“S&P”). An explanation of the significance of therating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of BAMshould be evaluated independently. The rating reflects the S&P’s current assessment of thecreditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is nota recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal atany time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Anydownward revision or withdrawal of the above rating may have an adverse effect on the market price ofthe Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by theissuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable(subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market priceor liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised orwithdrawn.

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Capitalization of BAM

BAM’s total admitted assets, total liabilities, and total capital and surplus, as of March 31, 2015,and as prepared in accordance with statutory accounting practices prescribed or permitted by the NewYork State Department of Financial Services were $466.5 million, $22.2 million and $444.3 million,respectively.

BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximumof 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations andrestrictions.

BAM’s most recent Statutory Annual Statement, which has been filed with the New York StateInsurance Department and posted on BAM’s website at www.buildamerica.com, is incorporated herein byreference and may be obtained, without charge, upon request to BAM at its address provided above(Attention: Finance Department). Future financial statements will similarly be made available whenpublished.

BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds.In addition, BAM has not independently verified, makes no representation regarding, and does not acceptany responsibility for the accuracy or completeness of this Official Statement or any information ordisclosure contained herein, or omitted herefrom, other than with respect to the accuracy of theinformation regarding BAM, supplied by BAM and presented under the heading “BOND INSURANCE”.

Additional Information Available from BAM

Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief CreditInsights video that provides a discussion of the obligor and some of the key factors BAM’s analysts andcredit committee considered when approving the credit for insurance. The Credit Insights videos areeasily accessible on BAM’s website at buildamerica.com/creditinsights/. (This reference is forconvenience of reference only and the information on such website is not incorporated herein by suchreference or otherwise.)

Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief onevery issue insured by BAM, including the Bonds. BAM Obligor Disclosure Briefs provide informationabout the gross par insured by CUSIP, maturity and coupon; sector designation (e.g. general obligation,sales tax); a summary of financial information and key ratios; and demographic and economic datarelevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM'swebsite at buildamerica.com/obligor/. (This reference is for convenience of reference only and theinformation on such website is not incorporated herein by such reference or otherwise.)

Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the informationcontained therein are not recommendations to purchase, hold or sell securities or to make anyinvestment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefsand the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes noresponsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insightvideos are prepared by BAM; and have not been reviewed or approved by the issuer of or theunderwriter for the Bonds, and the Community Facilities District and the Underwriter assume noresponsibility for their content.

BAM receives compensation (an insurance premium) for the insurance that it is providing withrespect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase,any of the Bonds, whether at the initial offering or otherwise.

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COMMUNITY FACILITIES DISTRICT NO. 97-1

General Information

The Community Facilities District is approximately 921 acres located in the central part of theCounty. The Community Facilities District lies within the geographic boundaries of the City of Irvineand consists of approximately 4,620 individual parcels of Developed Property, with approximately 7,764residential dwelling units comprised of 3,080 single family detached homes, 1,528 single family attachedhomes and 3,156 apartment units. The Community Facilities District has been completely built out formany years.

Summary of Proceedings

The Bonds are issued pursuant to the Act and the Fiscal Agent Agreement. In addition, asrequired by the Act, the Board of the School District has taken the following actions with respect toestablishing the Community Facilities District thereof, and authorizing issuance of the Bonds:

Resolution of Intention: On February 24, 1997, the Board adopted Resolution No. 02-07-97stating its intention to establish the Community Facilities District, and to authorize the levy of a specialtax therein pursuant to the Rate and Method. On the same day the Board adopted Resolution No. 02-08-97 stating its intention to incur bonded indebtedness in an amount not to exceed $110,000,000, withrespect to the Community Facilities District

Resolution of Formation: Immediately following completion of a noticed public hearingconducted on April 14, 1997, the Board adopted Resolution No. 04-18-97 (the “Resolution ofFormation”), which established the Community Facilities District, established the Rate and Method forthe Community Facilities District, and called a combined special tax election in order to authorize thelevy of a special tax within the Community Facilities District pursuant to the initial Rate and Method ofApportionment.

Resolution of Necessity: On April 14, 1997, the Board adopted Resolution No. 04-19-97declaring the necessity to incur bonded indebtedness in an amount not to exceed $110,000,000 within theCommunity Facilities District and submitting the proposition to the qualified electors of the CommunityFacilities District.

Landowner Election and Declaration of Results: On April 25, 1997, an election was held withinthe Community Facilities District, in which the landowners at that time, being the qualified electors,approved the combined ballot propositions (i) authorizing the issuance of up to $110,000,000 of bonds forthe Community Facilities District to finance the acquisition of school sites and the acquisition, design,construction, lease, equipping and/or improvement thereon of school facilities, (ii) authorizing the levy ofa special tax in accordance with the Rate and Method, and (iii) establishing an appropriations limit for theCommunity Facilities District.

On May 27, 1997, the Board adopted Resolution No. 05-30-97, pursuant to which the Boardapproved the canvass of the votes in the landowner voter election and declared the authority to levy theSpecial Taxes in accordance with the Rate and Method, to incur the bonded indebtedness and to haveestablished an appropriations limit.

Annexation of Territory. The Board, acting in its capacity as the Legislative Body of theCommunity Facilities District, adopted resolutions on March 9, 1998, stating its intention to annexterritory (the “Annexation No. 1 Territory”) to the Community Facilities District and to authorize the levyof a special tax on land within the Annexation No. 1 Territory (Resolution No. 97-1-04) and to have theCommunity Facilities District incur bonded indebtedness (Resolution No. 97-1-06). On April 27, 1998,

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following public hearings conducted pursuant to the provisions of the Act, annexed the Annexation No. 1Territory to the Community Facilities District (Resolution No. 97-01-07) and called a special election. Atthe special election, the electors within the boundaries of Annexation No. 1 Territory authorized theCommunity Facilities District to incur bonded indebtedness to finance the acquisition, design,construction, lease equipping and/or improvement of educational sites and facilities and approve the levyof a special tax pursuant to the Special Tax Formula.

Notices of Special Tax Lien and Levy. Notices of Special Tax with respect to the initial areaincluded within the Community Facilities District and with respect to the Annexation No. 1 Territoryhave been recorded with the County Recorder on May 28, 1997, and June 4, 1998.

Ordinances Levying Special Taxes: On May 27, 1997, the Board, acting as the Legislative Bodyof the Community Facilities District, adopted Resolution and Ordinance No. 05-31-97 providing for thelevy of the Special Taxes within the Community Facilities District. On May 28, 1998, the Board, actingas the Legislative Body of the Community Facilities District, adopted Resolution and Ordinance No. 97-1-10 providing for the levy of the Special Taxes within the Community Facilities District, includingAnnexation No. 1 Territory.

Resolution Authorizing Issuance of the Bonds: On April 20, 2015, the Board, acting as theLegislative Body of the Community Facilities District, adopted Resolution No. 97-1-86 approvingissuance of the Bonds in the aggregate principal amount not to exceed $120,000,000.

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Special Taxes – Developed Property

The following table shows the Special Taxes that were levied on parcels of property withinthe Community Facilities District for Fiscal Year 2014-15 and the percentages of the total SpecialTax levy. The Special Taxes in the Community Facilities District may be levied until the Bonds arepaid. The final maturity of the Bonds is September 1, 2038.

Table 1Community Facilities District No. 97-1

of the Tustin Unified School District2015 Special Tax Refunding Bonds

Fiscal Year 2014-15 Special Tax Levy(1)

LandUse

ClassDwelling

Type

ResidentialUnits Per

Acre

TaxableDwelling

Units/Acres

Fiscal Year2014-15

Special TaxRate

AggregateFiscal Year

2014-15Special Tax

Percent ofFiscal Year

2014-15Special Tax

1 SFD 0-2.9 1,763 $1,135.22 $2,001,392.86 36.44%2 SFD 3.0-4.9 1,317 759.34 1,000,050.78 18.213 SFA 5.0-6.9 1,528 405.30 619,298.40 11.274 Apartments 7.0-8.9 3,156 593.24 1,872,265.44 34.08

Undeveloped 0 N/A 0.00 0.00

Totals 7,764 $5,493,007.48 100.00%

(1)Totals may not sum due to rounding. In addition to the Special Taxes, the property is also subject to the levy of assessmentand special taxes by other jurisdictions. See “ – Direct and Overlapping Debt,” “– Overlapping Assessment andCommunity Facilities Districts” and “ – Value-to-Lien Ratios,” below.

__________________Source: Special District Financing & Administration, LLC.

For the complete text of the Special Tax Formula, see APPENDIX B – “SPECIAL TAXFORMULA.”

Special Tax Levy in Relation to Scheduled Debt Service

Pursuant to the Fiscal Agent Agreement and the Special Tax Formula, Special Taxes are leviedannually in an amount sufficient to pay Administrative Expenses in an amount equal to theAdministrative Expense Requirement and to ensure payment of debt service on the Bonds. Special Taxesare levied at approximately 67.79% of the Maximum Special Tax set forth in the Special Tax Formula,with approximately 65.92% of such levy being on individual homeowners and approximately 34.08% ofsuch levy being on seven apartment complexes on twelve separate parcels totaling 3,156 units.

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Fiscal Year 2014-15 Special Tax on Property by Development Type(1)

Type ofDevelopment

No. ofParcels

No. ofUnits

Fiscal Year2014-15

Special TaxesLevied

Percent ofAggregate

Special TaxesLevied

Single-Family Detached 3,080 3,080 $3,001,443.64 54.64%Single Family Attached 1,528 1,528 619,298.40 11.27Apartments 12 3,156 1,872,265.44 34.08Totals 4,620 7,764 $5,493,007.48 100.00%

(1) As of July 1, 2014.

__________________Source: Special District Financing & Administration, LLC.

Table 3 below illustrates the aggregate estimated coverage of the debt service on the Bonds inrelation to estimated Net Taxes of the Community Facilities District assuming Special Taxes were leviedon the individual homeowners at 110% of the amount necessary to pay the individual homeowners’proportionate share of debt service on the Bonds and the Special Taxes were levied on the multi-familyproperty at 110% of the amount necessary to pay the multi-family property’s proportionate share of debtservice on the Bonds. In each case, such amounts are the maximum amount permitted under the SpecialTax Formula). As set forth in Table 3, the expected debt service coverage from Special Taxes levied at110% of the assigned 67.79% estimated levy amount on individual homeowners’ property providesapproximately 72.51% of debt service. The Special Taxes are subject to the limitations of Section 53321of the Act that under no circumstances will the Special Tax levied against any parcel used for privateresidential purposes be increased as a consequence of delinquency or default by the owner of any otherparcel or parcels within a community facilities district by more than 10%. The Resolution of Intentionprovides that the Special Tax shall not be increased by more than 10% as a result of delinquencies ofother property owners.

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Estimated Debt Service CoverageFor Developed Residential Ownership

Bond YearEnding

September 1st

EstimatedAnnual

Debt Service

EstimatedCFD

AdministrativeExpenses(1)

Actual orEstimated LevyRequirement(2)

110% ofEstimatedIndividual

Homeowner’sSpecial Tax(3)

110% ofEstimated

Multi-FamilySpecial Tax(4)

Sum of 110% ofEstimated

Individual andMulti-Family

Tax(5)

IndividualHomeowners

EstimatedDebt Service

Coverage

All TaxablePropertiesEstimated

Debt ServiceCoverage

2015(5) $3,858,531 $100,000 $5,493,022 N/A N/A N/A N/A N/A2016 5,447,138 100,000 5,547,138 4,022,070 2,079,781 6,101,851 72.51% 110.00%2017 5,532,038 102,000 5,634,038 4,085,079 2,112,363 6,197,441 72.51 110.002018 5,647,913 104,040 5,751,953 4,170,575 2,156,572 6,327,148 72.51 110.002019 5,785,038 106,121 5,891,158 4,271,510 2,208,765 6,480,274 72.51 110.002020 5,929,338 108,243 6,037,581 4,377,676 2,263,663 6,641,339 72.51 110.002021 6,075,088 110,408 6,185,496 4,484,925 2,319,120 6,804,045 72.51 110.002022 6,269,600 112,616 6,382,216 4,627,562 2,392,876 7,020,438 72.51 110.002023 6,470,100 114,869 6,584,969 4,774,571 2,468,894 7,243,465 72.51 110.002024 6,634,600 117,166 6,751,766 4,895,511 2,531,431 7,426,943 72.51 110.002025 6,744,100 119,509 6,863,609 4,976,606 2,573,364 7,549,970 72.51 110.002026 6,895,600 121,899 7,017,499 5,088,187 2,631,062 7,719,249 72.51 110.002027 7,046,350 124,337 7,170,687 5,199,259 2,688,497 7,887,756 72.51 110.002028 7,200,600 126,824 7,327,424 5,312,905 2,747,262 8,060,167 72.51 110.002029 7,362,350 129,361 7,491,711 5,432,024 2,808,858 8,240,882 72.51 110.002030 7,525,350 131,948 7,657,298 5,552,087 2,870,941 8,423,028 72.51 110.002031 7,688,600 134,587 7,823,187 5,672,368 2,933,138 8,605,506 72.51 110.002032 7,856,100 137,279 7,993,379 5,795,769 2,996,947 8,792,716 72.51 110.002033 6,616,600 140,024 6,756,624 4,899,034 2,533,253 7,432,287 72.51 110.002034 6,764,350 142,825 6,907,175 5,008,194 2,589,698 7,597,892 72.51 110.002035 6,910,750 145,681 7,056,431 5,116,415 2,645,659 7,762,074 72.51 110.002036 7,067,750 148,595 7,216,345 5,232,364 2,705,615 7,937,979 72.51 110.002037 7,218,500 151,567 7,370,067 5,343,823 2,763,250 8,107,073 72.51 110.002038 7,381,500 154,598 7,536,098 5,464,208 2,825,500 8,289,708 72.51 110.00

(1) The Fiscal Agent Agreement provides that for Fiscal Year 2015-16, the Administrative Expense Requirement will be set at $80,000 escalating 2% annually; for estimating Fiscal Year 2015-16 levy the total CommunityFacilities District administrative expenses (and subsequent years) are estimated to be at 125% of the Administrative Expense Requirement.

(2) For the bond year ending September 1, 2015, the levy amount shown reflects the actual tax amount levied for Fiscal Year 2014-15 and is derived from existing debt service and incorporates a tax credit of $733,047.82which was funded from prior Special Taxes collected in excess of debt service requirements for the Prior Bonds; for subsequent bond years the estimated levy is equal to the sum of the Administrative ExpenseRequirement and 110% of estimated annual debt service. The actual levy in each fiscal year will be equal to the sum of (i) the Administrative Expense Requirement and (ii) 110% of estimated annual debt service less (iii)amounts on hand at the time the Special Tax levy is established from the prior fiscal year’s Special Taxes collected which are in excess of debt service requirements for the Bonds and total administrative expenses andtotal administrative expenses.

(3) Amount shown is equal to 110% of the Individual Homeowner’s 65.92% share of the expected levy requirement.(4) Amount shown is equal to 110% of the multi-family apartment project’s 34.08% share of the expected levy requirement. The Multi-Family residential properties consist of 7 apartment projects. The actual levy is limited

by the Resolution of Intention which provides that he Special Tax shall not be increased by more than 10% as a result of delinquencies of other property owners.(5) Represents the sum of (i) 110% of the individual homeowners' share of the expected Special Tax levy requirement and (ii) 110% of the Multi-Family Properties share of the expected Special Tax levy requirement.. The

actual levy is limited by the Resolution of Intention which provides that the Special Tax shall not be increased by more than 10% as a result of delinquencies of other property owners.____________________Source: Special District Financing & Administration, LLC and Piper Jaffray & Co.

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Concentration of Special Tax Obligations

The Community Facilities District currently consists of 4,620 individual parcels of developedland, on which there are 3,080 single family detached homes, 1,528 single family attached homes and3,156 apartment units. In aggregate, a single entity, The Irvine Company LLC, currently own sixapartment communities and has in interest in the seventh apartment community. The seven apartmentcommunities represent in the aggregate approximately 3,156 apartment units which are responsible forapproximately 34.08% of the total special tax liability of the Community Facilities District for FiscalYear 2014-15. The seventh apartment community ownership is listed as The Irvine Company LLC withJHC-Culver, LP, as a joint venture for the purpose of providing affordable housing in the City of Irvine.The timely payment on the Bonds depends upon the willingness and ability of the landowners to pay theSpecial Tax installments when due. Conditions may affect the willingness of the landowners, or anysuccessors, to pay Special Tax installments on property and there is no assurance that the owners will paysuch Special Tax installments even if financially able to do so.

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Table 4ACommunity Facilities District No. 97-1


Apartment Properties and Individual Homeowners within Community Facilities District No. 97-1(As of April 2015)

Owner Name ApartmentTaxableParcels

TaxableDwelling

Units

Estimated UnitSize

Range (sq.ft.)

2015 EstimatedMonthlyRental

Rate RangeThe Irvine Company LLC/JHC-Culver, LP Montecito Vista 1 162 Avg. 1,310(1) N/A(2)

The Irvine Company LLC Estancia 1 388 664 to 1,167 $1,710 to $2,250The Irvine Company LLC Solana 1 356 975 to 1,385 1,925 to 2,810The Irvine Company LLC Serrano 5 756 523 to 963 1,615 to 2,010The Irvine Company LLC Las Palmas 2 736 512 to 880 1,585 to 2,025The Irvine Company LLC Anacapa 1 380 719 to 1,086 1,770 to 2,285The Irvine Company LLC Somerset 1 378 664 to 1,176 1,660 to 2,600

Total Apartment Units N/A 12 3,156 N/A N/A

Individual Homeowners N/A 4,608 4,608 N/A N/A

TOTALS N/A 4,620 7,764 N/A N/A

(1) The figure shown above represents a weighted average of the two and three bedroom units constructed within the project.(2) This project is reserved for income-qualified applicants. As such, no published rent information is available.

_________________Source: Special District Financing & Administration, LLC; Review of information available on the internet relating to those projects.

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Table 4BCommunity Facilities District No. 97-1


Apartment Properties and Individual Homeowners within Community Facilities District No. 97-1Fiscal Year 2014-15 Value-to-Lien by Ownership

ApartmentTaxableParcels

TaxableDwelling

Units

GrossAssessedValue(1)

Fiscal Year2014-15

LevyAmount

PrincipalAmount of the

Bonds(2)

OtherOutstanding

Debt(3)

TotalOutstanding

Debt(4)

AverageValue-to-Lien

RatioIn Category

Montecito Vista (5) 1 162 $32,283,902 $96,104.88 $1,617,580 $1,225,141 $2,842,721 11.36:1

Estancia(6) 1 388 $41,014,154 $230,177.12 $3,874,203 $3,326,351 $7,200,553 5.70:1Solana (6) 1 356 46,783,025 211,193.44 3,554,681 3,823,348 7,378,029 6.34:1Serrano (6) 5 756 88,103,325 448,489.44 7,548,705 5,812,695 13,361,400 6.59:1Las Palmas (6) 2 736 75,956,992 436,624.64 7,349,003 3,152,804 10,501,807 7.23:1Anacapa (6) 1 380 56,445,558 225,431.20 3,794,322 1,946,985 5,741,308 9.83:1Somerset (6) 1 378 53,507,660 224,244.72 3,774,352 986,914 4,761,267 11.24:1

Total Apartment Units 12 3,156 $394,094,616 $1,872,265.44 $31,512,846 $20,274,238 $51,787,084 7.61:1

IndividualHomeowners

4,608 4,608 2,880,051,704 3,620,742.04 60,942,154 58,861,071 119,803,225 24.04:1

TOTAL 4,620 7,764 $3,274,146,320 $5,493,007.48 $92,455,000 $79,135,309 $171,590,309 19.08:1

(1) Represents the Gross Assessed Value as shown on the Overlapping Debt Statement.(2) Principal Amount of the Bonds has been allocated to the taxable parcels in proportion to their respective Fiscal Year 2014-15 Special Tax Obligation.(3) Includes Direct and Overlapping Debt from Metropolitan Water District, Irvine Ranch Water District, Improvement District Nos. 125 and 225, City of Irvine Assessment District

Nos. 97-16 and 97-17, City of Irvine Reassessment District Nos. 11-2 and 12-1 and Tustin Unified School District School Facilities Improvement District No. 2012-1. All debt isallocated on gross assessed valuation with the exception of the Improvement Districts of Irvine Ranch Water District, which are allocated on assessed land valuation only and theCity of Irvine Assessment Districts, which are allocated on outstanding debt.

(4) Total Outstanding Debt represents the sum of the Principal Amount of the Bonds and Other Outstanding Debt.(5) Owned by The Irvine Company/JHC-Culver, LP as a joint venture for the purpose of providing affordable housing in the City of Irvine.(6) Owned by The Irvine Company LLC.____________________Sources: Special District Financing & Administration, LLC and California Municipal Statistics, Inc.

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Table 4CCommunity Facilities District No. 97-1


Fiscal Year 2014-15 Top Taxpayers

Property OwnerTaxableParcels

AggregateSpecial Tax

Percentof

SpecialTax

Obligation

AssessedLandValue

AssessedImprovement

Value

Allocated Shareof PrincipalAmount of

Bonds(1)

AllocatedShare

of OtherOutstanding

Debt(2)

AllocatedShare

of TotalDebt(3)

Value-to-LienRatio

1 The Irvine Company, LLC 11 $1,776,160.56 32.33% $17,807,675 $344,003,039 $29,895,267 $19,049,097 $48,944,364 7.39:1

2 The Irvine Company JHC-Culver LP 1 96,104.88 1.75 12,458,938 19,824,964 1,617,580 1,225,141 2,842,721 11.36:1

3 Boehle Richard Allen Tr 3 2,675.74 0.05 1,388,498 868,550 45,036 40,899 85,935 26.26:1

4 Aggarwal Vishal & Monica 3 2,653.90 0.05 908,344 602,872 44,669 22,944 67,613 22.35:1

5 Cheng Li Li Tr Li Li 2 2,270.44 0.04 1,083,232 623,820 38,215 40,753 78,968 21.62:1

6 Espinosa Arthur S Tr 2 2,270.44 0.04 488,955 789,359 38,215 24,934 63,149 20.24:1

7 Haikal Joseph & Sonya 2 2,270.44 0.04 1,392,692 1,211,015 38,215 50,679 88,893 29.29:1

8 Mandeville Holdings Llc 2 2,270.44 0.04 1,265,388 1,504,832 38,215 52,879 91,093 30.41:1

9 Owyang Jason & Joanne 2 2,270.44 0.04 1,160,314 722,972 38,215 44,042 82,256 22.90:1

10 Venkitakrishnan Narayanan 2 2,270.44 0.04 1,028,291 901,921 38,215 43,268 81,483 23.69:1

11 Remaining Owners 4,590 3,601,789.76 65.57 1,656,861,066 1,207,249,583 60,623,160 58,540,674 119,163,834 24.04:1

Totals / AVG(4) 4,620 $5,493,007.48 100.00% $1,695,843,393 $1,578,302,927 $92,455,000 $79,135,309 $171,590,309 19.08:1

(1) Allocated Share of Principal Amount of Bonds has been allocated to the taxable parcels in proportion to their respective Fiscal Year 2014-15 Special Tax obligation.(2) Includes Direct and Overlapping Debt from Metropolitan Water District, Irvine Ranch Water District, Improvement District Nos. 125 and 225, City of Irvine Assessment

District Nos. 97-16 & 97-17, City of Irvine Reassessment District Nos. 11-2 & 12-1, and Tustin Unified School District School Facilities Improvement District No. 2012-1.All debt is allocated on gross assessed valuation with the exception of the Improvement Districts of Irvine Ranch Water District which are allocated on assessed land valueonly, and the City of Irvine Assessment Districts which are allocated on outstanding assessment amounts.

(3) Total Outstanding Debt represents the sum of the Allocated Share of Principal Amount of Bonds and Allocated Share of Other Outstanding Debt.(4) Value-to-Lien Ratio (VTL) shown on total line does not represent the total of figures in that column; it represents the VTL for the entire District and is computed by

dividing the total assessed value by the lien amount as indicated above. Current aggregate outstanding bond amount is $94,337,087.

____________________Source: Special District Financing & Administration, LLC and California Municipal Statistics, Inc.

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Direct and Overlapping Debt

Table 5 below sets forth the existing authorized indebtedness payable from taxes and assessmentsthat may be levied on territory within the Community Facilities District prepared by Special DistrictFinancing & Administration, LLC, based on Fiscal Year 2014-15 assessment roll information available toit as of March 30, 2015 (the “Debt Report”). The Debt Report is included for general informationpurposes only. In certain cases, the percentages of debt calculations are based on assessed values, whichwill change significantly as sales occur and assessed values increase to reflect housing values. TheCommunity Facilities District believes the information is current as of its date, but makes norepresentation as to its completeness or accuracy. Other public agencies, such as the City of Irvine, mayissue additional indebtedness at any time, without the consent or approval of the School District or theCommunity Facilities District. See “ – Overlapping Assessment and Community Facilities Districts”below.

The Debt Report generally includes long-term obligations sold in the public credit markets bypublic agencies whose boundaries overlap the boundaries of the Community Facilities District in wholeor in part. Such long-term obligations generally are not payable from property taxes, assessment orspecial taxes on land in the Community Facilities District. In many cases long-term obligations issued bya public agency are payable only from the general fund or other revenues of such public agency.Additional indebtedness could be authorized by the School District, the City of Irvine or other publicagencies at any time.

The Community Facilities District has not undertaken to commission annual appraisals of themarket value of property in the Community Facilities District for purposes of its Annual Reports pursuantto the Continuing Disclosure Agreement, and information regarding property values for purposes of adirect and overlapping debt analysis which may be contained in such reports, will be based on assessedvalues as determined by the County Assessor. See APPENDIX D hereto for the form of the CommunityFacilities District Continuing Disclosure Agreement.

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of the Tustin Unified School District

Detailed Direct and Overlapping Debt

2014-15 Local Secured Assessed Valuation: $3,274,146,320

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/15Metropolitan Water District 0.140% $ 154,666Tustin Unified School District School Facilities Improvement District No. 2012-1 15.710 5,111,099Irvine Ranch Water District, I.D. No. 125 (1) 5.586 10,362,319Irvine Ranch Water District, I.D. No. 225 (1) 6.674 15,935,512Tustin Unified School District Community Facilities District No. 97-1 100. 94,337,087 (2)

City of Irvine Assessment District No. 97-16 22.419 5,642,324City of Irvine Assessment District No. 97-17 41.962 13,576,459City of Irvine Reassessment District No. 11-2 0.924 245,467City of Irvine Reassessment District No. 12-1 27.940 30,373,871

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $175,738,804

OVERLAPPING GENERAL FUND DEBT:Orange County General Fund Obligations 0.688% $ 858,401Orange County Pension Obligation Bonds 0.688 3,526,371Orange County Board of Education Certificates of Participation 0.688 106,701Municipal Water District of Orange County Water Facilities Corporation 0.824 44,621

TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $4,535,621Less: MWDOC Water Facilities Corporation (100% supported) 44,148

TOTAL NET OVERLAPPING GENERAL FUND DEBT $4,491,473

GROSS COMBINED TOTAL DEBT $180,274,425 (3)

NET COMBINED TOTAL DEBT $180,230,277

(1) Improvement Districts 125 and 225 were formed in Fiscal Year 2014-15 by consolidating several prior improvement districts.The debt of these prior districts was absorbed by Improvement Districts 125 and 225 and spread throughout the properties ofthe new improvement districts.

(2) Includes principal amount of Prior Bonds which are being refunded and defeased with proceeds of the Bonds.(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Ratios to Assessed Valuation:Direct Debt ($94,337,087) ...............................................................2.88%Total Direct and Overlapping Tax and Assessment Debt .................5.37%Gross Combined Total Debt .............................................................5.51%Net Combined Total Debt.................................................................5.50%

____________________Source: California Municipal Statistics, Inc., prepared as of March 30, 2015.

Overlapping Assessment and Community Facilities Districts

As noted above, there are other tax and assessment bonds outstanding or proposed to be issuedwhich encompass the property within the Community Facilities District. The principal two of these arethose issued by the Irvine Ranch Water District, which are described briefly below. The CommunityFacilities District is not aware of any other overlapping special tax or assessment districts for whichbonded indebtedness has been issued or authorized.

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Water District Debt The property in the Community Facilities District receives water and sewerservice from the Irvine Ranch Water District (“IRWD”) and is located within IRWD’s ImprovementDistrict Nos. 125 and 225 (collectively, the “IRWD Improvement Districts”). Improvement Districts 125and 225 were formed in Fiscal Year 2014-15 by consolidating several prior improvement districts. Thedebt of these prior districts was absorbed by Improvement Districts 125 and 225 and spread throughoutthe properties of the new improvement districts.

IRWD Improvement District bonds are general obligation bonds payable from ad valorem taxes;the amount of the tax levy on each parcel is based on the assessed valuation of the land only. TheCommunity Facilities District cannot predict the amount of authorized but unissued bonds for IRWDImprovement Districts that will ultimately be issued by IRWD, nor can it predict when such debt will beissued or the debt service payments thereon.

Other Potential Debt

Additional Debt Payable from Taxes or Assessments. The Community Facilities District has nocontrol over the amount of additional debt payable from taxes or assessments levied on all or a portion ofthe property within a special district which may be incurred in the future by other governmental agencies,including, but not limited to, the City of Irvine, or any other governmental agency having jurisdictionover all or a portion of the property within the Community Facilities District. Furthermore, nothingprevents the owners of property within the Community Facilities District from consenting to the issuanceof additional debt by other governmental agencies which would be secured by taxes or assessments on aparity with the Special Taxes. To the extent such indebtedness is payable from assessments, other specialtaxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured byliens on the property within a district on a parity with a lien of the Special Taxes. For a description of theconditions to issuance of parity bonds by the Community Facilities District, see “SECURITY FOR THEBONDS – Additional Bonds for Refunding Purposes Only.”

Accordingly, the debt on the property within the Community Facilities District could increase,without any corresponding increase in the value of the property therein, and thereby severely reduce theratio that exists at the time the Bonds are issued between the value of the property and the debt secured bythe Special Taxes and other taxes and assessments which may be levied on such property. The incurringof such additional indebtedness could also affect the ability and willingness of the property owners withinthe Community Facilities District to pay the Special Taxes when due.

Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can begiven that the proceeds of any foreclosure sale of the property with delinquent Special Taxes would besufficient to pay the delinquent Special Taxes.

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Historical and Current Assessed Values; Value-to-Lien Ratios

Historical and Current Assessed Values. The following table summarizes the historical andcurrent assessed values within the Community Facilities District.

Table 6

Community Facilities District No. 97-1of the Tustin Unified School District2015 Special Tax Refunding Bonds

Historical and Current Assessed Values

YearValue Date(January 1)

TaxableAssessed Valueof All Parcels(1)

TaxableDwelling Units

Taxed PropertyGross Assessed

Value

AnnualPercentageChange in

Assessed Value

2005-06 2005 4,450 7,689 $2,505,799,916 –2006-07 2006 4,566 7,764 2,809,418,215 12.12%

2007-08 2007 4,616 7,764 3,031,093,766 7.89

2008-09 2008 4,616 7,764 3,126,299,253 3.14

2009-10 2009 4,616 7,764 2,925,594,809 (6.42)

2010-11 2010 4,616 7,764 2,986,857,595 2.09

2011-12 2011 4,616 7,764 3,013,373,981 0.89

2012-13 2012 4,616 7,764 3,034,158,892 0.69

2013-14 2013 4,616 7,764 3,114,451,754 2.65

2014-15 2014 4,616 7,764 3,274,146,320 5.13

(1)Source: Orange County Assessor Closed Roll Data as of July of each fiscal year; Assessed Values as of January 1.__________________Source: California Municipal Statistics, Inc. and Special District Financing & Administration, LLC.

Value-to-Lien Ratios. The total assessed values of all of the taxable property in the CommunityFacilities District, as determined by the County Assessor for Fiscal Year 2014-15, is $3,274,146,320. Thedirect and overlapping land secured special tax, assessment and general obligation bonded indebtednessof the Community Facilities District, as of March 30, 2015, plus the proposed aggregate principal amountof the Bonds is approximately $171,590,309. The assessed value-to-lien ratio of the property within theCommunity Facilities District, based on the Fiscal Year 2014-15 assessed values, the aggregate principalamount of the Bonds and the estimated direct and overlapping land secured special tax and assessmentand general obligation bonded indebtedness within the Community Facilities District is approximately19.08-to-1. The following table summarizes the assessed value-to-lien ratios within the CommunityFacilities District by value-to-lien category.

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Value-to-Lien Analysis

Value-to LienRange

TaxableParcels

TaxableDwelling

Units

GrossAssessedValue(1)

Fiscal Year2014-15

LevyAmount

PrincipalAmount ofthe Bonds(2)

OutstandingOtherDebt(3)

TotalOutstanding

Debt

AverageValue-to-Lien

Ratio

4.04 to 5 8(4) 8(4) $893,556 $7,976 $134,247 $86,958 $221,205 4.04:1

5.01 to 10 23 2,629 310,654,706 1,563,024 26,307,882 18,189,098 44,496,980 6.98:1

10.01 to 15 21 559 91,429,171 334,576 5,631,380 2,404,921 8,036,302 11.38:1

15.01 to 20 943 943 519,456,695 955,864 16,088,536 12,651,028 28,739,564 18.07:1

20.01 to 25 1,505 1,505 955,933,841 1,328,082 22,353,481 20,263,326 42,616,807 22.43:1

25. 01 to 30 1,238 1,238 811,437,209 835,039 14,054,882 15,666,897 29,721,779 27.30:1

Greater than 30 882 882 584,341,142 468,445 7,884,592 9,873,081 17,757,673 32.91:1

Total / Average 4,620 7,764 $3,274,146,320 $5,493,007 $92,455,000 $79,135,309 $171,590,309 19.08:1

(1) Represents the Gross Assessed Value as shown on the Overlapping Debt Statement.(2) Principal Amount of the Bonds has been allocated to the taxable parcels in proportion to their respective Fiscal Year 2014-15 Special Tax obligation.(3) Includes Direct and Overlapping Debt from Metropolitan Water District, Irvine Ranch Water District Improvement District No. 125, Irvine Ranch Water

District Improvement District No. 225, City of Irvine Assessment District No. 97-16, City of Irvine Assessment District No. 97-17, City of IrvineReassessment District No. 11-2, City of Irvine Reassessment District No. 12-1 and Tustin Unified School District School Facilities Improvement DistrictNo. 2012-1. All debt is allocated on gross assessed valuation, with the exception of the Improvement Districts of the Irvine Ranch Water District, which areallocated on assessed land valuation only, and the City of Irvine Assessment Districts, which are allocated on outstanding assessment amounts.

(4) The assessed value of these parcels is a result of transfer of base year values pursuant to Proposition 60, Proposition 90 or Proposition 110.

____________________Source: Special District Financing & Administration, LLC and California Municipal Statistics, Inc.

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Estimated Overall Tax Rates

Table 8 below sets forth estimated Fiscal Year 2014-15 overall tax rates projected to beapplicable to selected dwelling units with the indicated building square feet in the Community FacilitiesDistrict. Table 8 also sets forth those entities with fees, charges, ad valorem taxes and special taxesregardless of whether those entities have issued debt.



Fiscal Year 2014-15 Tax ObligationFor Selected Dwelling Units

Assessor’s Parcel No. 530-384-05 530-682-51 935-536-80 530-791-26Situs 46 Declaration

Pl 5 Benicia1406 Terra

Bella 10 MarketplaceBuilding Permit Issuance Date 7/15/1997 11/2/1999 4/13/2000 2/25/2006Tract No. 15432 15814 15739 15871Lot No. 46 25 14 MultipleSquare Footage of DwellingUnit(s) 3,801 2,723 1,942 565,012Land Use Category 1 2 3 4Density SFD Large Lot SFD Small Lot SFA AptDwelling Units 1 1 1 378

Land Value Only $338,558 $648,137 $143,738 $2,940,908Fiscal Year 2014/15 Net AssessedValue 571,450 977,000 277,797 53,507,660Ad Valorem Property Taxes:

General Purpose $5,714.50 $9,770.00 $2,777.96 $535,076.60TUSD SFID 2012-1 Series A 80.34 137.36 39.05 7,523.17Metropolitan Water District-West 20.00 34.20 9.73 1,872.77Irvine Ranch Water District (Land

Value Only) 94.78 181.46 40.24 823.44Total General Property Taxes $5,909.62 $10,123.02 $2,866.98 $545,295.98Assessments, Special Taxes & ParcelCharge:

TUSD CFD No. 97-1 $1,135.22 $759.34 $405.30 $224,244.72Tustin Landscape & Lighting #1 196.42 1,366.78 583.64 0.00MWD Standby Charge 101.52 96.32 96.32 2,360.98Mosquito Fire and Ant 10.08 10.08 10.08 154.36Vector Control 5.02 5.02 3.01 54.72

Total Assessments & Parcel Charges 1.92 1.92 0.67 6.72$1,450.18 $2,239.46 $1,099.02 $226,821.50

Fiscal Year 2014-15 Total Property Tax $7,359.80 $12,362.48 $3,966.00 $772,117.48Effective Tax Rate: 1.29% 1.27% 1.43% 1.44%

____________________Source: Special District Financing & Administration, LLC; County of Orange Treasurer-Tax-Collector’s Website.

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Delinquency History; School District Community Facilities District Special Tax Delinquencies

Community Facilities District Delinquency History. For Fiscal Year 2014-15, $5,493,007.48was levied on 4,616 parcels and as of April 29, 2015, the second installment of Special Taxes has beenpaid with respect to the Community Facilities District except for an aggregate of approximately$58,823.00 levied on 131 parcels.

The following table summarizes the Special Tax delinquencies for Fiscal Years 2005-06through the second installment of Fiscal Year 2014-15.



Special Tax Delinquency History

Delinquencies at Fiscal Year End Delinquencies as of April 29, 2015FiscalYear

AmountLevied

ParcelsLevied

ParcelsDelinquent

AmountDelinquent

PercentDelinquent

ParcelsDelinquent

AmountDelinquent

PercentDelinquent

2005/06 $6,728,991.00 4,441 89 $52,177.33 0.78% 0 $0.00 0.00%

2006/07 6,916,080.10 4,566 135 89,837.20 1.30 0 0.00 0.00

2007/08 7,054,441.48 4,616 164 126,723.29 1.80 0 0.00 0.00

2008/09 7,195,542.86 4,616 157 116,726.88 1.62 0 0.00 0.00

2009/10 7,339,434.88 4,616 87 69,209.10 0.94 0 0.00 0.00

2010/11 5,756,887.08 4,616 82 42,059.48 0.73 1 594.88 0.01

2011/12 5,345,128.62 4,616 54 25,802.73 0.48 0 0.00 0.00

2012/13 5,452,065.08 4,616 52 29,001.32 0.53 0 0.00 0.00

2013/14 5,430,909.72 4,616 30 15,410.27 0.28 5 2,088.05 0.042014/15

(1)5,493,007.48 4,616 131 58,823.00 1.07 131 58,823.00 1.07

(1)Delinquency percentage shown for Fiscal Year 2014-15 reflects delinquent amount based on information available as of April 29, 2015.

____________________Source: Special District Financing & Administration, LLC.

School District Community Facilities District Special Tax Delinquencies. The School Districthas formed five other community facilities districts in the past, three of such community facilitiesdistricts have special tax bonds currently outstanding and one of which has been dissolved. None ofsuch community facilities districts have experienced delinquencies in excess of 2%. The CommunityFacilities District cannot predict what future delinquency rates within the Community Facilities Districtor other community facilities districts formed by the School District may be.

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BONDOWNERS’ RISKS

In addition to the other information contained in this Official Statement, the following risk factorsshould be carefully considered in evaluating the investment quality of the Bonds. The CommunityFacilities District cautions prospective investors that this discussion does not purport to be comprehensiveor definitive and does not purport to be a complete statement of all factors which may be considered asrisks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussedherein could adversely affect the ability or willingness of property owners in the Community FacilitiesDistrict to pay their Special Taxes when due. Any such failure to pay Special Taxes could result in theinability of the Community Facilities District to make full and punctual payments of debt service on theBonds. In addition, the occurrence of one or more of the events discussed herein could adversely affectthe value of the property in the Community Facilities District.

Risks of Real Estate Secured Investments Generally

The Bondowners will be subject to the risks generally incident to an investment secured by realestate, including, without limitation, (i) adverse changes in local market conditions, such as changes in themarket value of real property in the vicinity of the Community Facilities District, the supply of or demandfor competitive properties in such area, and the market value of residential property or apartment propertyin the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses,governmental rules (including, without limitation, zoning laws and laws relating to endangered speciesand hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation,earthquakes, landslides, wildfires, floods and drought), which may result in uninsured losses and (iv) theimposition of overlapping debt by the Community Facilities District or other public agencies.

Property Tax Delinquencies

Under the Fiscal Agent Agreement, the Community Facilities District has the authority and theobligation to increase the levy of Special Taxes against non-delinquent property owners in theCommunity Facilities District if other owners are delinquent in the payment of Special Taxes. However,the Community Facilities District’s ability to increase Special Tax levies for this purpose is limited bytwo factors: (a) the Maximum Special Tax rates set forth in the Rate and Method; and (b) the limitationson such increases set forth in the Act and the Resolution of Intention. The Act provides that under nocircumstances may the Special Tax levied against any parcel used for private residential purposes beincreased as a consequence of delinquency or default by an owner of any other parcel or parcels withinthe Community Facilities District by more than 10%. The Resolution of Intention provides that theSpecial Tax shall not be increased by more than 10% as a result of delinquencies of other propertyowners. Thus, the Community Facilities District may not be able to increase Special Tax levies in futurefiscal years by enough to make up for delinquencies for prior fiscal years. If the Community FacilitiesDistrict were not included within the County’s Teeter Plan, this would result in defaults in the payment ofprincipal of and interest on the Bonds.

Although the Community Facilities District has covenanted under the Fiscal Agent Agreement tocommence and diligently pursue foreclosure under certain circumstances (see “SECURITY FOR THEBONDS – Proceeds of Foreclosure Sales”), foreclosure delays may occur due to bankruptcy of delinquentproperty owners and other circumstances (see “BONDOWNERS’ RISKS – Bankruptcy and ForeclosureDelays”).

Delinquencies in the payment of property taxes and the Special Taxes may result from any of anumber of factors (including the state of the local economy and the local real estate market) affectingindividual property owners, which may or may not apply to the property owners in the Community

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Facilities District. See “BONDOWNERS’ RISKS” generally for discussions of certain potential causesof property tax delinquencies.

Economic Uncertainty

Economic uncertainty can affect the ability of homeowners or owners of apartment complexes topay the Special Taxes or the marketability of the Bonds. As compared to the economic uncertainty andincreased unemployment experienced in recent years, pursuant to the California EmploymentDevelopment Department, unemployment rates decreased to approximately 3.5% for the City of Irvinethrough March, 2015 (not seasonally adjusted), as compared to 3.5% for calendar year 2014, decreased toapproximately 4.1% for the City of Tustin through March, 2015 (not seasonally adjusted), as compared to4.4% for calendar year 2014, decreased to approximately 4.4% for the Santa Ana/Anaheim/Irvine areathrough March, 2015 (not seasonally adjusted), as compared to 4.7% for calendar year 2014 anddecreased to approximately 4.4% through March, 2015 (not seasonally adjusted), for the County ascompared to 4.7% for calendar year 2014.

State Budget. In recent years, as a result of the slow State and national economies, the Stateexperienced serious budgetary shortfalls. More recently, State revenues have increased. The effect ofState revenue shortfalls, should they occur in the future, on the local or State economy or on the demandfor, or value of, the property within the Community Facilities District cannot be predicted.

Concentration of Ownership

No property owner is obligated in any manner to continue to own the land it presently ownswithin the Community Facilities District. The Special Taxes are not a personal obligation of any ownerof the parcels, and the Community Facilities District can offer no assurance that any current owner or anyfuture owner will be financially able to pay such installments or that it will choose to pay even iffinancially able to do so. As indicated in “COMMUNITY FACILITIES DISTRICT NO. 97-1 –Concentration of Special Tax Obligation,” there are 7 apartment complexes owned primarily by a singleentity, The Irvine Company, with one of the apartment complexes being owned by The Irvine Companyand JHC-Culver, LP, as a joint venture for the purpose of providing affordable housing in the City ofIrvine. In the aggregate, the 7 apartment complexes were subject to the levy of Special Taxes in FiscalYear 2014-15 equal to approximately 34.08% of the aggregate Fiscal Year 2014-15 Special Taxes levied.

Special Taxes Are Not Personal Obligations

The current and future owners of land within the Community Facilities District are not personallyliable for the payment of the Special Taxes. Rather, the Special Tax is an obligation only of the landwithin the Community Facilities District. If the value of the land within the Community Facilities Districtis not sufficient to fully secure the Special Tax, then the Community Facilities District has no recourseagainst the landowner under the laws by which the Special Tax has been authorized and levied and theBonds have been issued.

Assessed Values; Value-to-Lien Ratios

Assessed Values. Prospective purchasers of the Bonds should not assume that the land within theCommunity Facilities District could be sold for the assessed amount described in this Official Statementat a foreclosure sale for delinquent Special Taxes.

The assessed values summarized hereto estimates the fee simple interest assessed value of theproperty within the Community Facilities District. This value is merely the amount of the assessed valuein the records maintained by the County Assessor. The assessed value relates to sale by a willing seller to

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a willing buyer at a point in time, as adjusted by State law. Consequently, the assessed value is of limiteduse in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may nothave the benefit of full information.

No assurance can be given that if any of the Taxable Property in the Community FacilitiesDistrict should become delinquent in the payment of Special Taxes, and be foreclosed upon, that suchproperty could be sold for the assessed value. See “COMMUNITY FACILITIES DISTRICT NO. 97-1 –Historical and Current Assessed Values; Value-to-Lien Ratios.”

Value-to-Lien Ratios. Value-to-lien ratios have traditionally been used in land-secured bondissues as a measure of the “collateral” supporting the willingness of property owners to pay their specialtaxes and assessments (and, in effect, their general property taxes as well). The value-to-lien ratio ismathematically a fraction, the numerator of which is the value of the property (usually either the assessedvalue or a market value as determined by an appraiser) and the denominator of which is the “lien” of theassessments or special taxes. A value-to-lien ratio should not, however, be viewed as a guarantee ofcredit-worthiness. Land values are especially sensitive to economic cycles. A downturn of the economymay depress land values and hence the value-to-lien ratios. Further, the value-to-lien ratio cited for abond issue is an average. Individual parcels in a community facilities district may fall above or below theaverage, sometimes even below a 1:1 ratio. (With a 1:1 ratio, the land is worth less than the debt on it.)Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years tocomplete, and the bankruptcy courts may impede the foreclosure action. Finally, local agencies may formoverlapping community facilities districts or assessment districts. They typically do not coordinate theirbond issuances. Debt issuance by another entity can dilute value-to-lien ratios. See “COMMUNITYFACILITIES DISTRICT NO. 97-1 – Direct and Overlapping Debt.”

The Bonds Are Limited Obligations of the Community Facilities District

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

Neither the faith and credit nor the taxing power of the School District, the State or any politicalsubdivision thereof other than the Community Facilities District is pledged to the payment of the LocalObligations. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. TheBonds are not general or special obligations of the School District, the State or any political subdivisionthereof nor general obligations of the Community Facilities District, but are special obligations of theCommunity Facilities District, payable solely from Net Taxes and the other assets pledged therefor underthe Fiscal Agent Agreement.

Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property

While the Special Taxes are secured by the Taxable Property, the security only extends to thevalue of such Taxable Property that is not subject to priority and parity liens and similar claims.

Table 7 in the section entitled “COMMUNITY FACILITIES DISTRICT NO. 97-1 – Historicaland Current Assessed Values; Value-to-Lien Ratios” indicates the presently outstanding amount ofgovernmental obligations (with stated exclusions), the tax or assessment for which is or may become anobligation of one or more of the parcels of Taxable. The table does not specifically identify which of thegovernmental obligations are secured by liens on one or more of the parcels of Taxable Property.

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In addition, other governmental obligations may be authorized and undertaken or issued in thefuture, the tax, assessment or charge for which may become an obligation of one or more of the parcels ofTaxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing theBonds.

In general, as long as the Special Taxes are collected on the County tax roll, the Special Taxesand all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are ofequal 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 ofproceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Taxes will besubordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosureproceedings, the Special Taxes will generally be on a parity with the other taxes, assessments andcharges, and will share the proceeds of such foreclosure proceedings on a pro rata basis. Although theSpecial 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 SpecialTaxes 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 aparcel of Taxable Property, other less common claims may be relevant. One of the most serious in termsof the potential reduction in the value that may be realized to pay the Special Taxes is a claim with regardto a hazardous substance. See “ – Factors Affecting Parcel Values and Aggregate Value – HazardousSubstances” below.

Disclosure to Future Purchasers

The Community Facilities District has recorded a Notice of Special Tax Lien in the office of theOrange County Recorder. While title companies normally refer to such notices in title reports, there canbe no guarantee that such reference will be made or, if made, that a prospective purchaser or lender willconsider such Special Tax obligation in the purchase of a parcel of land or a home in the CommunityFacilities District or the lending of money thereon. The Act requires the subdivider (or its agent orrepresentative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, orunit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using astatutorily 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 tonotify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by anowner of the property to comply with the above requirements, or failure by a purchaser or lessor toconsider or understand the nature and existence of the Special Tax, could adversely affect the willingnessand ability of the purchaser or lessor to pay the Special Tax when due.

Insufficiency of the Special Tax

The principal source of payment of principal of and interest on the Bonds is the proceeds of theannual levy and collection of the Special Tax against property within the Community Facilities District.The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot bemade at a higher rate even if the failure to do so means that the estimated proceeds of the levy andcollection of the Special Tax, together with other available funds, will not be sufficient to pay debt serviceon the Bonds. Other funds which might be available include funds derived from the payment of penaltieson delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels onwhich levies of the Special Tax are delinquent.

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The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the valueof particular Taxable Property 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 theproportionate share of debt service on the Bonds, and certainly not a direct relationship.

The Special Tax levied in any particular tax year on a Taxable Property is based upon therevenue needs and the application of the Rate and Method. Application of the Rate and Method will, inturn, be dependent upon certain development factors with respect to each Taxable Property bycomparison with similar development factors with respect to the other Taxable Property within theCommunity Facilities District. Thus, in addition to annual variations of the revenue needs from theSpecial Tax, the following are some of the factors which might cause the levy of the Special Tax on anyparticular Taxable Property to vary from the Special Tax that might otherwise be expected:

(1) Reduction in the amount of Taxable Property, for such reasons as acquisition ofTaxable Property by a government and failure of the government to pay the Special Tax basedupon 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 parcels ofTaxable Property; or

(2) Failure of the owners of Taxable Property to pay the Special Tax and delays inthe collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of thedelinquent parcels, thereby resulting in an increased tax burden on the remaining parcels ofTaxable Property.

Except as set forth above under “SECURITY FOR THE BONDS – Special Taxes” and “ – Rateand Method” herein, the Fiscal Agent Agreement provides that the Special Tax is to be collected in thesame manner as ordinary ad valorem property taxes are collected and, except as provided in the specialcovenant for foreclosure described in “SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales”and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case ofdelinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes areunpaid 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 inpayments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings andreceipt by the Community Facilities District of the proceeds of sale if the Reserve Fund is depleted. See“SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales.”

Exempt Properties

Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see“SECURITY FOR THE BONDS – Rate and Method” herein). In addition, the Act provides thatproperties or entities of the state, federal or local government are exempt from the Special Tax; provided,however, that property within the Community Facilities District acquired by a public entity throughnegotiated transactions, or by gift or devise, which is not otherwise exempt from the Special Taxes willcontinue to be subject to the Special Taxes. In addition, the Act provides that if property subject to theSpecial Taxes is acquired by a public entity through eminent domain proceedings, the obligation to paythe Special Taxes with respect to that property is to be treated as if it were a special assessment and bepaid from the eminent domain award. The constitutionality and operation of these provisions of the Acthave not been tested. If for any reason property subject to the Special Taxes becomes exempt fromtaxation by reason of ownership by a non-taxable entity such as the federal government, or another publicagency, subject to the limitation of the maximum authorized rate of levy, the Special Taxes may bereallocated to the remaining taxable properties within the Community Facilities District. This would

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result in the owners of such property paying a greater amount of the Special Taxes and could have anadverse impact upon the timely payment of the Special Taxes; however, the amount of Special Tax to belevied and collected from the property owner is subject to the Special Taxes as permitted by the SpecialTax Formula, the Act and the Resolution of Intention. If a substantial portion of land within theCommunity Facilities District became exempt from the Special Taxes because of public ownership, orotherwise, the maximum Special Taxes which could be levied upon the remaining acreage might not besufficient to pay principal of and interest on the Bonds when due and a default will occur with respect tothe payment of such principal and interest.

The Act further provides that no other properties or entities are exempt from the Special Taxesunless the properties or entities are expressly exempted in a resolution of consideration to levy a newspecial tax or to alter the rate or method of apportionment of an existing special tax. The Act wouldprohibit the Board from adopting a resolution to reduce the rate of the Special Tax or terminate the levyof the Special Tax unless the Board determined that the reduction or termination of the Special Tax“would not interfere with the timely retirement” of the Bonds. See “ – Right to Vote on Taxes Act”below.

Depletion of Reserve Fund

Each Reserve Account of the Reserve Fund is to be maintained at an amount equal to itsrespective Reserve Requirement (see “SECURITY FOR THE BONDS – Reserve Fund” herein). Fundsin a Reserve Account may be used to pay principal of and interest on the corresponding Series of Bondsin the event the proceeds of the levy and collection of the Special Tax against property within theCommunity Facilities District is insufficient. If funds in a Reserve Account for the corresponding Seriesof Bonds are depleted, the funds can be replenished from the proceeds of the levy and collection of theSpecial Tax that are in excess of the amount required to pay all amounts to be paid to the Bondownerspursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Taxlevy can occur if the proceeds that are collected from the levy of the Special Tax against property withinthe Community Facilities District at the maximum tax rates, together with other available funds, remaininsufficient to pay all such amounts. Thus it is possible that a Reserve Account will be depleted and notbe replenished by the levy of the Special Tax.

Bond Insurance Risk Factors. The Community Facilities District has acquired a Policy toguarantee the scheduled payment of principal and interest on the Insured Bonds. The following are riskfactors relating to bond insurance.

In the event of default of the payment of principal or interest with respect to the Insured Bondswhen all or a portion becomes due, any Owner of the Insured Bonds shall have a claim under the Policyfor such payments. The Policy does not insure against redemption premium. The payment of principaland interest in connection with mandatory or optional redemption of the Insured Bonds by theCommunity Facilities District which is recovered by the Community Facilities District from the Owner asa voidable preference under applicable bankruptcy law is covered by the Policy; however, such paymentswill be made by the Insurer at such time and in such amounts as would have been due absent suchredemption by the Community Facilities District unless the Insurer chooses to pay such amounts at anearlier date.

Under most circumstances, default of payment of principal and interest does not obligateacceleration of the obligations of the Bond Insurer without appropriate consent. The Bond Insurer maydirect and must consent to any remedies and the Bond Insurer’s consent may be required in connectionwith amendments to any applicable legal documents.

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In the event the Bond Insurer is unable to make payment of principal and interest on the InsuredBonds as such payments become due under the Policy, the Insured Bonds are payable solely from themoneys received pursuant to the applicable legal documents. In the event the Bond Insurer becomesobligated to make payments with respect to the Insured Bonds, no assurance is given that such event willnot adversely affect the market price of the Insured Bonds or the marketability (liquidity) for the InsuredBonds.

The long-term ratings on the Insured Bonds are dependent in part on the financial strength of theBond Insurer and its claims-paying ability. The Bond Insurer’s financial strength and claims-payingability are predicated upon a number of factors which could change over time. No assurance is given thatthe long-term ratings of the Bond Insurer and of the ratings on the Insured Bonds insured by the BondInsurer will not be subject to downgrade and such event could adversely affect the market price of theInsured Bonds or the marketability (liquidity) for the Insured Bonds. See description of “RATINGS”herein.

The obligations of the Bond Insurer are contractual obligations and in an event of default by theBond Insurer, the remedies available may be limited by applicable bankruptcy law or state law related toinsolvency of insurance companies.

None of the Community Facilities District, the School District or the Underwriter has madeindependent investigation into the claims-paying ability of the Bond Insurer and no assurance orrepresentation regarding the financial strength or projected financial strength of the Bond Insurer is given.Thus, when making an investment decision, potential investors should carefully consider the ability of theCommunity Facilities District to pay principal and interest on the Insured Bonds and the claims-payingability of the Bond Insurer, particularly over the life of the investment. See “BOND INSURANCE” forfurther information provided by the Bond Insurer regarding the Bond Insurer and the Policy and forinstructions for obtaining current financial information concerning the Bond Insurer.

Potential Delay and Limitations in Foreclosure Proceedings

The payment of property owners’ taxes and the ability of the Community Facilities District toforeclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicialforeclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affectingcreditors’ rights or by the laws of the State relating to judicial foreclosure. See “SECURITY FOR THEBONDS – Proceeds of Foreclosure Sales” and “BONDOWNERS’ RISKS – Bankruptcy and ForeclosureDelay” herein. In addition, the prosecution of a foreclosure could be delayed due to many reasons,including crowded local court calendars or lengthy procedural delays. For a description of historicalspecial tax collections in community facilities districts formed by the School District, see“COMMUNITY FACILITIES DISTRICT NO. 97-1 – Delinquency History; School District CommunityFacilities District Special Tax Delinquencies.”

The ability of the Community Facilities District to collect interest and penalties specified by Statelaw and to foreclose against properties having delinquent Special Tax installments may be limited incertain respects with regard to properties in which the Federal Deposit Insurance Corporation (the“FDIC”) has or obtains an interest. The FDIC would obtain such an interest by taking over a financialinstitution which has made a loan which is secured by property within the Community Facilities District.See “BONDOWNERS’ RISKS – Payments by FDIC and Other Federal Agencies” herein.

The Community Facilities District and the School District are unable to predict what effect theapplication of a policy statement by the FDIC regarding payment of State and local real property taxeswould have in the event of a delinquency on a parcel within the Community Facilities District in whichthe FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial

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foreclosure sale would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosuresale.

In addition, potential investors should be aware that judicial foreclosure proceedings are notsummary remedies and can be subject to significant procedural and other delays caused by crowded courtcalendars and other factors beyond the control of the Community Facilities District or the School District.Potential investors should assume that, under current conditions, it is estimated that a judicial foreclosureof 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 bidamount” which is equal to the sum of all delinquent Special Tax installments, penalties and interestthereon, costs of collection (including reasonable attorneys’ fees), post-judgment interest and costs ofsale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parceland multiple parcels may not be aggregated in a single “bulk” foreclosure sale. If any parcel fails toobtain a “minimum bid,” the Community Facilities District, may, but is not obligated to, seek superiorcourt approval to sell such parcel at an amount less than the minimum bid. Such superior court approvalrequires the consent of the owners of 75% of the aggregate principal amount of the outstanding Bonds.

Delays and uncertainties in the Special Tax lien foreclosure process create significant risks forBondowners. High rates of special tax payment delinquencies, which continue during the pendency ofprotracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of theReserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, therecould be a default in payment of the principal of, and interest on, the Bonds. See “ – Concentration ofOwnership” above.

Bankruptcy and Foreclosure Delay

The payment of Special Taxes and the ability of the Community Facilities District to foreclosethe lien of delinquent Special Taxes as discussed in the section herein entitled “SECURITY FOR THEBONDS” may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights orby the laws of the State relating to judicial foreclosure. In addition, the prosecution of a judicialforeclosure 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 (includingBond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legalinstruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting therights of creditors generally.

Although bankruptcy proceedings would not cause the obligation to pay the Special Tax tobecome extinguished, bankruptcy of a property owner or of a partner or other equity owner of a propertyowner, could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecutingsuperior court foreclosure proceedings or adversely affect the ability or willingness of a property owner topay the Special Taxes and could result in the possibility of delinquent Special Taxes not being paid infull. In addition, the amount of any lien on property securing the payment of delinquent Special Taxescould be reduced if the value of the property were determined by the bankruptcy court to have becomeless than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reducedlien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of thelien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay ordefault in payment of the principal of and interest on the Bonds and the possibility of delinquent SpecialTaxes not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient tofully discharge delinquent installments

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

According to the court’s ruling, as administrative expenses, post-petition taxes would have to bepaid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of suchadministrative expenses may be allowed to be deferred. Once the property is transferred out of thebankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current advalorem taxes.

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

It should also be noted that on October 22, 1994, Congress enacted 11 U.S. C. Section362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed bya political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, inthe event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes insubsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bondownersshould be aware that the potential effect of 11 U.S. C. Section 362(b)(18) on the Special Taxes dependsupon whether a court were to determine that the Special Taxes should be treated like ad valorem taxes forthis purpose.

In addition, potential investors should be aware that judicial foreclosure proceedings are notsummary remedies and can be subject to significant procedural and other delays caused by crowded courtcalendars and other factors beyond control of the Community Facilities District or the School District.Potential investors should assume that, under current conditions, it is estimated that a judicial foreclosureof 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 bidamount” which is equal to the sum of all delinquent Special Tax installments, penalties and interestthereon, costs of collection (including reasonable attorneys’ fees), post-judgment interest and costs ofsale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parceland multiple parcels may not be aggregated in a single “bulk” foreclosure sale. If any parcel fails toobtain a “minimum bid,” the Community Facilities District may, but is not obligated to, seek superiorcourt approval to sell such parcel at an amount less than the minimum bid. Such superior court approvalrequires 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 theability 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 theforeclosure covenant, a six-month period after termination of such military service to redeem propertysold to enforce the collection of a tax or assessment, and a limitation on the interest rate on the delinquenttax or assessment to persons in military service if the court concludes the ability to pay such taxes orassessments is materially affected by reason of such service.

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Payments by FDIC and Other Federal Agencies

The ability of the Community Facilities District to collect interest and penalties specified byState law and to foreclose the lien of delinquent Special Taxes may be limited in certain respects withregard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the FederalNational Mortgage Association (“Fannie Mae”), Freddie Mac (formerly the Federal Home LoanMortgage Corporation), the Drug Enforcement Agency, the Internal Revenue Service or other similarfederal governmental agencies has or obtains an interest.

Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of PolicyRegarding the Payment of State and Local Property Taxes (the “1991 Policy Statement”). The 1991Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the“Policy Statement”). The Policy Statement provides that real property owned by the FDIC is subject tostate and local real property taxes only if those taxes are assessed according to the property’s value, andthat the FDIC is immune from real property taxes assessed on any basis other than property value.According to the Policy Statement, the FDIC will pay its property tax obligations when they become dueand payable and will pay claims for delinquent property taxes as promptly as is consistent with soundbusiness practice and the orderly administration of the institution’s affairs, unless abandonment of theFDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquentproperty taxes owed at the rate provided under state law, to the extent the interest payment obligation issecured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and willnot pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC ownedproperty are secured by a valid lien (in effect before the property became owned by the FDIC), the FDICwill pay those claims. The Policy Statement further provides that no property of the FDIC is subject tolevy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC willnot permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’sconsent.

The Policy Statement states that the FDIC generally will not pay non ad valorem taxes, includingspecial assessments, on property in which it has a fee interest unless the amount of tax is fixed at the timethat the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to theextent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and aspecial tax formula which determines the special tax due each year, are specifically identified in thePolicy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity.With respect to property in California owned by the FDIC on January 9, 1997, and that was owned by theResolution Trust Corporation (“RTC”) on December 31, 1995, or that became the property of the FDICthrough foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC’sprior practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to theRTC’s acquisition of an interest in the property. All other special taxes may be challenged by the FDIC.

The Community Facilities District is unable to predict what effect the application of the PolicyStatement would have in the event of a delinquency on a parcel within the Community Facilities Districtin which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed ata judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at aforeclosure sale. Owners of the Bonds should assume that the Community Facilities District will beunable to collect Special Taxes or to foreclose on any parcel owned by the FDIC. Such an outcome couldcause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Basedupon the secured tax roll as of January 1, 2014, the FDIC did not own any of the property in theCommunity Facilities District. The Community Facilities District expresses no view concerning thelikelihood that the risks described above will materialize while the Bonds are outstanding.

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Similarly, in the event a parcel of taxable property is owned by a federal government entity orfederal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trustsecured by a parcel of taxable property is owned by a federal government entity or federal governmentsponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collectdelinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause ofthe United States Constitution (“This Constitution, and the Laws of the United States which shall be madein Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the UnitedStates, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anyThing in the Constitution or Laws of any State to the contrary notwithstanding.”), in the absence ofCongressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes orassessments if foreclosure would impair the federal government interest. This means that, unlessCongress has otherwise provided, if a federal government entity owns a parcel of taxable property butdoes not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable stateand local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest inthe parcel and a District wishes to foreclose on the parcel as a result of delinquent Special Taxes, theproperty cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to paydelinquent taxes and assessments on a parity with the Special Taxes and preserve the federalgovernment’s mortgage interest. For a discussion of risks associated with taxable parcels within theCommunity Facilities District becoming owned by the federal government, federal government entities orfederal government sponsored entities, see “ – Insufficiency of Special Taxes” and “ − Exempt Properties.”

Factors Affecting Parcel Values and Aggregate Value

Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in theCommunity Facilities 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 privateimprovements on the parcels of Taxable Property and the continued habitability and enjoyment of suchprivate improvements. Such additional factors include, without limitation, geologic conditions such asearthquakes and volcanic eruptions, topographic conditions such as earth movements, landslides,liquefaction, floods or fires, and climatic conditions such as tornadoes, droughts, and the possiblereduction in water allocation or availability. The Community Facilities District is not within a flood zoneand flood insurance is not required within the Community Facilities District. Grading and slopes were tobe constructed in a manner expected to remain stable. It is possible that one or more of the conditionsreferenced above may occur and may result in damage to improvements of varying seriousness, that thedamage may entail significant repair or replacement costs and that repair or replacement may never occureither because of the cost or because repair or replacement will not facilitate habitability or other use, orbecause other considerations preclude such repair or replacement. Under any of these circumstances, thevalue of the Taxable Property may well depreciate or disappear.

Seismic Conditions. The Community Facilities District, like all California communities, may besubject to unpredictable seismic activity. The occurrence of seismic activity in the Community FacilitiesDistrict could result in substantial damage to properties in the Community Facilities District which, inturn, could substantially reduce the value of such properties and could affect the ability or willingness ofthe property owners to pay their Special Taxes. Any major damage to structures as a result of seismicactivity could result in greater reliance on undeveloped property in the payment of Special Taxes.

January 17, 2014 Governor State of Emergency Proclamation regarding Drought. OnJanuary 17, 2014, with California facing water shortfalls in the then driest year in recorded state history,Governor Edmund G. Brown Jr. proclaimed a State of Emergency and directed state officials to take allnecessary actions to prepare for these drought conditions. In the State of Emergency declaration,

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Governor Brown directed state officials to assist farmers and communities that are economically impactedby dry conditions and to ensure the State can respond if Californians face drinking water shortages. TheGovernor also directed state agencies to use less water and hire more firefighters and initiated a greatlyexpanded water conservation public awareness. In addition, the proclamation gave state water officialsmore flexibility to manage supply throughout California under drought conditions.

The Governor’s drought State of Emergency follows a series of actions the administration hastaken to ensure that California is prepared for record dry conditions. In May 2013, Governor Brownissued an Executive Order to direct state water officials to expedite the review and processing ofvoluntary transfers of water and water rights. In December 2014, the Governor formed a Drought TaskForce to review expected water allocations, California’s preparedness for water scarcity and whetherconditions merit a drought declaration.

On April 1, 2015, for the first time in state history, the Governor directed the State WaterResources Control Board to implement mandatory water reductions in cities and towns across Californiato reduce water usage by 25 percent. This savings amounts to approximately 1.5 million acre-feet ofwater over the next nine months.

California set a new "low water" mark on April 1, 2015, with its early-April snowpackmeasurement. The statewide electronic reading of the snowpack's water content stood at 5 percent of theApril 1st average. April 1, 2015’s content was only 1.4 inches, or 5 percent of the 28-inch average. Thelowest previous reading since 1950 was 25 percent of average, so Water Year 2015 is the driest winter inCalifornia's written record.

The implementation of mandatory water reductions is ongoing. The Community FacilitiesDistrict cannot predict how long the drought conditions will last, what effect drought conditions may haveon property values or whether or to what extent water reduction requirements may affect the homeownersor owners of the apartment complexes in the Community Facilities District.

Hazardous Substances. While government taxes, assessments, and charges are a common claimagainst the value of a taxed parcel, other less common claims can occur. One of the most serious in termsof the potential reduction in the value that may be realized to pay the Special Taxes is a claim with regardto hazardous substances. In general, the owners and operators of a parcel may be required by law toremedy conditions relating to releases or threatened releases of hazardous substances. The federalComprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred toas “CERCLA” or “Superfund Act,” is the most well known and widely applicable of these laws, butCalifornia laws with regard to hazardous substances are also stringent and similar. Under many of theselaws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whetheror not the owner (or operator) had anything to do with creating or handling the hazardous substance. Theeffect therefore, should any of the parcels be affected by a hazardous substance, would be to reduce themarketability and value by the costs of remedying the condition, because the purchaser, upon becomingowner, will become obligated to remedy the condition just as is the seller.

Further, it is possible that liabilities may arise in the future with respect to any of the land withinthe Community Facilities Districts resulting from the existence, currently, of a substance presentlyclassified as hazardous but which has not been released or of a substance not presently classified ashazardous but which may in the future be so classified. Further, such liabilities may arise not simplyfrom the existence of a hazardous substance but from the method of handling it. All of these possibilitiescould significantly adversely affect the value of a parcel and the willingness or ability of the owner of anyparcel to pay the Special Tax installments.

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Legal Requirements. Other events which may affect the value of a parcel of Taxable Property inthe Community Facilities District include changes in the law or application of the law. Such changes mayinclude, without limitation, local growth control initiatives, local utility connection moratoriums and localapplication of statewide tax and governmental spending limitation measures.

No Acceleration Provisions

The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of apayment default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Pursuantto the Fiscal Agent Agreement, a Bondowner is given the right for the equal benefit and protection of allBondowners similarly situated to pursue certain remedies (see APPENDIX C – “SUMMARY OFCERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” herein). So long as the Bonds arein book-entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights andremedies of Bondowner.

Teeter Plan Termination

In 1993, the County implemented its Teeter Plan, as an alternate procedure for the distribution ofcertain property tax and assessment levies on the secured roll. Pursuant to its Teeter Plan, the County haselected to provide local agencies and taxing areas, including the Community Facilities District, with fulltax and assessment levies instead of actual tax and assessment collections. In return the County is entitledto retain all delinquent tax and assessment payments, penalties and interest. Thus, the County’s TeeterPlan may help protect Owners from the risk of delinquencies in the payment of Special Taxes. However,the County is entitled, and under certain circumstances could be required, to terminate its Teeter Plan withrespect to all or part of the local agencies and taxing areas covered thereby. A termination of the TeeterPlan with respect to the Community Facilities District would eliminate such protection from delinquentSpecial Taxes. See “SECURITY FOR THE BONDS – The Teeter Plan.”

Community Facilities District Formation

California voters, on June 6, 1978, approved an amendment (“Article XIIIA”) to the CaliforniaConstitution. Section 4 of Article XIIIA, requires a vote of two-thirds of the qualified electorate toimpose “special taxes,” or any additional ad valorem, sales or transaction taxes on real property. At anelection held in the Community Facilities District, pursuant to the Act, more than two-thirds of thequalified electors within the Community Facilities District authorized the Community Facilities Districtto incur bonded indebtedness to finance the Facilities and approved the Rate and Method. The SupremeCourt of the State of California has not yet decided whether landowner elections (as opposed to residentelections) satisfy requirements of Section 4 of Article XIIIA, nor has the Supreme Court decided whetherthe 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, voidor annul the levy of a special tax or an increase in a special tax pursuant to the Act shall be commencedwithin 30 days after the special tax is approved by the voters. No such action has been filed with respectto the Special Tax.

Billing of Special Taxes

A special tax formula can result in a substantially heavier property tax burden being imposedupon properties within a community facilities district than elsewhere in a city or county, and this in turncan lead to problems in the collection of the special tax. In some community facilities districts thetaxpayers have refused to pay the special tax and have commenced litigation challenging the special tax,the community facilities district and the bonds issued by the community facilities district.

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Under provisions of the Act, the Special Taxes are billed to the properties within the CommunityFacilities District which were entered on the Assessment Roll of the County Assessor by January 1 of theprevious fiscal year on the regular property tax bills sent to owners of such properties. Such Special Taxinstallments are due and payable, and bear the same penalties and interest for non-payment, as do regularproperty tax installments. These Special Tax installment payments cannot be made separately fromproperty tax payments. Therefore, the unwillingness or inability of a property owner to pay regularproperty tax bills as evidenced by property tax delinquencies may also indicate an unwillingness orinability to make regular property tax payments and installment payments of Special Taxes in the future.See “SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales,” for a discussion of the provisionswhich apply, and procedures which the Community Facilities District is obligated to follow, in the eventof delinquency in the payment of installments of Special Taxes.

Inability to Collect Special Taxes

In order to pay debt service on the Bonds, it is necessary that the Special Tax levied against landwithin the Community Facilities District be paid in a timely manner. The Community Facilities Districthas covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosureproceedings against property with delinquent Special Tax in order to obtain funds to pay debt service onthe Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, butwould not be required to, advance the amount of the delinquent Special Tax to protect its security interest.In the event such superior court foreclosure is necessary, there could be a delay in principal and interestpayments to the owners of the Bonds pending prosecution of the foreclosure proceedings and receipt ofthe proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject toforeclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale willbe sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the Board, asthe Legislative Body of the Community Facilities District, to cause such an action to be commenced anddiligently pursued to completion, the Act does not specify the obligations of the Board with regard topurchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is noother purchaser at such sale.

Right to Vote on Taxes Act

An initiative measure, Proposition 218, commonly referred to as the “Right to Vote on TaxesAct” (the “Initiative”) was approved by the voters of the State of California at the November 5, 1996,general election. The Initiative added Article XIIIC (“Article XIIIC”) and Article XIIID to the CaliforniaConstitution. According to the “Title and Summary” of the Initiative, prepared by the California AttorneyGeneral, the Initiative limits “the authority of local governments to impose taxes and property-relatedassessments, fees and charges.” The provisions of the Initiative as they may relate to community facilitiesdistricts are subject to interpretation by the courts.

Among other things, Section 3 of Article XIIIC states that “. . . the initiative power shall not beprohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee orcharge.” The Act provides for a procedure, which includes notice hearing, protest and votingrequirements to alter the rate and method of apportionment of an existing special tax. However, the Actprohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminatethe levy of any special tax pledged to repay any debt incurred pursuant to the Act, unless such legislativebody determines that the reduction or termination of the special tax would not interfere with the timelyretirement of that debt. On July 1, 1997, a bill signed into law by the Governor of the State enactingGovernment Code Section 5854, which states that:

“Section 3 of Article XIIIC of the California Constitution, as adopted at theNovember 5, 1996, general election, shall not be construed to mean that any owner or

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beneficial owner of a municipal security, purchased before or after that date, assumesthe risk of, or in any way consents to, any action by initiative measure that constitutesan impairment of contractual rights protected by Section 10 of Article I of the UnitedStates Constitution.”

Accordingly, although the matter is not free from doubt, it is likely that the Initiative has notconferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interferewith the timely retirement of the Bonds.

It may be possible, however, for voters of the Community Facilities District to reduce theSpecial Taxes in a manner which does not interfere with the timely repayment of the Bonds but whichdoes reduce the maximum amount of Special Taxes that may be levied in any year below the existinglevels. Therefore, no assurance can be given with respect to the levy of Special Taxes for AdministrativeExpenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes inamounts greater than the amount necessary for the timely retirement of the Bonds.

The Act also establishes time limits for initiating any challenge to the validity of special taxeslevied pursuant to the Act and any challenge to the validity of bonds issued pursuant to the Act. Section53341 of the Act provides that:

“Any action or proceeding to attack, review, set aside, void, or annul the levy of aspecial tax or an increase in a special tax pursuant to this chapter shall be commencedwithin 30 days after the special tax is approved by the voters. Any appeal from a finaljudgment in that action or proceeding shall be perfected within 30 days after the entryof judgment.”

Section 53359 of the Act provides that:

“An action to determine the validity of bonds issued pursuant to this chapter or thevalidity of any special taxes levied pursuant to this chapter may be brought pursuantto Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code ofCivil Procedure but shall, notwithstanding the time limits specified in Section 860 ofthe Code of Civil Procedure, be commenced within 30 days after the voters approvethe issuance of the bonds or the special tax if the action is brought by an interestedperson pursuant to Section 863 of the Code of Civil Procedure. Any appeal from ajudgment in that action or proceeding shall be commenced within 30 days after entryof judgment.”

Like its antecedents, the Initiative is likely to undergo both judicial and legislative scrutinybefore its impact on the Community Facilities District and its obligations can be determined. Certainprovisions of the Initiative may be examined by the courts for their constitutionality under both State andfederal constitutional law. For example, on August 1, 2014, in City of San Diego. v. Shapiro, anAppellate Court ruled that an election held by the City of San Diego to authorize the levying of specialtaxes on hotels city-wide pursuant to a City of San Diego ordinance which created a convention centerfacilities district and which specifically defined the electorate to consist solely of (1) the owners of realproperty in the City of San Diego on which a hotel is located, and (2) the lessees of real property ownedby a governmental entity on which a hotel is located, was invalid under the California Constitutionbecause such landowners and lessees are neither “qualified electors” of the City of San Diego forpurposes of Articles XIII A, Section 4 of the California Constitution nor do they comprise a proper“electorate” under Article XIIIC, Section 2(d). (At the time the Community Facilities District electionwas conducted, there were no registered voters.) The Court specifically noted that the decision did notrequire the Court to consider the distinct question of whether landowner voting to impose special taxes

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pursuant to Section 53326(b) of the Act is constitutional under Article XIII A, Section 4 and ArticleXIIIC, Section 2(d) in districts that lack sufficient registered voters to conduct an election amongregistered voters, and thus does not affect the validity of the levy of the Special Taxes by a District. Inaddition, the provisions of the Act described above that establish time limits for initiating any challenge tothe validity of the Special Taxes levied pursuant to the Act or the issuance of Bonds pursuant to the Actdescribed above would provide obstacles to any party which sought to present a legal challenge to thevalidity of the Special Taxes or the Bonds based on the City of San Diego v. Shapiro case. TheCommunity Facilities District is not able to predict the outcome of any such examination of the Initiativein relation to community facilities districts formed under the Act.

The Community Facilities District covenants in the Fiscal Agent Agreement that nomodification of the maximum authorized Special Taxes within the Community Facilities District shall beapproved by the Community Facilities District which would prohibit the Community Facilities Districtfrom levying the Special Tax within the Community Facilities District in any Fiscal Year at such a rate ascould generate Special Taxes within the Community Facilities District in each Fiscal Year at least equalto 110% of Annual Debt Service plus estimated annual Administrative Expenses. The CommunityFacilities District further covenants that in the event an ordinance is adopted by initiative pursuant toSection 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter themaximum authorized Special Taxes, it will, to the extent of available District funds therefore, commenceand pursue legal action seeking to preserve its ability to comply with its covenant contained in thepreceding sentence.

The foregoing discussion of the Initiative should not be considered an exhaustive or authoritativetreatment of the issues. The Community Facilities District does not expect to be in a position to controlthe consideration or disposition of these issues and cannot predict the timing or outcome of any judicial orlegislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislativeenactments may all affect the impact of the Initiative 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 effectsof the Initiative.

Ballot Initiatives and Legislative Measures

The Initiative was adopted pursuant to a measure qualified for the ballot pursuant to California’sconstitutional initiative process, and the State Legislature has in the past enacted legislation which hasaltered 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 enactedby the State Legislature. The adoption of any such initiative or enactment of legislation might placelimitations on the ability of the State, the County, the School District or local districts to increaserevenues or to increase appropriations or on the ability of a property owner to complete the developmentof the property.

Limited Secondary Market

There can be no guarantee that there will be a secondary market for the Bonds or, if a secondarymarket exists, that such Bonds can be sold for any particular price. Although the Community FacilitiesDistrict has committed to provide certain statutorily-required financial and operating information, therecan be no assurance that such information will be available to Bondowners on a timely basis. The failureto provide the required annual financial information does not give rise to monetary damages but merelyan action for specific performance. Occasionally, because of general market conditions, lack of currentinformation, the absence of credit rating for the Bonds or because of adverse history or economicprospects connected with a particular issue, secondary marketing practices in connection with a particularissue are suspended or terminated. Additionally, prices of issues for which a market is being made will

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depend upon then prevailing circumstances. Such prices could be substantially different from the originalpurchase price.

Loss of Tax Exemption

As discussed under the caption “LEGAL MATTERS – Tax Exemption,” the interest on the 2015Series A Bonds could become includable in gross income for federal income tax purposes retroactive tothe date of issuance of the 2015 Series A Bonds as a result of a failure of the Community FacilitiesDistrict to comply with certain provisions of the Code. In order to maintain the exclusion from grossincome for federal income tax purposes of the interest on the 2015 Series A Bonds, the CommunityFacilities District has covenanted in the Fiscal Agent Agreement not to take any action, or fail to take anyaction, if such action or failure to take such action would adversely affect the exclusion from grossincome of interest on the 2015 Series A Bonds under Section 103 of the Internal Revenue Code of 1986,as amended. Interest on the 2015 Series A Bonds could become includable in gross income for purposesof federal income taxation retroactive to the date the 2015 Series Bonds were issued, as a result of acts oromissions of the Community Facilities District in violation of the Code. Should such an event oftaxability occur, the 2015 Series A Bonds are not subject to early redemption and will remain outstandingto maturity or until redeemed under one of the redemption provisions contained in the Fiscal AgentAgreement, as applicable. See “THE BONDS – Redemption.”

IRS Audit of Tax-Exempt Bond Issues

The Internal Revenue Service has initiated an expanded program for the auditing of tax-exemptbond issues, including both random and targeted audits and examinations. It is possible that the 2015Series A Bonds will be selected for audit or examination by the Internal Revenue Service. It is alsopossible that the market value of the 2015 Series A Bonds might be affected as a result of such an audit orexamination of the 2015 Series A Bonds (or by an audit of similar bonds).

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 maycause interest on the 2015 Series A Bonds to be subject, directly or indirectly, to federal income taxationor to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners fromrealizing the full current benefit of the tax status of such interest. The introduction or enactment of anysuch future legislative proposals, clarification of the Code or court decisions may also affect the marketprice for, liquidity of or marketability of, the 2015 Series A Bonds. In 2013 and 2014, legislative changeswere proposed in Congress, which, if enacted would result in additional federal income tax being imposedon certain owners of tax-exempt state or local obligations, such as the 2015 Series A Bonds. Prospectivepurchasers of the 2015 Series A Bonds should consult their own tax advisors regarding any pending orproposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses noopinion. As discussed in this Official Statement under the caption “LEGAL MATTERS - TaxExemption,” interest on the 2015 Series A Bonds could become includable in gross income for purposesof federal income taxation retroactive to the date the 2015 Series A Bonds were issued as a result offuture acts or omissions of the Community Facilities District in violation of its covenants in the FiscalAgent Agreement. Should such an event of taxability occur, the 2015 Series A Bonds are not subject tospecial redemption or acceleration and will remain outstanding until maturity or until redeemed under oneof the redemption provisions contained in the Fiscal Agent Agreement.

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Backup Withholding

Interest paid with respect to tax-exempt obligations such as the 2015 Series A Bonds is subjectto information reporting to the IRS in a manner similar to interest paid on taxable obligations. Inaddition, interest with respect to the Bonds may be subject to backup withholding if such interest is paidto a registered owner that (a) fails to provide certain identifying information (such as the registeredowner’s taxpayer identification number) in the manner required by the IRS, or (b) has been identified bythe IRS as being subject to backup withholding.

Limitations on Remedies

Remedies available to the Bondowners may be limited by a variety of factors and may beinadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. See “ – Payments by FDIC and Other Federal Agencies,” “ – NoAcceleration Provisions” and “ – Billing of Special Taxes” herein.

LEGAL MATTERS

Legal Opinion

The legal opinions of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, BondCounsel, approving the validity of each Series of Bonds will be made available to purchasers at the timeof original delivery and the forms of which are attached hereto as APPENDIX E. A copy of thecorresponding legal opinion will be printed on the Bonds of each Series. McFarlin & Anderson LLP,Laguna Hills, California is serving as Disclosure Counsel. Bowie, Arneson, Wiles & Giannone will alsopass upon certain legal matters for the School District and the Community Facilities District as specialcounsel to these entities. Nossaman LLP, Irvine, California, is serving as Underwriter’s Counsel.

Tax Exemption

2015 Series A Bonds. In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach,California, Bond Counsel, subject, however, to certain qualifications described herein, based upon ananalysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things,compliance with certain covenants, interest on the 2015 Series A Bonds is excluded from gross incomefor federal income tax purposes. In the opinion of Bond Counsel, such interest is not an item of taxpreference for purposes of the federal alternative minimum tax imposed on individuals and corporations.In addition, interest on the 2015 Series A Bonds is included as an adjustment in calculating federalcorporate alternative minimum taxable income for purposes of determining a corporation's alternativeminimum tax liability.

The opinions of Bond Counsel set forth in the preceding paragraph are subject to the conditionthat the Community Facilities District complies with all requirements of the Code that must be satisfiedsubsequent to the issuance of the 2015 Series A Bonds in order that such interest be, or continue to be,excluded from gross income for federal income tax purposes. The Community Facilities District hascovenanted in the Fiscal Agent Agreement to comply with each such requirement. Failure to comply withcertain of such requirements may cause the inclusion of such interest in gross income federal income taxpurposes to be retroactive to the date of issuance of the 2015 Series A Bonds. The Fiscal AgentAgreement and other related documents refer to certain requirements, covenants and procedures whichmay be changed and certain actions that may be taken, upon the advice or with an opinion of nationallyrecognized bond counsel. No opinion is expressed by Bond Counsel as to the effect on any Bond or theinterest thereon if any such change is made or action is taken upon the advice or approval of counsel other

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than Bond Counsel. Bond Counsel expresses no opinion regarding other tax consequences arising withrespect to the Bonds.

In the further opinion of Bond Counsel, interest on the 2015 Series A Bonds is exempt fromState personal income taxation.

Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual orreceipt of interest on, the Bonds may have federal or State tax consequences other than as describedabove. Bond Counsel expresses no opinion regarding any federal or State tax consequences arising withrespect to the Bonds other than as expressly described above.

2015 Series B Bonds. In the opinion of Bond Counsel, interest on the 2015 Series A Bonds isexempt from State of California personal income taxation.

Other Federal or State Tax Consequences. Owners of the Bonds should also be aware that theownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or Statetax consequences other than as described above. Bond Counsel expresses no opinion regarding anyfederal or State tax consequences arising with respect to the Bonds other than as expressly describedabove.

See APPENDIX E for the proposed forms of the opinions of Bond Counsel.

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 the Community Facilities District orthe School District, as applicable, or the Beneficial Owners regarding the tax-exempt status of the 2015Series A Bonds in the event of an audit examination by the IRS. Under current procedures, parties otherthan the Community Facilities District and their respective appointed counsel, including the BeneficialOwners, 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 isdifficult, obtaining an independent review of IRS positions with which the Community Facilities Districtlegitimately disagrees may not be practicable. Any action of the IRS, including but not limited toselection of the 2015 Series A Bonds for audit, or the course or result of such audit, or an audit of 2015Series A Bonds presenting similar tax issues may affect the market price for, or the marketability of, the2015 Series A Bonds, and may cause the Community Facilities District, the School District or theBeneficial Owners to incur significant expense.

Original Issue Discount; Premium Bonds. To the extent the issue price of any maturity of theBonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to beinterest and payable at least annually over the term of such Bonds), the difference constitutes “originalissue discount,” the accrual of which, to the extent properly allocable to each Owner thereof, is treated asinterest, and, in the case of the 2015 Series A Bonds, such interest is excluded from gross income forfederal income tax purposes and in with respect to both Series of Bonds is treated as interest on eachSeries of Bonds which is excluded from State personal income taxes. For this purpose, the issue price ofa particular maturity of the Bonds is the first price at which a substantial amount of such maturity of theBonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting inthe capacity of underwriters, placement agents or wholesalers). The original issue discount with respectto any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of aconstant interest rate compounded semi-annually (with straight-line interpolations between compoundingdates). The accruing original issue discount is added to the adjusted basis of such Bonds to determinetaxable 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 ofownership of the Bonds with original issue discount, including the treatment of purchasers who do not

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purchase such Bonds in the original offering to the public at the first price at which a substantial amountof such Bonds is sold to the public.

The Bonds purchased, whether at original issuance or otherwise, for an amount greater than theirprincipal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) willbe treated as having amortizable bond premium. No deduction is allowable for the amortizable bondpremium in the case of bonds, like the Premium Bonds, the interest on which in the case of the 2015Series A Bonds is excluded from gross income for federal income tax purposes. However, a purchaser'sbasis in a Premium Bond, and under Treasury Regulations the amount of tax-exempt interest receivedwith respect to the 2015 Series A Bonds, will be reduced by the amount of amortizable bond premiumproperly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisorswith 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 TaxExemption. Future legislative proposals, if enacted into law, clarification of the Code or court decisionsmay cause interest on the 2015 Series A Bonds to be subject, directly or indirectly, to federal incometaxation or may cause interest on the Bonds to be subject to or exempted from state income taxation, orotherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of suchinterest. The introduction or enactment of any such future legislative proposals, clarification of the Codeor court decisions may also affect the market price for, liquidity of or marketability of, the Bonds. In 2013and 2014, legislative changes were proposed in Congress, which, if enacted, would result in additionalfederal income tax being imposed on certain owners of tax-exempt state or local obligations, such as the2015 Series A Bonds. Prospective purchasers of the Bonds should consult their own tax advisorsregarding any pending or proposed federal or state tax legislation, regulations or litigation as to whichBond Counsel expresses no opinion. Interest on the 2015 Series A Bonds could become includable ingross income for purposes of federal income taxation retroactive to the date the 2015 Series A Bondswere issued as a result of future acts or omissions of the Community Facilities District in violation of itscovenants in the Fiscal Agent Agreement. Should such an event of taxability occur, the 2015 Series ABonds are not subject to special redemption or acceleration and will remain outstanding until maturity oruntil redeemed under one of the redemption provisions contained in the Fiscal Agent Agreement.

Backup Withholding. Interest paid with respect to tax-exempt obligations such as the 2015Series A Bonds is subject to information reporting to the IRS in a manner similar to interest paid ontaxable obligations. In addition, interest with respect to the Bonds may be subject to backup withholdingif such interest is paid to a registered owner that (a) fails to provide certain identifying information (suchas the registered owner’s taxpayer identification number) in the manner required by the IRS, or (b) hasbeen identified by the IRS as being subject to backup withholding.

IRS Audit of Tax-Exempt Bond Issues. The IRS has initiated an expanded program for theauditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the2015 Series A Bonds will be selected for audit by the IRS. It is also possible that the market value of the2015 Series A Bonds might be affected as a result of such an audit of the 2015 Series A Bonds (or by anaudit of similar bonds or securities).

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 Community Facilities District or the School District to be pending at thepresent time restraining or enjoining the delivery of the Bonds or in any way contesting or affecting thevalidity of the Bonds or any proceedings of the Community Facilities District or the School District takenwith respect to the execution thereof. A no litigation certification executed by the School District, on

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behalf of the Community Facilities District, will be delivered to the Underwriter simultaneously with thedelivery of the Bonds.

No General Obligation of School District or Community Facilities District

The Bonds are not general obligations of the School District or the Community FacilitiesDistrict, but are limited obligations of the Community Facilities District payable solely from proceeds ofthe Special Tax of the Community Facilities District and proceeds of the Bonds, including amounts in theReserve Accounts of the Reserve Fund, the Special Tax Fund and the Bond Fund and investment incomeon funds held pursuant to the Fiscal Agent Agreement (other than as necessary to be rebated to the UnitedStates of America pursuant to Section 148(f) of the Code and any applicable regulations promulgatedpursuant thereto). Any tax levied for the payment of the Bonds shall be limited to the Special Taxes to becollected within the Community Facilities District.

RATINGS

Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business(“S&P”), will assign the rating of “AA” to the Insured Bonds with the understanding that, upon deliveryof the Insured Bonds, the Insurance Policy will be issued by the Bond Insurer. Additionally, S&P hasassigned the Bonds an underlying rating of “BBB” without consideration of the issuance of the InsurancePolicy. The rating agency may have obtained and considered information and material which has notbeen included in this Official Statement. Generally, a rating agency bases its ratings on information andmaterial so furnished and on investigations, studies and assumptions made by the rating agency. A ratingis not a recommendation to buy, sell or hold the Bonds. A rating reflects only the view of the ratingagency with respect to its rating and an explanation of the significance of such rating may be obtainedfrom it. No assurance can be given that the rating of a rating agency will be maintained for any givenperiod of time or that the rating may not be revised downward or withdrawn entirely by the rating agency,if in its own judgment, circumstances warrant. Any such downward change in or withdrawal may havean adverse effect on the market price of the Bonds. The Underwriter and the Community FacilitiesDistrict have not undertaken any responsibility after the offering of the Bonds to assure the maintenanceof the rating or to oppose any such revision or withdrawal.

Rating Downgrades of Municipal Bond Insurers. In the past, Moody’s Investors Service, S&Pand Fitch Ratings (the “Rating Agencies”) have each downgraded the claims-paying ability and financialstrength of various bond insurance companies. Additional downgrades or negative changes in the ratingoutlook are possible. In addition, recent events in the credit markets have had a substantial negativeeffect on the bond insurance business. These developments could be viewed as having a material adverseeffect on the claims-paying ability of the Bond Insurer. The Community Facilities District and theUnderwriter have not made an independent investigation into the claims-paying ability of the BondInsurer and no assurance or representation regarding the financial strength or projected financial strengththereof can be given. Thus, when making an investment decision, potential investors should carefullyconsider the ability of the Community Facilities District to pay the principal of and interest on the Bondsand the claims-paying ability of the Bond Insurer, particularly over the life of the investment.

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UNDERWRITING

The 2015 Series A Bonds are being purchased by Piper Jaffray & Co. (the “Underwriter”) at apurchase price of $90,925,194.35 (which represents the aggregate principal amount of the 2015 Series ABonds of $82,820,000.00, plus a net original issue premium of $8,519,294.35 and less an underwriter’sdiscount of $414,100.00).

The 2015 Series B Bonds are being purchased by the Underwriter at a purchase price of$9,817,155.35 (which represents the aggregate principal amount of the 2015 Series B Bonds of$9,635,000.00, plus a net original issue premium of $230,330.35 and less an underwriter’s discount of$48,175.00).

The purchase agreement relating to the Bonds provides that the Underwriter will purchase all ofthe Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms andconditions set forth in such purchase agreement.

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

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

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

PROFESSIONAL FEES

Fees payable to certain professionals, including the Underwriter, Nossaman LLP, asUnderwriter’s counsel, McFarlin & Anderson LLP, as Disclosure Counsel, Bowie, Arneson, Wiles &Giannone, as Bond Counsel and District Counsel, RBC Capital Markets, LLC, as Financial Advisor, andU.S. Bank National Association, as the Fiscal Agent, are contingent upon the issuance of the Bonds. Thefees of Special District Financing & Administration, LLC, as Special Tax Consultant, are in partcontingent upon the issuance of the Bonds.

RBC Capital Markets, LLC is employed as Financial Advisor to the Community FacilitiesDistrict in connection with the issuance of the Bonds. The Financial Advisor’s fees for services renderedwith respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. TheFinancial Advisor is not obligated to undertake, and has not undertaken to make, an independentverification or to assume responsibility for the accuracy, completeness or fairness of the information inthis Official Statement.

MISCELLANEOUS

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statement of the contents thereof.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. This Official Statement is not to be construed as a contract or agreement between the Community Facilities District and the purchasers or owners of any of the Bonds.

The execution and delivery of the Official Statement by the Community Facilities District has been duly authorized by the Tustin Unified School District on behalf of the Community Facilities District.

COMMUNITY FACILITIES DISTRICT NO. 97-1 OF THE TUSTIN UNIFIED SCHOOL DISTRICT

By ~ur Z,/:2-Greg6ryAranklin, Ed.D., Superintendent, TfstirytJnifi.ed Sch??~ Dist~ict. on behalf of·eummumty Faciht1es D1stnct No. 97-1 of the Tustin Unified School District

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APPENDIX A

GENERAL INFORMATION ABOUT THETUSTIN UNIFIED SCHOOL DISTRICT

General Information

The Tustin Unified School District (the “School District”) was established July 1, 1972. TheSchool District currently encompasses approximately 24 square miles in the central portion of the Countyof Orange (the “County”) and includes the City of Tustin, easterly portions of the City of Santa Ana, theFoothills portion of the unincorporated area of the County (North Tustin) and portions of the City ofIrvine (West Irvine, Northpark and Orchard Hills). The School District currently operates eighteen (18)elementary schools, one (1) grades 5-8 middle school, five (5) grades 6-8 middle schools, three (3)comprehensive high schools, a continuation high school and alternative and adult education programs.The School District’s projected average daily attendance for Fiscal Year 2014-15 is approximately23,346.

Board of Education

The School District is governed by a Board of five members, each of which is elected to a four-year term. Elections for positions to the Board are held every two years, alternating between two andthree available positions. If a vacancy arises during any term, the vacancy is filled by an appointment bya majority vote of the remaining Board members and, if there is no majority, by a special election.Current members of the Board, together with their offices and the dates their current terms expire, arelisted below:

Board Member Office Current Term Expires

Francine Scinto President December, 2016

Lynn Davis Vice President December, 2018

Jonathan Abelove Clerk December, 2018

Tammie Bullard Member December, 2016

James Laird Member December, 2016

____________________Source: Tustin Unified School District.

The administrative staff of the School District includes Gregory A. Franklin, Ed.D.,Superintendent, Anthony Soria, Chief Financial Officer, Charles Lewis, Ed.D., Chief Personnel Officer,Kathie Nielsen, Chief Academic Officer, Crystal Turner, Assistant Superintendent, AdministrativeServices, and Lori Stillings, Ed.D., Assistant Superintendent, Special Education.

The Superintendent of the School District is responsible for administering the affairs of theSchool District in accordance with the policies of the Board.

Population

Separate population statistics are not maintained for the School District. The School Districtbelieves that the statistics for the City of Tustin area are indicative of population trends within the SchoolDistrict. The City’s population as of January 1, 2014, was approximately 78,360 persons, representingapproximately 2.5% of the population of the County. The population of the City and the County from2005 to 2014 is shown in the following table. Since 2005, Tustin’s population has increased byapproximately 11.8%, representing an annual compound growth rate of approximately 1.12%.

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POPULATION OF TUSTIN AND ORANGE COUNTY2005-2014

City of Tustin Orange County

Year PopulationAnnual

% Change PopulationAnnual

% Change

2005 70,116 – 2,956,847 –2006 70,880 1.1 2,956,334 0.0

2007 71,493 0.9 2,960,659 0.1

2008 73,270 2.5 2,974,321 0.5

2009 74,340 1.5 2,990,805 0.6

2010 75,400 1.4 3,008,855 0.6

2011 75,772 0.5 3,028,846 0.7

2012 76,618 1.0 3,057,875 1.0

2013 78,071 1.9 3,085,267 0.9

2014 78,360 0.4 3,113,991 0.9____________________Note: California Department of Finance for January 1.

Allocation of State Funding to School Districts; Restructuring of the K-12 Funding System

California school districts receive a significant portion of their funding from State appropriations.As a result, changes in State revenues may affect appropriations made by the Legislature to schooldistricts. Commencing with the Fiscal Year 2013-14, the State budget restructures the manner in whichthe State allocates funding for K-12 education. In Fiscal Year 2013-14, State legislation replaces themajority of revenue limit and categorical funding formulas with a new set of funding formulas. TheGovernor refers to the proposals as the “Local Control Funding Formula” (“Local Control FundingFormula” or “LCFF”). The State budget provided funding in Fiscal Year 2013-14 to begin implementingthe new formulas. Under the prior funding system, school districts received different per-pupil fundingrates based on historical factors and varying participation in categorical programs. The new systemprovides a more uniform base per-pupil rate for each of several grade levels. The base rates areaugmented by several funding supplements such as for (1) students needing additional services, definedas English learners, students from lower income families, and foster youth; and (2) school districts withhigh concentrations of English learners and lower income families. The new funding system requiresschool districts to develop local plans describing how the school district intends to educate its students.

Under the prior system, California Education Code Section 42238 and following, each schooldistrict is determined to have a target funding level: a “base revenue limit” per student multiplied by theschool district’s student enrollment measured in units of average daily attendance (“ADA”). The baserevenue limit is calculated from the school district’s prior-year funding level, as adjusted for a number offactors, such as inflation, special or increased instructional needs and costs, employee retirement costs,especially low enrollment, increased pupil transportation costs, etc. Generally, the amount of Statefunding allocated to each school district is the amount needed to reach that district’s base revenue limitafter taking into account certain other revenues, in particular, locally generated property taxes. This isreferred to as State “equalization aid.” To the extent local tax revenues increase due to growth in localproperty assessed valuation, the additional revenue is offset by a decline in the State’s contributionultimately, a school district whose local property tax revenues exceed its base revenue limit is entitled toreceive no State equalization aid, and receives only its special categorical aid, which is deemed to includethe “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the Constitution. Suchschool districts are known as “basic aid districts.” School districts that received some equalization aidwere commonly referred to as “revenue limit districts.”

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The School District has been a revenue limit district. The 2014-15 State Budget (describedbelow) implements the new Local Control Funding Formula school funding allocation system. The LocalControl Funding Formula replaces revenue limit and most categorical program funding.

The Local Control Funding Formula is also based on enrollment. Enrollment can fluctuate due tofactors such as population growth or decline, competition from private, parochial, and public charterschools, inter-district transfers in or out, and other causes. Losses in enrollment will cause a schooldistrict to lose operating revenues, without necessarily permitting the school district to make adjustmentsin fixed operating costs.

Average Daily Attendance

In the past, annual State apportionments of basic and equalization aid to school districts werecomputed based on a revenue limit per unit of ADA. Prior to Fiscal Year 1998-99, daily attendancenumbers included students who were absent from school for an excused absence, such as illness.Effective in Fiscal Year 1998-99, only actual attendance is counted in the calculation of ADA. Thischange was essentially fiscally neutral for school districts which maintain the same excused absence rate.The rate per student was recalculated to provide the same total funding to school districts in the base yearas would have been received under the old system. After Fiscal Year 1998-99, school districts whichimproved their actual attendance rate received additional funding.

As indicated above, commencing with the Fiscal Year 2013-14, the State budget restructures themanner in which the State allocates funding for K-12 education using the Local Control FundingFormula. Under the prior funding system, school districts received different per-pupil funding rates basedon historical factors and varying participation in categorical programs. The first of the following twotables shows the School District’s enrollment, ADA and revenue limit per ADA for 2007-08 through2012-13 under the historical funding program and for 2013-14 and estimated 2014-15 under the LocalControl Funding Formula. The second of the two following tables shows the average daily attendance bygrade year for purposes of the Local Control Funding Formula for Fiscal Years 2013-14 to 2014-15.

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TUSTIN UNIFIED SCHOOL DISTRICTAverage Daily Attendance, Revenue Limit and Enrollment

Fiscal Years 2007-08 through 2014-15

Fiscal YearAverage Daily

Attendance(1) Change

% ofChange

ADA BaseRevenue Limit(2)

Deficit RevenueLimit Per

ADA/LCFFRevenues(2) Enrollment(3)

2007-08 20,136 – – $5,786 $5,786 20,8142008-09 20,927 791 3.93% 6,115 5,636 21,6282009-10 21,601 674 3.22 6,337 5,207 22,3472010-11 22,364 763 3.53 6,352 5,211 23,0932011-12 22,894 530 2.37 6,495 5,157 23,4942012-13 23,126 232 1.01 6,705 6,213 23,7522013-14 23,259 133 0.58 6,266 23,9492014-15 23,346 87 0.37 6,953 24,068

(1) Reflects ADA as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior toApril 15 of each school year.

(2) Deficit revenue limit funding, when provided for in State budgetary legislation, reduced the revenue limit allocations receivedby school districts by applying a deficit factor to the base revenue limit for the given fiscal year, and resulted from aninsufficiency of appropriation funds in the State budget to provide for State aid owed to school districts. The State’s practiceof deficit revenue limit funding was most recently reinstated beginning in Fiscal Year 2008-09, and discontinued followingthe implementation of the LCFF (as defined herein).

(3) Enrollment as of October report submitted to the California Basic Educational Data System (“CBEDS”) in each school year.(4) LCFF Revenue estimates shown commencing Fiscal Year 2013-14.(5) Budgeted.Source: Tustin Unified School District.

The following table shows a breakdown of the School District’s ADA by grade span, totalenrollment and the percentage of EL/LI student enrollment for Fiscal Years 2013-14 to 2014-15.

TUSTIN UNIFIED SCHOOL DISTRICTLocal Control Funding Formula

ADA, Enrollment and EL/LI Enrollment PercentageFiscal Year 2013-14 to 2014-15

Average Daily Attendance(1) Enrollment

FiscalYear K-3 4-6 7-8 9-12

TotalADA

TotalEnrollment

% ofEL/LI

Enrollment(2)

2013-14(3) 6,756 5,501 3,681 7,321 23,259 24,114 45.18%

2014-15(4) 6,710 5,470 3,708 7,458 23,346 24,233 44.59

(1) ADA is as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior to April 15of each school year.

(2) As of October report submitted To the California Basic Educational Data System (CBEDS). For purposes of calculatingSupplemental and Concentration Grants, a school district’s Fiscal Year 2013-14 percentage of unduplicated EL/LI studentswill be expressed solely as a percentage of its Fiscal Year 2013-14 total enrollment. For Fiscal Year 2014-15, the percentageof unduplicated EL/LI enrollment will be based on the two-year average of EL/LI enrollment in Fiscal Years 2013-14 and2014-15. Beginning in Fiscal Year 2015-16, a school district’s percentage of unduplicated EL/LI students will be based on arolling average of such district’s EL/LI enrollment for the then-current fiscal year and the two immediately preceding fiscalyears.

(3) Projected.(4) Budgeted.

Source: Tustin Unified School District.

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ADA figures for the School District for the most recent five years, as well as a projection for the2014-15 Fiscal Year, are shown below:

TUSTIN UNIFIED SCHOOL DISTRICTAverage Daily Attendance

Fiscal YearAverage DailyAttendance(1)

2009-10 21,601

2010-11 22,364

2011-12 22,894

2012-13 23,126

2013-14 23,259

2014-15 (estimated) 23,346

(1) ADA does not include Regional Occupational Programs and Adult ADA.____________________Source: Tustin Unified School District.

.Labor Relations

As of June 30, 2014, the School District employed approximately 1,321 certificated professionalsand approximately 1,289 classified employees. The certificated professionals, except management andsome part-time employees, are represented by the bargaining units as noted below:

TUSTIN UNIFIED SCHOOL DISTRICTDistrict Employees

Labor Organization Classification

ApproximateNumber ofEmployees

In Organization

ContractExpiration

Date

Tustin Educators’ Association Certificated Teaching andNon-Teaching

1,008 June 30, 2017

California School Employees’Association

Classified Employees 961 November 30, 2015

Tustin School Management Association Certificated Administrators/Classified Mgmt/Confidential

107 N/A(1)

Classified Supervisory ManagementAssociation

Classified Supervisors 22 June 30, 2016

(1) The Tustin School Management Association is an association of certificated administrators, classified management andconfidential employees. There is no contract between the School District and the employees who are members of suchAssociation.

___________________Source: The School District.

Retirement Programs

The School District participates in the State of California Teachers’ Retirement System(“STRS”). Generally, this plan covers all full-time certificated employees, as well as certain classifiedemployees. STRS provides retirement, disability and survivor benefits to plan members andbeneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within theState Teachers’ Retirement Law. The School District is currently required by such statutes to contribute8.25% of eligible salary expenditures, while participants contribute 8% of their respective salaries. The

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State also contributes to STRS, currently in an amount equal to 3.041% of teacher payroll. The State’scontribution reflects a base contribution of 2.017% and a supplemental contribution of 1.024% that willvary from year-to-year based on statutory criteria.

The School District’s contribution to STRS for the Fiscal Year ending June 30, 2013, was$6,755,914. The School District’s contribution to STRS for the Fiscal Year ending June 30, 2014, was$7,289,578. The School District budgeted approximately $8,403,839 for this purpose for Fiscal Year2014-15.

The School District also participates in the State of California Public Employees’ RetirementSystem (“PERS”) which covers all classified personnel who are employed four or more hours per day.PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits toplan members and beneficiaries. Benefit provisions are established by the State statutes, as legislativelyamended, with the Public Employees’ Retirement Laws. School districts are currently required tocontribute to PERS at an actuarially determined rate, which is 11.442% of eligible salary expenditures forFiscal Year 2013-14, while participants enrolled in PERS prior to the Implementation Date (definedherein) contribute 7% of their respective salaries. Participants enrolled after the Implementation Datecontribute at an actuarially determined rate, which is 6% of their respective salary for Fiscal Year 2014-15. See “ – Pension Reform” herein.

The School District’s participation in PERS is funded each fiscal year through School Districtappropriations. Annual earnings on the PERS portfolio attributable to school districts and offices ofeducation can result in a reduction in the School District’s contribution to PERS. A correspondingadjustment is made in the revenue limit calculation such that the School District experiences an offsetreduction in the revenue limit allocated to it by the State. As of Fiscal Year 2013-14, the PERS reductionoffset was eliminated with the implementation of the Local Control Funding Formula.

The School District’s contribution to PERS for the Fiscal Year ending June 30, 2013, was$2,822,696. In addition, the School District made a PERS reduction contribution to the revenue limit byapproximately $221,946. The School District’s contribution to PERS for the Fiscal Year ending June 30,2014, was $3,033,480. No PERS reduction contribution has been required after June 30, 2013. In FiscalYear 2014-15, the School District estimates the employer contribution to PERS to be approximately$3,731,464. Both retirement systems are operated on a statewide basis.

Contribution rates to these two retirement systems vary annually depending on changes inactuarial assumptions and other factors, such as changes in retirement benefits. The contribution rates arebased on state-wide rates set by the STRS and PERS retirement boards. STRS has a substantial state-wide unfunded liability. Since this liability has not been broken down by each school district, it isimpossible to determine the School District’s share.

Interested persons may review the STRS website for details regarding its programs –http://www.calstrs.com (this reference is for convenience of reference only and not considered to beincorporated as part of this Official Statement). The following information has been obtained from theinformation published by STRS and is believed to be reliable but is not guaranteed as to accuracy orcompleteness. The governing board of STRS adopts a valuation of its defined benefit plan and its definedbenefit supplemental plan each year. Due to the financial market declines which occurred during theFiscal Year 2008-09 period, STRS investments lost substantial value at that time. STRS used anaveraging process that recognizes gains and losses over a three-year period, as a result of which the fundis still being affected by losses incurred during the market downturn. Recent years have seen positiveinvestment returns. The valuation for the period ending June 30, 2013, identified the level of funding forthe STRS defined benefit program at 66.9% of full funding, with an estimated actuarial obligation of$208.4 billion, an actuarial valuation of assets of $148.6 billion and unfunded actuarial obligations of

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$73.67 billion. In recent years, historical unfunded actuarial obligations for the defined benefit plan haveranged from being over funded in the late 1990’s to the 66.9% of full funding estimated in the June 30,2013 valuation. Contributions to STRS are generally fixed by State law.

The 2014-15 State Budget proposes a plan of shared responsibility among the State, schooldistricts and teachers. The first year’s increased contributions from all three entities are estimated in the2014-15 State Budget at $275 million. The contributions are proposed to increase in subsequent years,reaching more than $5 billion annually. The 2014-15 State Budget indicates that total contributionscurrently equal 19.3% of teacher payroll and under the proposal are estimated to rise to 35.7%. Thisproposed increase, if it were implemented, is estimated in the 2014-15 State Budget to eliminate theunfunded liability by approximately 2046.

Interested persons may review the PERS website for details regarding its programs –http://www.calpers.ca.gov (this reference is for convenience of reference only and not considered to beincorporated as part of this Official Statement). The following information has been obtained from theinformation published by PERS and is believed to be reliable but is not guaranteed as to accuracy orcompleteness. The governing board of the PERS adopts a valuation of its defined benefit plan each year.Due to the financial market declines which occurred during the Fiscal Year 2008-09 period, PERSinvestments lost substantial value at that time. In December 2009, the PERS Board adopted changes to itsasset smoothing method in order to phase in over a three-year period the impact of the 24% investmentloss experience by PERS in Fiscal Year 2008-09. Recent years have seen positive investment returns.The valuation for the period ending June 30, 2013, identified the level of funding for the PERS definedbenefit program for schools at 80.5% of full funding. PERS website does not provide an estimate of theactuarial obligations, of the estimated actuarial valuation of assets or of the estimated unfunded actuarialobligations. PERS has adopted policies regarding contribution rates for the various plans and such plansare subject to modification as the PERS governing board determines how to address the unfundedactuarial obligations. At its April 17, 2013 meeting, the Board approved a change to the CalPERSamortization and smoothing policies. Beginning with the June 30, 2014, valuation, the newly adopteddirect smoothing method will be used to set the 2015-16 rates for the State and Schools defined benefitplans. Under this new direct-rate smoothing method, all gains and losses will be paid over a fixed 30-yearperiod with the increases or decreases in the rate spread over a five-year period. On February 20, 2014,the PERS governing board adopted new assumptions regarding the longer life expectancy of state retirees.The impact of these assumptions will be $1 billion phased in over three years. The costs in Fiscal Year2014-15 will be $430 million ($254 million is a State General Fund)..

For Fiscal Year 2014-15, at the revised final Budget, the School District has budgeted for a STRScontribution of $3,731,464 and a PERS contribution of 8,403,839.

Pension Reform

On August 28, 2012, Governor Brown and the State Legislature reached agreement on a new lawthat reforms pensions for State and local government employees. AB 340, which was signed into law onSeptember 12, 2012, established the California Public Employees’ Pension Reform Act of 2012(“PEPRA”) which governs pensions for public employers and public pension plans on and after January 1,2013 (the “Implementation Date”). For new employees, PEPRA, among other things, caps pensionablesalaries at the Social Security contribution and wage base, which is $110,100 for 2012, or 120% of thatamount for employees not covered by Social Security, increases the retirement age by two years or morefor all new public employees while adjusting the retirement formulas, requires state employees to pay atleast half of their pension costs, and also requires the calculation of benefits on regular, recurring pay tostop income spiking. For all employees, changes required by PEPRA include the prohibition ofretroactive pension increases, pension holidays and purchases of service credit. PEPRA applies to allState and local public retirement systems, including county and school district retirement systems.

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PEPRA only exempts the University of California system and charter cities and counties whose pensionplans are not governed by State law. Although the School District anticipates that PEPRA would notincrease the School District’s future pension obligations, the School District is unable to determine theextent of any impact PEPRA would have on the School District’s pension obligations at this time.Additionally, the School District cannot predict if PEPRA will be challenged in court and, if so, whetherany challenge would be successful.

GASB 67 and 68

On June 25, 2012, the Governmental Accounting Standards Board (“GASB”) voted to approvetwo new standards that aimed to improve the accounting and financial reporting of public employeepensions by state and local governments. Statement No. 67, Financial Reporting for Pension Plans,revised existing guidance for the financial reports of most pension plans. Statement No. 68, Accountingand Financial Reporting for Pensions, revised and established new financial reporting requirements formost governments that provide their employees with pension benefits.

Statement 67 replaces the requirements of Statement No. 25, Financial Reporting for DefinedBenefit Pension Plans and Note Disclosures for Defined Contribution Plans and Statement 50, PensionDisclosures as they relate to pension plans that are administered through trusts or similar arrangementsmeeting certain criteria. Statement 67 builds upon the existing framework for financial reports of definedbenefit pension plans, which includes a statement of fiduciary net position (the amount held in a trust forpaying retirement benefits) and a statement of changes in fiduciary net position. Statement 67 enhancesnote disclosures and RSI for both defined benefit and defined contribution pension plans. Statement 67also requires the presentation of new information about annual money-weighted rates of return in thenotes to the financial statements and in 10-year required supplementary information schedules.

Statement 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State andLocal Governmental Employers and Statement No. 50, Pension Disclosures, as they relate to governmentsthat provide pensions through pension plans administered as trusts or similar arrangements that meetcertain criteria. Statement 68 requires governments providing defined benefit pensions to recognize theirlong-term obligation for pension benefits as a liability for the first time, and to more comprehensively andcomparably measure the annual costs of pension benefits. The Statement also enhances accountabilityand transparency through revised and new note disclosures and required supplementary information.

Post-Retirement Health Care Benefits

The School District provides post-retirement medical benefits to the age of 65 to certain retiredcertificated employees over the age of 50 years old and who have at least 8 years of service. The SchoolDistrict also provides post-retirement medical benefits to the age of 65 to certain retired classifiedemployees over 50 years old and who have at least 5 years of service. The School District has accountedfor these benefits on a “pay as you go” basis and as such, records the expenses when paid. The “pay asyou go” estimate for providing retiree health benefits in the year beginning July 1, 2012, was $1,034,242.The “pay as you go” estimate for providing retiree health benefits in the year beginning July 1, 2013, was$961,491. The “pay as you go” estimate for providing retiree health benefits in the year beginning July 1,2014, is $1,254,411.

GASB Statement No. 45 requires governmental agencies that are on a “pay-as-you-go” basis,such as the School District to account for and report the outstanding obligations and commitments relatedto such post-employment benefits in essentially the same manner as for pensions. The School Districtcommissioned a study by Total Compensation Systems, Inc., dated March 21, 2013, with respect to itsliability in connection with such benefits (the “Actuarial Report”). The Actuarial Report concluded that,had the School District begun accruing retiree health benefits when each current employee and retiree was

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hired, a substantial liability would have accumulated and of that amount, the remaining unamortizedbalance of the initial unfunded “actuarial accrued liability” (“UAAL”) as of March 1, 2013, was$15,294,022. The Actuarial Report states that the School District’s Annual Required Contribution(“ARC”) necessary to fund the annual contribution required to fund retiree benefits over the workinglifetime of eligible employees (the “normal cost”) and to fund the residual UAAL amortization costs was$2,788,980 for the year ending June 30, 2013.

Outstanding Debt; Financial Obligations

As of June 30, 2014, the School District had leases for equipment and portables valued atapproximately $119,070 under agreements which provide for title to pass upon expiration of the leaseperiod. The School District is current on these capital lease obligations. The School District also hascommunity facilities district special tax securities outstanding, as well as general obligation bonds of itsSchool Facilities Improvement District No. 2002-1 (“SFID No. 2002-1”) outstanding in the aggregateprincipal amount of $52,914,327 and of its Improvement District outstanding in the aggregate principalamount of $70,495,000, as of June 30, 2014. In addition, the School District issued $35,000,000aggregate principal amount of its School Facilities Improvement District No. 2012-1 of the Tustin UnifiedSchool District, 2012 Election, Series A on March 14, 2013. The School District refunded a portion ofthe School District’s outstanding SFID No. 2002-1 Series B Bonds, on an advance basis, in the amount of$8,695,000 (the “Refunded Series B Bonds”) and the outstanding SFID No. 2002-1 Series C Bonds, on anadvance basis, in the amount of $17,125,000 during January 2015 and the School District issued$20,000,000 aggregate principal amount of its School Facilities Improvement District No. 2008-1 of theTustin Unified School District, 2008 Election, Series D on February 18, 2015.

Insurance

The School District maintains insurance or self-insurance in such amounts and with suchretentions and other terms providing coverage for property damage, fire and theft, general public liabilityand worker’s compensation, as are adequate, customary and comparable with such insurance maintainedby similarly situated school districts. In addition, based upon prior claims experience, the School Districtbelieves that the recorded liabilities for self-insured claims are adequate.


APPENDIX B

SPECIAL TAX FORMULA

COMMUNITY FACILITIES SPECIAL TAXFOR COMMUNITY FACILITIES DISTRICT NO. 97-1

OF TUSTIN UNIFIED SCHOOL DISTRICT


RATE AND METHOD OF APPORTIONMENT OF A SPECIAL TAX FOR

COMMUNITY FACILITIES DISTRICT NO. 97-1 OF THE

TUSTIN UNIFIED SCHOOL DISTRICT

The Board of Education of the Tustin Unified School District (the “Board) sitting as the legislative body of the Community Facilities District No. 97-1 of Tustin Unified School District (“CFD No. 97-1”), shall levy and collect a special tax (the “Special Tax”) which, pursuant to the procedures and terms described below, is applicable to each taxable Assessor’s Parcel located within the boundaries of CFD No. 97-1. The Special Tax shall be levied to pay for or finance certain school and related facilities, to pay incidental expenses, to create and replenish reserves and to provide funds for debt service on obligations of CFD No. 97-1 as described herein, the proceeds of which will be used to finance the acquisition and construction of school sites and related facilities. The Special Tax will be levied at the applicable rate for Developed Property, as hereinafter defined, or Undeveloped Property as hereinafter defined. Each Assessor’s Parcel which is Developed Property shall be assigned to a land use class (“Class”) of property as described below and taxes at the applicable rate for that Class. Those parcels which constitute Undeveloped Property shall be taxed at the applicable rate as set for below.

All property located within the boundaries of CFD No. 97-1 shall be taxed for the purposes, to the extent and in the manner herein set forth unless exempted by law or by the provisions of Section 5 herein.

Section 1. Definitions.

“Alternative Special Tax” means, for Fiscal Year 1997-98, an amount equal to $4,602 per acre of Assessor’s Parcel of Single Family Detached Residential Property described in Section 3(A) and, for each subsequent Fiscal Year, an amount equal to such rate increased by two percent (2%) of the amount in effect in the previous year.

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

“Assigned Special Tax” means the Special Tax for each Class, as determined by reference to Section 3(A) below.

“CFD No. 97-1” shall mean the territory within the boundaries of Community Facilities District No. 97-1 as depicted on the map as recorded with the County Recorder of Orange County on file with the District.

“CFD 97-1 Special Reserve Fund” means the fund established and maintained by or on behalf of CFD 97-1 separate and apart from its other funds and accounts into which money is to be deposited and from which money is to be expended as provided herein. Amounts deposited in the CFD 97-1 Special Reserve Fund shall come from (a) Special Taxes collected in excess of the amounts required for the purposes described in clauses (a), (c) and (d) of he definition of “Debt Service Requirement”, and (b) earnings derived from the investment of amounts on deposit in the CFD 97-1 Special Reserve Fund. On or before the No Additional Bonds Date, amounts on deposit in the CFD 97-1 Special Reserve Fund shall be applied as a credit to taxes that would otherwise be levied on Undeveloped Property.

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After the No Additional Bonds Date, amounts on deposit in this fund shall be used to redeem bonds.

“Debt Service Requirement” means for each Fiscal Year the sum of (a) one hundred percent (100%) of the principal of and interest on bonds of CFD No. 97-1 coming due in the bond year which ends in the next subsequent Fiscal Year, except to the extent such principal or interest is expected to be paid from proceeds from the sale of bonds or other amounts then available in the applicable debt service fund for such purpose, (b) the product of the amount described in clause (a) times the larger of (i) the rate of delinquency in the payment of the special tax during the Fiscal Year immediately preceding the Fiscal Year for which the Debt Service Requirement is being determined or (ii) ten percent (10%), (c) the sum of all deposits then required to be made into any reserve fund established with respect to any bonds of CFD No. 97-1, and (d) the reasonably estimated administrative expenses for the bond year referred to in clause (a).

“Developed Property” shall mean all Taxable Property for which a building permit was issued as of July 1 of the Fiscal Year.

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

“Maximum Special Tax” shall mean the highest Special Tax determined in accordance with Section 3 for each Class of Developed Property or for Undeveloped Property, as the case may be, which can be levied by the Board in any Fiscal Year.

“Multifamily Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit has been issued for purposes of constructing a multifamily residential dwelling but excluding Seniors Housing Developed Property.

“No Additional Bonds Date” means the earliest of (a) the date on which the Board adopts a resolution declaring that no additional bonds of CFD No. 97-1 will be issued, (b) the date on which the aggregate principal amount of all bonds theretofore issued on behalf of CFD No. 97-1 equals the principal amount of such bonds authorized to be issued and (c) the seventh anniversary of the date on which The Irvine Company files with the Board a certificate specifying the maximum number of dwelling units expected to be constructed in the Lower Peters Canyon Community and stating that building permits have been issued for at least 95% of said number.

“Other Developed Property” means all Assessor’s Parcels of Developed Property other than Residential Developed Property and Seniors Housing Developed Property.

“Previously Taxed Undeveloped Property” means property that was Undeveloped Property as of the effective date of a consent of The Irvine Company delivered in satisfaction of the condition set forth in Section 8(A), whether or not the Special Tax was thereafter imposed on such property.

“Proportionately or Proportioned” shall mean for Developed Property that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Developed Properties. “Proportionately” or Proportioned” shall mean for Undeveloped Property that the ratio of the actual Special Tax levy to the Maximum Special Tax for Undeveloped Property is equal for all Undeveloped Properties.

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“Residential Developed Property” means all Assessor’s Parcels of Developed Property consisting of Single Family Attached Residential Property, Single Family Detached Residential Property, and Multifamily Residential Property.

“Seniors Housing Developed Property” means all Assessor’s Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwellings, the occupancy of which is restricted to seniors as described in Government Code Section 65955.1.

“Single Family Attached Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit has been issued for purposes of constructing an attached Single Family Residential dwelling but excluding Seniors Housing Developed Property.

“Single Family Detached Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit has been issued for purposes of constructing a detached Single Family Residential dwelling but excluding Seniors Housing Developed Property.

“Taxable Property” shall mean the area within the boundaries of CFD No. 97-1 which is not exempt from application of the Special Tax by operation of law or Section 5 herein.

“Undeveloped Property” shall mean all Taxable Property which is not classified as Developed Property.

Section 2. Assignment to Development Status.

The District shall, on or before July 1 of each year classify all Taxable Property within the boundaries of CFD as either Developed or Undeveloped Property. In order to determine the applicable Special Tax, each Assessor’s Parcel which constitutes Developed Property shall be assigned to a Class, classified as either Residential Developed Property or Other Developed Property and taxed as set forth below. Undeveloped Property shall be taxed as set forth below.

Section 3. Maximum Special Tax Rates.

Residential Developed Property shall be assigned to a product class. The product class shall be determined by the product type (Single Family Detached, Single Family Attached or Multifamily) and for Single Family Detached Residential Property by the average lot size as determined by dividing the total square footage of residential lots within the boundaries of a final Development Subdivision Map by the total number of dwelling units permitted within the Map as certified by a registered civil engineer. In determining the amount of the Assigned Special Tax for Undeveloped Property, Other Developed Property or Seniors Housing Residential Developed Property to be levied on an Assessor’s Parcel, the square footage shall include all square footage in the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel map of the County Assessor or, if the land area is not shown on said map, the land area on the applicable final map, parcel map, or other recorded County map.

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A. Residential Developed Property

The Maximum Special Tax in each fiscal year for an Assessor’s Parcel classified as Developed Property shall be the Assigned Special Tax indicated below for the applicable Class, provided that the Maximum Special Tax shall be the greater of the applicable Assigned Special Tax, or the Alternative Special Tax in the case of property that (i) is Single Family Detached Residential Property, (ii) was created by a subdivision map in which the average lot size (computed in the manner described in the first paragraph of this Section 3) is not less than 10,000 square feet, and (iii) consists of property that was Previously Taxed Undeveloped Property, but not property that in any Fiscal Year since it became classified as Developed Property has had imposed on it the applicable Assigned Special Tax but not the Alternative Special Tax. The Assigned Special Tax for Fiscal Year 1997-98 shall be as indicated below. Each July 1, commencing July 1, 1998, the Assigned Special Tax for each Class shall be increased by two percent (2%) of the amount in effect the previous year. The Special Tax may only be applied to Seniors Housing Developed Property which were initially taxed as Undeveloped Property.

PRODUCT TYPE DESCRIPTION ASSIGNED SPECIAL TAX

(1997-98)

1-Single Family Detached Property

+4300 sq.ft. average lot size

$1196 per unit

2-Single Family Detached Property

0-4300 sq.ft. average lot size

$800 per unit

3-Single Family Attached Property

$427 per unit

4-Multifamily Property $625 per unit

B. Undeveloped Property

The Maximum Special Tax on Undeveloped Property shall be $4,602 per acre of the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel map of the County Assessor or, if the land area is not shown on said map, the land area on the applicable final map, parcel, or other recorded County Map. Each July 1 commencing on July 1, 1998, the Maximum Special Tax for Undeveloped Property shall be increased by two percent (2%) of the amount in effect the previous year.

C. Other Developed Property

The Maximum Special Tax on Other Developed Property shall be $4,602 per acre of the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel map of the County Assessor or, if the land area is not shown on said map, the land area on the applicable final map, parcel or other recorded County Map. Each July 1 commencing on July 1, 1998, the Maximum Special Tax for Other Developed Property shall be increased by two percent (2%) of the maximum amount which could have been levied the previous year.

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D. Seniors Housing Developed Property

The Maximum Special Tax on Senior Housing Developed Property shall be $4,602 per acre of the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel map of the County Assessor or, if the land area is not shown on said map, the land area on the applicable final map, parcel, or other recorded County Map. Each July 1 commencing on July 1, 1998, the Maximum Special Tax for Seniors Housing Developed Property shall be increased by two percent (2%) of the maximum amount which could have been levied the previous year. The Special Tax may only be applied to Seniors Housing Developed Property consisting of Previously Taxed Undeveloped Property.

Section 4. Apportionment of Special Tax.

A. Prior to the No Additional Bonds Date

Commencing in Fiscal Year 1997-98, and for each Fiscal Year thereafter prior to the No Additional Bonds Date, the Board shall levy the Special Tax on each Assessor’s Parcel of Developed Property, in an amount equal to the applicable Assigned Special Tax for that Fiscal Year, as set forth in Section 3(A) above.

If the aggregate amount of the Special Tax so levied on Residential Developed Property is less that the applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each parcel of Undeveloped Property up to the applicable Maximum Special Tax for that Fiscal Year, as set forth in Section 3(B) above such that the aggregate amount so levied equals the difference between the applicable Debt Service Requirement and the aggregate amount of such special tax levies on Residential Developed Property.

If the aggregate amount of the Special Tax so levied on Residential Developed Property and Undeveloped Property is less than the then applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel of Other Developed Property, in an amount not in excess of the applicable Maximum Special Tax for that Fiscal Year, as set forth in Section 3(C) above such that the aggregate amount so levied equals the difference between the applicable Debt Service Requirement and the aggregate amount of such special tax levies on Residential Developed Property and Undeveloped Property.

If the aggregate amount of the Special Tax so levied on Residential Developed Property, Undeveloped Property and Other Developed Property is less than the applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel that is subject to the Alternative Special Tax as the Alternative Special Tax in an amount (giving credit for the Assigned Special Tax levied pursuant to the first paragraph of this Section) not in excess of the applicable Maximum Special Tax for that fiscal year, as set forth in section 3(A) above such that the aggregate amount so levied equals the difference between the applicable Debt Service and the aggregate amount of the special tax levies on Residential Developed Property, Undeveloped Property and Other Developed Property.

If the aggregate amount of the Special Tax so levied on Residential Developed Property, Undeveloped Property and Other Developed Property is less than the applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel of Seniors Housing Developed Property consisting of Previously Taxed Undeveloped Property, in an amount not in excess of the applicable Maximum Special

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Tax for that Fiscal Year, as described in Section 3(D) above such that the sum of the aggregate amount of the Special Tax levied on all Taxable Property equals, but does not exceed, the then applicable Debt Service Requirement.

B. On or After the No Additional Bonds Date

Commencing with the first Fiscal Year subsequent to the No Additional Bonds Date, and for each Fiscal Year thereafter, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel of Residential Developed Property, in an amount not in excess of the applicable Maximum Special Tax for that Fiscal Year, such that the aggregate amount so levied equals, but does not exceed, the then applicable Debt Service Requirement.

If the aggregate amount of the Special Tax so levied on Residential Developed Property is less than the applicable Debt Service Requirement, the Board shall levy the special Tax Proportionately on each parcel of Undeveloped Property up to the applicable Maximum Special Tax for that Fiscal Year, as set forth in Section 3(B) above such that the aggregate amount so levied equals the difference between the applicable Debt Service Requirement and the Aggregate amount of such special tax levies on Developed Property.

If the aggregate amount of the Special Tax so levied on Residential Developed Property and Undeveloped Property is less than the then applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel of Other Developed Property, in an amount not in excess of the applicable Maximum Special Tax for that Fiscal Year, such that the sum of the aggregate amount of the Special Tax levied on all Residential Developed Property, Undeveloped Property and Other Developed Property equals, but does not exceed, the then applicable Debt Service Requirement.

If the aggregate amount of the Special Tax so levied on Residential Developed Property, Undeveloped Property and Other Developed Property is less than the applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel that is subject to the Alternative Special Tax at the Alternative Special Tax in an amount not in excess of the applicable Maximum Special Tax for that Fiscal Year, as set forth in Section 3(A) above such that the aggregate amount so levied equals the difference between the applicable Debt Service Requirement and the aggregate amount of the special tax levies on Residential Developed Property, Undeveloped Property and Other Developed Property.

If the aggregate amount of the Special Tax so levied on Residential Developed Property, Undeveloped Property and Other Developed Property is less than the applicable Debt Service Requirement, the Board shall levy the Special Tax Proportionately on each Assessor’s Parcel of Seniors Housing Developed Property consisting of Previously Taxed Undeveloped Property which was subject to the Undeveloped Property Tax, in an amount not in excess of the applicable Maximum Special Tax for that Fiscal Year, as described in section 3(D) above such that the sum of the aggregate amount of the Special Tax levied on all Taxable Property equals, but does not exceed, the then applicable Debt Service Requirement.

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Section 5. Exemptions.

The Special Tax shall not be levied on parks, public properties classified as Undeveloped Property, utility properties belonging to public or private utilities, Seniors Housing Developed Property (except as provided in Section 3(D) and properties exempt from general ad valorem property taxes.

Section 6. Manner of Collection.

The Special Taxes for CFD No. 97-1 will be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 97-1 may collect special taxes at a different time or in a different manner as determined by the Board, and the special taxes will be subject to the same penalties and procedures, sale, and lien priority in the event of delinquencies as provided for ad valorem taxes.

A three-member Appeals Board, to be appointed by the legislative body of the CFD No. 97-1, shall set forth al rules and further specifics relating to the implementation, interpretation and administration of the special tax formula. Any dispute regarding the allocation or amount of special taxes levied against any particular parcel shall be submitted to the Appeals Board for consideration.

Section 7. Prepayment.

The Board may specify conditions under which the obligation to pay the special tax may be prepaid and permanently satisfied and the lien of the special tax canceled so long as the prepayment is not less than the maximum present value of the special tax obligation.

Section 8. Limitations on Debt.

A. No CFD indebtedness shall be incurred without The Irvine Company’s consent if the annual Special Tax applicable to Developed Property in each Fiscal Year is or will be less than the sum of (i) one hundred percent (100%) of the principal of and interest on bonds coming due in the bond year which ends in the next subsequent Fiscal Year (except to the extent such principal or interest is expected to be paid from proceeds from the sale of bonds or other amounts then available in the applicable debt service fund for such purposes) plus (ii) the reasonably estimated administrative expenses for the bond year referred to in clause (i).

B. No CFD indebtedness shall be incurred after the No Additional Bonds Date. If the No Additional Bonds Date occurs because The Irvine Company files with the Tustin Unified School District a certificate specifying the maximum number of dwelling units expected to be constructed in the Lower Peters Canyon Community and stating that building permits have been issued for a least 95% of said number, then, subsequent to the delivery of such a certificate neither The Irvine Company nor Irvine Company Development company nor any successor thereof shall be entitled to construct or cause to be constructed any residential dwelling unit in excess of the maximum specified by The Irvine Company without the consent of the Tustin Unified School District.

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APPENDIX C

____________________

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT____________________

COMMUNITY FACILITIES DISTRICT NO. 97-1OF THE TUSTIN UNIFIED SCHOOL DISTRICT

2015 SPECIAL TAX REFUNDING BONDS

Comprised of

2015 Special Tax Refunding Bonds,Series A


2015 Special Tax Refunding Bonds,Series B

(Federally Taxable)

____________________

The following is a brief summary of certain provisions of the Fiscal Agent Agreement, relative tothe above-referenced 2015 Special Tax Refunding Bonds. This summary is not intended to be definitiveand is qualified in its entirety by reference to such Fiscal Agent Agreement for the complete terms thereof.Copies of the Fiscal Agent Agreement are available upon request from the Tustin Unified School District.

DEFINITIONS

The following are summaries of definitions of certain terms used in this Summary. Allcapitalized terms not defined therein or elsewhere in the Preliminary Official Statement have themeaning(s) set forth in the Fiscal Agent Agreement.

“2002 Bonds” or “Prior Bonds” means, collectively, the Community Facilities District No. 97-1of the Tustin Unified School District 2002 Special Tax Bonds, Series A (Senior Lien Bonds) and Series B(Junior Lien Bonds).

“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections53311, et seq., of the Government Code of the State of California.

“Administrative Expense Fund” means the fund of that name established under and held by theFiscal Agent pursuant to the provisions of the Fiscal Agent Agreement.

“Administrative Expense Requirement” means an amount up to a maximum of $80,000 per FiscalYear, which amount shall escalate at 2.00% per Fiscal Year after Fiscal Year 2015/2016.

“Administrative Expenses” means the administrative costs with respect to the calculation andcollection of the Special Taxes and any other costs related to the Bonds and the Fiscal Agent Agreement,including the fees and expenses of the Fiscal Agent and any Persons, parties, consultants or attorneysemployed pursuant to certain sections set forth in the Fiscal Agent Agreement, costs and legal expenses offoreclosure actions undertaken pursuant to the terms thereof to the extent not recovered pursuant tostatutory authorization, costs otherwise incurred by the District in order to carry out the authorizedpurposes of the 2015 Special Tax Refunding Bonds, including statutory disclosure, for the District’s

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Continuing Disclosure obligations, and reporting requirements and for “Administrative Expenses” asdefined in the Rate and Method of Apportionment of Special Taxes for the District.

“Annual Debt Service” means, with respect to any Outstanding Bonds, for each Bond Year, thesum of (a) the interest payable on such Bonds in such Bond Year, and (b) the principal amount of theOutstanding Bonds scheduled to be paid in such Bond Year.

“Authorized Investments” means, subject to the terms of the Fiscal Agent Agreement, any of thefollowing investments, if and to the extent the same are at the time legal for investment of the SchoolDistrict’s funds:

(a) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those forwhich the faith and credit of the United States of America are pledged for the payment of principal andinterest, 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 fullfaith and credit of the United States of America, and which have a maximum term to maturity not toexceed 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 fullyguaranteed by the full faith and credit of the United States of America, and which have a maximum termto maturity not to exceed three years:

-- Senior debt obligations rated “AAA” by Moody’s and “AAA” by Standard & Poor’sissued by the Federal National Mortgage Association (FNMA) or Federal Home LoanMortgage 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 of California (“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 inone 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 agencyof 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 exemptfrom federal and State income taxes and which are rated in one of the two highest short-term or long-termrating categories by Moody’s or Standard & Poor’s.

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(f) Deposit accounts, time certificates of deposit or negotiable certificates of deposit issuedby a state or nationally chartered bank or trust company, which may include the Fiscal Agent or itsaffiliates, or a state or federal savings and loan association; provided, that the certificates of deposit shallbe 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) abovewhich shall have a market value, as determined on a marked-to-market basiscalculated at least weekly, and exclusive of accrued interest, or not less than onehundred two percent (102%) of the principal amount of the certificates ondeposit.

(g) Commercial paper of “prime” quality of the highest ranking or of the highest letter andnumerical rating as provided by Moody’s and Standard & Poor’s, which commercial paper is limited toissuing corporations that are organized and operating within the United States of America and that havetotal assets in excess of five hundred million dollars ($500,000,000) and that have an “A” or higher ratingfor the issuer’s debentures, other than commercial paper, by Moody’s and Standard & Poor’s, providedthat purchases of eligible commercial paper may not exceed 180 days’ maturity nor represent more thanten percent (10%) of the outstanding commercial paper of an issuing corporation. Purchases ofcommercial paper may not exceed twenty percent (20%) of the proceeds of the Bonds.

(h) A repurchase agreement with a state or nationally chartered bank or trust company or anational banking association or government bond dealer reporting to, trading with, and recognized as aprimary dealer by the Federal Reserve Bank of New York the long term debt of which is rated at least“A” by Moody’s and Standard & Poor’s, provided that all of the following conditions are satisfied:

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

(B) The Underlying Securities are required by the repurchase agreement to beheld by a bank, trust company, or primary dealer having a combinedcapital and surplus of at least one hundred million dollars ($100,000,000)and which is independent of the issuer of the repurchase agreement(“Holder of Collateral”) and the Underlying Securities have beentransferred to the Holder of Collateral in accordance with applicable stateand federal laws (other than by means of entries on the transferor’sbooks); and

(C) The Underlying Securities are maintained at a market value, as determinedon a marked-to-market basis calculated at least weekly, of not less thanone hundred three percent (103%) of the amount so invested and at suchlevels and additional conditions not otherwise in conflict with the termsabove as would be acceptable to Standard & Poor’s and Moody’s tomaintain an “A” rating in an “A” rated structured financing (with a marketvalue approach).

(2) The repurchase agreement shall provide that if during its term the provider’srating by Moody’s and Standard & Poor’s is withdrawn or suspended or fallsbelow “A-” by Standard & Poor’s or “A3” by Moody’s, as appropriate, theprovider must within ten (10) days of receipt of direction from the Fiscal Agent,

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repurchase all collateral and terminate the agreement, with no penalty orpremium to the District or Fiscal Agent.

(i) An investment agreement or guaranteed investment contract with, or guaranteed by, afinancial institution, the long-term unsecured obligations of which are rated “AA” or “Aa1” or better byMoody’s and Standard & Poor’s at the time of initial investment (“Provider”). The investment agreementshall be subject to a downgrade provision with at least the following requirements:

(1) If within five Business Days after the Provider’s long-term unsecured creditrating has been reduced below “AA-” by Standard & Poor’s or below “Aa3” byMoody’s (these events are called “Rating Downgrades”), the Provider shall givenotice to the Fiscal Agent and the District and, within the five-day period, and foras long as the Rating Downgrade is in effect, shall deliver or transfer in the nameof the District to the Fiscal Agent or a third party acting solely as agent therefore(the “Holder of Collateral”) (other than by means of entries on the Provider’sbooks) federal securities allowed as investments under clause (a) above withaggregate current market value equal to at least one hundred five percent (105%)of the principal amount of the investment agreement invested with the Provider atthat time, and shall deliver additional such federal securities as needed tomaintain an aggregate current market value equal to at least one hundred fivepercent (105%) of the principal amount of the investment agreement within threedays after each evaluation date, which shall be at least weekly.

(2) If the Provider’s long-term unsecured credit rating is withdrawn, suspended,other than because of general withdrawal or suspension by Moody’s or Standard& Poor’s from the practice of rating that debt, or reduced below “Aa3” byMoody’s or below “AA-” by Standard & Poor’s, the Provider shall give notice ofthe rating downgrade to the District and the Fiscal Agent, shall, upon fiveBusiness Days’ written notice to the Provider, withdraw the investmentagreement, with accrued but unpaid interest thereon to the date, and terminatesuch agreement.

(j) A taxable or tax-exempt government money market portfolio mutual fund restricted toobligations with either maturities of one year or less or a dollar weighted average maturity of 120 days orless, and either issued, guaranteed or collateralized as to payment of principal and interest by the full faithand credit of the United States of America or rated in one of the three highest categories by Moody’s orStandard & Poor’s. Such money market funds may include funds for which the Fiscal Agent, its affiliatesor subsidiaries provide investment advisory or other management services.

(k) The Local Agency Investment Fund referred to in Section 16429.1 of the GovernmentCode of the State of California to the extent the Fiscal Agent may deposit and withdraw funds directly.

(l) The Orange County Investment Pool, provided the District may statutorily invest funds insuch Investment Pool.

(m) The California Asset Management Program (CAMP).

“Authorized Representative(s)” or “District Representative(s)” means an officer of the SchoolDistrict authorized to provide written directives on behalf of the District, which shall include the SchoolDistrict’s Superintendent, Chief Financial Officer and such other Persons as shall be designated in writingby the School District.

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“Board” or “Board of Education” means the Board of Education of the Tustin Unified SchoolDistrict.

“Bonds” or “2015 Special Tax Refunding Bonds” means the outstanding Community FacilitiesDistrict No. 97-1 of the Tustin Unified School District 2015 Special Tax Refunding Bonds, Series A(Federally Tax-Exempt) and Series B (Federally Taxable).

“Bond Counsel” means (a) the firm of Bowie, Arneson, Wiles & Giannone, or (b) any otherattorney or firm of attorneys nationally recognized for expertise in rendering opinions as to the legalityand tax exempt status of securities issued by public entities.

“Bond Fund” means the fund of that name established under and held by the Fiscal Agentpursuant to the provisions of the Fiscal Agent Agreement.

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

“Bond Year” means each twelve-month period extending from September 2 in one calendar yearto September 1 of the succeeding calendar year, except in the case of the initial Bond Year which shall bethe period from the Dated Date to September 1, 2015, both dates inclusive.

“Bondowner(s)” or “Owner(s)” means the Person or Persons in whose name or names any 2015Special Tax Refunding Bond is registered.

“Business Day” means a day which is not a Saturday or a Sunday or a day on which banks in LosAngeles, 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 provisionsthereto.

“Community Facilities District Policy” means that policy initially adopted by the School Districtpursuant to Government Code Section 53312.7 as emended from time to time.

“Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by theDistrict or School District and related to the authorization, issuance and sale of the 2015 Special TaxRefunding Bonds, which items of expense shall include, but not be limited to, printing costs, cost ofreproducing and binding documents, closing costs, appraisal costs, mortgage study costs, filing andrecording fees, fees and expenses of counsel to the District or School District, initial fees and expenses ofthe Fiscal Agent and/or the Escrow Agent, including its first annual administration fee and fees of itscounsel, expenses incurred by the District and the School District in connection with the authorization andissuance of the 2015 Special Tax Refunding Bonds, rating agency fees or costs, costs of obtainingrating(s) for the 2015 Special Tax Refunding Bonds, Underwriter’s discount, legal fees and charges,including those of Bond Counsel and Disclosure Counsel, Financial Advisor’s fees, bond insurancepremium(s), surety policy premium(s) or costs, charges for execution, transportation and safekeeping ofthe 2015 Special Tax Refunding Bonds and other costs, charges and fees in connection with theforegoing.

“Costs of Issuance Fund” means the fund of that name established under, and held by the FiscalAgent pursuant to, the provisions of the Fiscal Agent Agreement.

“County” means the County of Orange, a political subdivision of the State of California.

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“Dated Date” or “Delivery Date” means the date the 2015 Special Tax Refunding Bonds aredelivered.

“Depository” means any depository which holds 2015 Special Tax Refunding Bonds pursuant tothe provisions of the Fiscal Agent Agreement.

“Developed Property” shall have the same meaning set forth in the Rate and Method.

“Dissemination Agent” means Special District Financing & Administration, or any successordissemination agent appointed by the District pursuant to the District Continuing Disclosure Agreement.

“District” or “CFD No. 97-1” means Community Facilities District No. 97-1 of the TustinUnified School District.

“District Continuing Disclosure Agreement” shall mean that certain Continuing DisclosureAgreement provided by the District, dated the Delivery Date, as originally executed and as it may beamended from time to time in accordance with the terms thereof and with respect to any Series of the2015 Special Tax Refunding Bonds, the Continuing Disclosure Agreement (or equivalent document)entered into, or executed and delivered, by and between the School District, on behalf of the District, anda Dissemination Agent, as originally executed and as amended from time to time.

“Escrow Agent” means U.S. Bank National Association, or any successor thereto, as the EscrowAgent designated under the terms of the Escrow Agreement.

“Escrow Agreement” means the Escrow Agreement entered into by and between U.S. BankNational Association, as the Escrow Agent and Prior Bonds fiscal agent, and the District dated as of theDelivery Date and providing for the payment, redemption and defeasance of the outstanding Prior Bonds.

“Escrow Fund” means the Tustin Unified School District (CFD No. 97-1) Escrow Fund(including the Accounts thereof) established and administered under the Escrow Agreement and as furtherdescribed in 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 NonpurposeInvestments in which Gross Proceeds are invested (other than amountsattributable to an excess described in this subparagraph (i)), over

(B) the amount that would have been earned if the yield on such NonpurposeInvestments (other than amounts attributable to an excess described in thissubparagraph (i)) had been equal to the Yield on the 2015 Special Tax RefundingBonds,

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 amountearned on any fund or account which is used primarily to achieve a proper matching of revenues andannual debt service on the 2015 Special Tax Refunding Bonds during each Bond Year and which isdepleted at least once a year except for a reasonable carryover amount not in excess of the greater of one

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year’s earnings on such fund or account or one-twelfth (1/12) of annual debt service on the 2015 SpecialTax Refunding Bonds, as well as amounts earned on said earnings. The District intends that the BondFund, including the Principal Account and the Interest Account established therein, the Special Tax Fundand the Redemption Fund will be the type of funds described in the preceding sentence.

“Federal Securities” means any of the following which are non-callable and which at the time ofinvestment are legal investments under the laws of the State of California for funds held by the FiscalAgent: direct general obligations of the United States of America (including obligations issued or held inbook-entry form on the books of the United States Department of the Treasury) and obligations, thepayment of principal of and interest on which are directly or indirectly guaranteed by the United States ofAmerica, including, without limitation, such of the foregoing which are commonly referred to as“stripped” obligations and coupons.

“Fiscal Agent” means U.S. Bank National Association, and its successors and assigns or anyother fiscal agent which may be appointed pursuant to the provisions of the Fiscal Agent Agreement.

“Fiscal Agent Agreement” means the Fiscal Agent Agreement, as amended or supplementedpursuant to the terms thereof.

“Fiscal Year” means the period from July 1 to June 30 in any year.

“Fitch” means Fitch Ratings Service and its successors and assigns, except that if such entity shallbe dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then theterm “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency selectedby the District.

“Gross Taxes” means the amount of all Special Taxes collected within the District as set out inthe Rate and Method and proceeds from the sale of property collected pursuant to the foreclosureprovisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes.

“Independent Financial Consultant” means a consultant or firm of such consultants generallyrecognized to be qualified in the field of implementation and administration of community facilitiesdistricts, 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 withinthe District;

(2) does not have any substantial interest, direct or indirect, with the District or any of theproperty owners within the District; and

(3) is not connected with the District as a member, officer or employee of the District or anyof the property owners within the District, but who may be regularly retained to makeannual or other reports to the District.

“Informational Services” means the Municipal Securities Rulemaking Board, through itsElectronic Municipal Market Access (EMMA) system, and, in accordance with then current guidelines ofthe Securities and Exchange Commission and/or such other services providing information with respect tocalled bonds as the District may designate in a written request of the District delivered to the FiscalAgent.

“Insurance Policy” or “Policy” means the policy of municipal bond insurance issued by theInsurer guaranteeing the scheduled payment of principal and interest on the Insured Bonds when due.

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“Insured Bonds” means the 2015 Special Tax Refunding Bonds which are covered by the termsof the Insurance Policy, specifically the Series B Bonds and the Series A Bonds maturing September,2032, through 2038, inclusive (CUSIP® Nos. 901073GK6, 901073GL4, 901073GY6, 901073GZ3, and901073HA7).

“Insurer” or “Bond Insurer” means Build America Municipal Assurance Company, or anysuccessor or assignee thereof.

“Interest Payment Date” means March 1 and September 1 of each year during which 2015Special Tax Refunding Bonds are Outstanding, commencing September 1, 2015.

“Legislative Body” means the Board of Education, acting as the Legislative Body of the District.

“Mandatory Redemption Account” means the account of that name established under, and heldby the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

“Maximum Annual Debt Service” means the maximum sum for any Series of 2015 Special TaxRefunding Bonds obtained for any remaining Bond Year prior to the final maturity on the Bonds bytotaling the following for each Bond Year:

(1) the principal amount of all Outstanding Series of 2015 Special Tax RefundingBonds payable in such Bond Year whether at maturity or by redemption, togetherwith any applicable premium thereon, if any premium is payable; and

(2) the interest payable on the aggregate principal amount of all Outstanding Seriesof 2015 Special Tax Refunding Bonds in such Bond Year assuming the 2015Special Tax Refunding Bonds are retired as scheduled.

“Moody’s” means Moody’s Investors Service, Inc., a corporation duly organized and existingunder the laws of the State of Delaware, and its successors and assigns, except that if such entity shall bedissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term“Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selectedby the District.

“Net Taxes” means the amount of all Gross Taxes minus Administrative Expenses up to theAdministrative Expense Requirement.

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

“Nonpurpose Investments” means any security, investment, obligation, annuity, investment-typeproperty, specified private activity bond or any other type of investment property defined in Section 148of the Code in which Gross Proceeds are invested (other than tax-exempt securities which are described inSection 103(a) of the Code) and which is not acquired to carry out the governmental purpose of the 2015Special Tax Refunding Bonds.

“Optional Redemption Account” means the account of that name established under, and held bythe Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

“Ordinance(s)” means, collectively, Resolution and Ordinance No. 05-31-97 adopted by theBoard of Education on May 27, 1997, and Resolution and Ordinance No. 97-1-10 adopted by the Boardof Education on May 26, 1998.

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“Outstanding” means all 2015 Special Tax Refunding Bonds, of either Series, theretofore issuedby the District, except:

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

(2) Bonds for the transfer or exchange of or in lieu of or in substitution for whichother Bonds shall have been authenticated and delivered by the Fiscal Agentpursuant to the terms of the Fiscal Agent Agreement; and

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

“Participating Underwriter” means the initial Underwriter of the 2015 Special Tax RefundingBonds (Piper Jaffray & Co.).

“Person” means an individual, corporation, limited liability company, firm, association,partnership, trust or other legal entity or group of entities, including a governmental entity or any agencyor political subdivision thereof.

“Prepaid Special Taxes” means all Special Taxes prepaid to the District pursuant to the Rate andMethod and the findings and directives of the Legislative Body with respect to permitting prepayment(s)of Special Taxes during the term of the Fiscal Agent Agreement, less related Administrative Expenses ofcollecting such Prepaid Special Taxes.

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

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

“Principal Corporate Trust Office” means the corporate trust office of the Fiscal Agent, which, atthe date of execution of this Fiscal Agent Agreement, is located at 633 West Fifth Street 24th Floor, LosAngeles, California 90071, or such other office(s) as the Fiscal Agent may designate from time to time.

“Purchase Price” for the purpose of computation of the Yield of the Series A Bonds, has the samemeaning as the term “issue price” in Sections 1273 (b) and 1274 of the Code, and, in general, means theinitial offering price to the public (not including bond houses and brokers, or similar Persons ororganizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount ofthe Series A Bonds are sold. The term “Purchase Price,” for the purpose of computation of the Yield ofNonpurpose Investments, means the fair market value of the Nonpurpose Investments on the date of useof Gross Proceeds for acquisition thereof, or, if later, on the date that Investment Property (as defined inSection 148(b)(2) and (3) of the Code) constituting a Nonpurpose Investment becomes a NonpurposeInvestment of the Series A Bonds, as the case may be.

“Rate and Method” means the amended Rate and Method of Apportionment of Special Taxes ofthe District, as approved pursuant to the Act, and as such may be amended or interpreted from time totime.

“Rating Agencies” means Fitch, Moody’s and/or S&P, as applicable.

“Rebate Fund” means the fund of that name established under, and held by the Fiscal Agentpursuant to, the provisions of the Fiscal Agent Agreement.

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“Record Date” means the 15th day of the calendar month preceding an Interest Payment Datewhether or not such day is a Business Day.

“Redemption Fund” means the fund of that name established under, and held by the Fiscal Agentpursuant to the terms of the Fiscal Agent Agreement.

“Refunding” means the current refunding of the Outstanding Prior Bonds.

“Regulations” means any temporary, proposed or final regulations of the United StatesDepartment of Treasury with respect to obligations issued pursuant to Section 103 and Sections 141 to150 of the Code.

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

“Reserve Fund” means the fund of that name established under, and held by the Fiscal Agentpursuant to, the provisions of the Fiscal Agent Agreement.

“Reserve Fund Account(s)” means, individually or collectively, the Reserve Fund Accounts ofthe Reserve Fund, as established under, and held by the Fiscal Agent pursuant to the terms of the FiscalAgent Agreement

“Reserve Fund Surety” means the debt service reserve surety provided by the Bond Insurer to bedeposited into the Reserve Fund, and the Reserve Fund Accounts, as applicable, to satisfy a portion of thecorresponding Reserve Requirement(s).

“Reserve Fund Surety Bond” means a surety bond, or equivalent security, provided by a qualifiedprovider pursuant to the terms of the Fiscal Agent Agreement.

“Reserve Requirement” means, with respect to each Series of the 2015 Special Tax RefundingBonds, an amount, as of any date of calculation, equal to the least of (i) 10% of the original principalamount of the corresponding Series of the 2015 Special Tax Refunding Bonds, less original issuediscount, if any, plus original issue premium, if any, (ii) Maximum Annual Debt Service on the applicableSeries of the 2015 Special Tax Refunding Bonds, or (iii) 125% of average annual debt service on thecorresponding Series of the 2015 Special Tax Refunding Bonds.

“Residual Fund” means the fund of that name established and held by the School Districtpursuant to, the provisions of the Fiscal Agent Agreement.

“Responsible Officer” of the Fiscal Agent means and includes the president, every senior vicepresident, every vice president, every assistant vice president, every trust officer or any other authorizedofficer of the Fiscal Agent at its Principal Corporate Trust Office.

“School District” means the Tustin Unified School District.

“School Facilities” means public school facilities and supporting infrastructure owned by theSchool District which the District is authorized to acquire or finance pursuant to the formationproceedings and the provisions of the Act.

“Securities Depositories” means The Depository Trust Company, at its then-current address; and,in accordance with then-current guidelines of the Securities and Exchange Commission, such other

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addresses and/or such other securities depositories as the District may designate in a certificate deliveredto the Fiscal Agent.

“Series” means the Series A Bonds and/or Series B Bonds, individually or collectively, as shallbe applicable.

“Series A Bonds” means the $82,820,000 aggregate principal amount Community FacilitiesDistrict No. 97-1 of the Tustin Unified School District 2015 Special Tax Bonds, Series A (Federally Tax-Exempt).

“Series A Costs of Issuance Account” means the account of that name established under, and heldby the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

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

“Series A Principal Account” means the account of that name established under, and held by theFiscal Agent pursuant to, the terms of the Fiscal Agent Agreement

“Series A Reserve Account” means that Reserve Account of the Reserve Fund established under,and held by the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

“Series A Term Bonds” or “Term Bond(s)`” means the Series A Bonds maturing September 1,2038.

“Series B Bonds” means the $9,635,000 aggregate principal amount Community FacilitiesDistrict No. 97-1 of the Tustin Unified School District 2015 Special Tax Bonds, Series B (FederallyTaxable).

“Series B Costs of Issuance Account” means the account of that name established under, and heldby the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

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

“Series B Principal Account” means the account of that name established under, and held by theFiscal Agent pursuant to, the terms of the Fiscal Agent Agreement

“Series B Reserve Account” means that Reserve Account of the Reserve Fund established under,and held by the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

“Sinking Fund Payment” means the annual sinking fund payment to be deposited in the SinkingFund Redemption Account of the Redemption Fund to redeem a portion of the Series A Term Bonds.

“Sinking Fund Redemption Account” means the account of that name established under, and heldby the Fiscal Agent pursuant to, the terms of the Fiscal Agent Agreement.

“Special Tax Fund” means the fund of that name established under, and held by the Fiscal Agentpursuant to, the provisions of the Fiscal Agent Agreement.

“Special Taxes” means the special taxes levied by the Board, acting as the Legislative Body,within the District pursuant to the Act, the Resolution of Formation, the Ordinances and the voter

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approvals obtained at the Elections held within the District and the Annexation Proceedings (as defined inThe Fiscal Agent Agreement), including, but not limited to, the Annexation Election (as defined in TheFiscal Agent Agreement).

“Standard & Poor’s” or “S&P” means Standard & Poor’s Rating Services, a Division of TheMcGraw-Hill Companies, Inc, except that if such corporation shall be dissolved or liquidated or shall nolonger perform the functions of a securities rating agency, then the term “S&P” shall be deemed to referto any other nationally recognized securities rating agency selected by the District.

“Supplement” means any supplemental agreement amending or supplementing the Fiscal AgentAgreement.

“Tax Certificate” means the certificate of that name, delivered with respect to the Series A Bonds,to be executed by an authorized representative of the District on the closing date to establish certain factsand expectations and which contains certain covenants relevant to compliance with the Code.

“Underwriter” means the initial Underwriter of the 2015 Special Tax Refunding Bonds, PiperJaffray & Co.

“Undeveloped Property” shall have the same meaning set forth in the Rate and Method and setforth in the Ordinances.

“Yield” means that yield which, when used in computing the present worth of all payments ofprincipal and interest (or other payments in the case of Nonpurpose Investments which require paymentsin a form not characterized as principal and interest) on a Nonpurpose Investment or on the Series ABonds produces an amount equal to the Purchase Price of such Nonpurpose Investment or the Series ABonds, as the case may be, all computed as prescribed in the applicable Regulations.

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ISSUANCE OF THE 2015 SPECIAL TAX REFUNDING BONDS

The 2015 Special Tax Refunding Bonds are issued pursuant to the Resolution of 2015 BondsIssuance (as defined in the Fiscal Agent Agreement), the Act and the Fiscal Agent Agreement in theamounts and maturities set forth in the Fiscal Agent Agreement (see “INTRODUCTION” and “THEBONDS - Authority for Issuance,” “ – General Provisions” and “ – Debt Service Schedule” in thePreliminary Official Statement for further information).

Purpose of the Bonds

The 2015 Special Tax Refunding Bonds are being issued, pursuant to the Act, to refund theoutstanding Prior Bonds. As part of the refinancing of the Prior Bonds, a portion of the net proceeds ofeach series of the 2015 Special Tax Refunding Bonds will be deposited in the respective EscrowAccounts of the Escrow Fund, held by the Escrow Agent pursuant to the terms of the Escrow Agreementand expended to pay, redeem and refund the outstanding Prior Bonds. (See “INTRODUCTION –Purpose of the Bonds” and “THE FINANCING PLAN” in the Preliminary Official Statement for furtherinformation).

Limited Obligation

The 2015 Special Tax Refunding Bonds shall be and are limited obligations of the District andshall be payable as to the principal thereof and interest thereon and premiums upon the redemptionthereof solely from the Net Taxes and amounts in certain funds, accounts and subaccounts createdpursuant to the Fiscal Agent Agreement as specified therein. The Net Taxes are pledged and set aside forthe payment of the 2015 Special Tax Refunding Bonds pursuant to the terms of the Fiscal AgentAgreement.

The 2015 Special Tax Refunding Bonds and interest thereon are not payable from the generalfund of the District or the School District. Except with respect to the Special Taxes, neither the credit northe taxing power of the District or the School District is pledged for the payment of the 2015 Special TaxRefunding Bonds or interest thereon, and no Owner of the 2015 Special Tax Refunding Bonds maycompel the exercise of the taxing power by the District or the School District or the forfeiture of any oftheir property. The principal of and interest on the 2015 Special Tax Refunding Bonds are not a debt ofthe District or the School District, the State of California nor any of its political subdivisions within themeaning of any constitutional or statutory limitation or restriction. The 2015 Special Tax RefundingBonds 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 which are, under the termsof the Fiscal Agent Agreement, pledged and set aside for the payment of the 2015 Special Tax RefundingBonds and interest thereon. Neither the members of the Legislative Body or the Board of Education norany persons executing the 2015 Special Tax Refunding Bonds are personally liable on the 2015 SpecialTax Refunding Bonds by reason of their issuance (see “INTRODUCTION,” “SECURITY FOR THEBONDS - General” and “ - Special Taxes” and “BONDOWNERS’ RISKS – The Bonds are LimitedObligations of the Community Facilities District” and “ - Insufficiency of the Special Tax” in thePreliminary Official Statement for further information).

Equality of 2015 Special Tax Refunding Bonds, Pledge of Net Taxes

Pursuant to the Act and the provisions of the Fiscal Agent Agreement, the 2015 Special TaxRefunding Bonds shall be equally payable from the Net Taxes without priority for Series, number, dateof the 2015 Special Tax Refunding Bonds, date of sale, date of execution or date of delivery, and thepayment of the interest on and principal of the 2015 Special Tax Refunding Bonds and any premiumsupon the redemption thereof shall be exclusively paid from the Net Taxes and amounts held in certain

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funds and accounts created under the terms of the Fiscal Agent Agreement, as specified therein. All ofthe Net Taxes are pledged and set aside for the payment of the 2015 Special Tax Refunding Bonds, andsuch Net Taxes and any interest earned on the Net Taxes shall constitute a trust fund for the payment ofthe interest on and principal of the 2015 Special Tax Refunding Bonds and so long as any of the 2015Special Tax Refunding Bonds or interest thereon are unpaid the Net Taxes and interest thereon shall notbe 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 FiscalAgent Agreement, or to the Fiscal Agent Agreement as modified pursuant to provisions therein.Notwithstanding any provision contained in the Fiscal Agent Agreement to the contrary, Net Taxesdeposited in the Administrative Expense Fund and the Rebate Fund shall no longer be considered to bepledged to the 2015 Special Tax Refunding Bonds and the Administrative Expense Fund and the RebateFund 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 principaland interest on the 2015 Special Tax Refunding Bonds when due, such principal of and interest on the2015 Special Tax Refunding Bonds shall be paid from available amounts held by the Fiscal Agent in theSpecial Tax Fund (and its accounts), Bond Fund, Reserve Fund or Redemption Fund under the FiscalAgent Agreement (not including those amounts deposited in the Administrative Expense Fund, theEscrow Fund, the Residual Fund and the Rebate Fund) in accordance with such terms without preferenceor priority of interest over principal or principal over interest, or of any installment of principal or interestover any other installment of principal or interest, ratably to the aggregate amount of such principal andinterest (See “INTRODUCTION – Special Tax Requirement,” “ – Sources of Payment for the Bonds,”“SECURITY FOR THE BONDS - General” and “ - Special Taxes” in the Preliminary Official Statementfor further information).

Funds and Accounts

The Fiscal Agent Agreement creates specified funds, accounts and subaccounts to be maintainedby the Fiscal Agent for specified purposes:

Special Tax Fund

(a) The District shall establish and maintain the Special Tax Fund to be held by the CountyTreasurer. Special Taxes (exclusive of Prepaid Special Taxes) received shall be deposited into the SpecialTax fund. Prepaid Special Taxes shall, upon receipt, be deposited into the Prepayment Accounts of theSpecial Tax fund and applied as set out in the Fiscal Agent Agreement.

(b) Moneys in the Special Tax Fund are subject to the pledge for payment of principal andinterest on the Bonds as set forth in the Fiscal Agent Agreement. Upon receipt thereof from the County,the District shall deposit all Gross Taxes into the Special Tax Fund. All moneys in the Special Tax Fund(exclusive of Prepaid Special Taxes) shall be held by the County Treasurer on behalf of the District.

(c) Special Taxes in the Special Tax Fund (exclusive of Prepaid Special Taxes) shall beapplied by the District as follows and in the following order of priority:

1. To the Administrative Expense Fund, an amount equal to the AdministrativeExpense Requirement.

2. To the Series A Interest Account and the Series B Interest Account of the BondFund, an amount such that the balance in each Interest Account, as applicable,one Business Day prior to each Interest Payment Date shall be equal to theinstallment of interest due on the corresponding Series of Bonds on each Interest

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Payment Date. Moneys in the Interest Account shall be used for the payment ofinterest on the corresponding Series of Bonds as the same become due.

3. To the Series A Principal Account and Series B Principal Account of the BondFund, an amount up to the amount needed to make the principal payment due onthe corresponding Series of Bonds, as applicable, during the current Bond Year.

4. To the Sinking Fund Redemption Account(s) (or subaccounts) of the RedemptionFund an amount up to the amount needed to make the Mandatory SinkingPayments due on the 2015 Special Tax Refunding Bonds (of either Series) duringthe current Bond Year.

5. To the Series A Reserve Account and/or the Series B Reserve Account, theamounts, if any, necessary to replenish each Reserve Fund Account to theapplicable Reserve Requirement, including the reimbursement to the BondInsurer for all amounts due and payable to the Bond Insurer in connection withthe Reserve Fund Surety and to pay Reserve Fund Surety reimbursements due tothe Bond Insurer pursuant to the terms of the Reserve Fund Surety.

6. To the extent that Administrative Expenses are not fully satisfied in (1) above, tothe Administrative Expense Fund in the amount(s) required to bring the balancetherein to the amount identified by the District to the Fiscal Agent to meet suchadditional Administrative Expenses (over and above the Administrative ExpenseRequirement) in the coming Fiscal Year, or Administrative Expenses from aprior Fiscal Year which remain unpaid.

7. To the Redemption Fund, the amount(s), if any, that the District directs the FiscalAgent to deposit pursuant to the provisions of the Fiscal Agent Agreement foroptional redemption of Outstanding Series A Bonds.

8. Any remaining Special Taxes and other amounts constituting Net Taxes shallremain in the Special Tax Fund subject to the provisions of (d), below.

(d) Any remaining Special Taxes and other amounts constituting Net Taxes, if any, shallremain in the Special Tax Fund until the end of the Bond Year. At the end of each Bond Year, anyremaining funds in the Special Tax Fund, which are not required to cure a delinquency in the payment ofprincipal and interest on any Series of the Bonds, to restore the Reserve Accounts of the Reserve Fund asprovided for in (c)(5) (or provide for required payments to the Bond Insurer for draws on the ReserveFund Surety), above, or to pay current or pending Administrative Expenses as provided for in (c)(1) and(6) above, shall, without further action by any party, be transferred by the Fiscal Agent on September 15of each year into the Residual Fund and shall thereafter be used for the purposes applicable to theResidual Fund (which are purposes authorized under the provisions of the Act and the proceedings underwhich the District was formed). The Fiscal Agent shall promptly confirm the amount of such transfer(s)in writing to the District. Moneys deposited into, or held within, the Residual Fund are not pledgedto the payment of principal, interest or premiums on the 2015 Special Tax Refunding Bonds ofeither Series. Any funds which are required to cure any such delinquency shall be retained in the SpecialTax Fund and expended or transferred, at the earliest possible date, for such purpose.

(See “SECURITY FOR THE BONDS – Special Tax Fund” in the Preliminary Official Statement).

Prepayment Account of the Special Tax Fund. Prepaid Special Taxes collected by the District(net of any costs of collection) shall be transferred, no later than 10 days after receipt thereof, to the FiscalAgent; and the District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in the

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Prepayment Account of the Special Tax Fund. The Prepaid Special Taxes shall be held in the PrepaymentAccount for the benefit of the Series A Bonds and shall be transferred by the Fiscal Agent to theMandatory Redemption Account of the Redemption Fund to call Series A Bonds on the next InterestPayment Date for which notice can be given in accordance with the special mandatory redemptionprovisions as set forth in the Fiscal Agent Agreement. The Prepaid Special Taxes shall be transferred tothe Mandatory Redemption Account and applied to call Series A Bonds on a pro rata basis. (See “THEBONDS – Redemption” in the Preliminary Official Statement).

Bond Fund - The Bond Fund (in which there are established Interest Accounts and PrincipalAccounts for each Series of the 2015 Special Tax Refunding Bonds), is used to disperse payments ofprincipal and interest to the Bondowners of each Series of the Bonds on each Interest Payment Date.Moneys in each of the Interest Accounts are allocated to the payment of interest due on the respectiveseries of the 2015 Special Tax Refunding Bonds on each Interest Payment Date and moneys in each of thePrincipal Accounts are allocated to the repayment of principal on the respective series of the 2015 SpecialTax Refunding Bonds on the corresponding Interest Payment Date (see “SECURITY FOR THE BONDS- Bond Fund” in the Preliminary Official Statement).

Reserve Fund.

(a) There shall be maintained in the Series A Reserve Account of the Reserve Fund anamount equal to the Reserve Requirement for the Series A Bonds. Notwithstanding the foregoing, in theevent of a redemption or partial defeasance of the Series A Bonds, the Reserve Requirement for the SeriesA Bonds shall thereafter be determined by the District and communicated to the Fiscal Agent in writingand any funds in excess of such predetermined Reserve Requirement for the Series A Bonds shall beutilized as set forth in the Fiscal Agent Agreement.

(b) Moneys in the Series A Reserve Account of the Reserve Fund shall be used solely for thepurpose of (i) making transfers to the Series A Interest Account and/or Series A Principal Account of theBond Fund or the Sinking Fund Redemption Account of the Redemption Fund to pay the principal of, andinterest and premium on Series A Bonds when due to the extent that moneys in the Series A InterestAccount and the Series A Principal Account of the Bond Fund are insufficient therefor; (ii) making anyrequired transfer to the Rebate Fund pursuant to the provisions of the Fiscal Agent Agreement uponwritten direction from the District; (iii) paying the principal and interest due on Series A Bonds in thefinal Bond Year applicable to the Series A Bonds; and (iv) application to the defeasance of such Series ABonds in accordance with the provisions of the Fiscal Agent Agreement. If the amounts in the Series AInterest Account or the Series A Principal Account of the Bond Fund, as provided for herein, areinsufficient to pay the principal of, or interest on the Series A Bonds when due, the Fiscal Agent shall,one Business Day prior to the corresponding Interest Payment Date, withdraw from the Series A ReserveAccount of the Reserve Fund for deposit in the Series A Interest Account and the Series A PrincipalAccount of the Bond Fund, moneys necessary for such purpose. Following any transfer to the Series AInterest Account or the Series A Principal Account of the Bond Fund, the Fiscal Agent shall notify theDistrict of the amount needed to replenish the Series A Reserve Account of the Reserve Fund to theReserve Requirement applicable to the Series A Bonds and the District shall include such amount as isrequired at that time to correct such deficiency in the next Special Tax levy to the extent of the permittedmaximum Special Tax rates.

(c) The Reserve Requirement for the Series A Bonds, or any portion thereof, may besatisfied by crediting to the Series A Reserve Account of the Reserve Fund moneys, a letter of credit, abond insurance policy, or any other comparable credit facility or any combination thereof, which in theaggregate make funds available in the Series A Reserve Account of the Reserve Fund in an amount equalto the Reserve Requirement applicable to the Series A Bonds; however, the long-term unsecured debt orclaim-paying ability, as the case may be, of the provider of any such letter of credit, bond insurance

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policy or any other comparable credit facility, must, at the time of issuance, have a rating of at least “A1”from Moody's if Moody's shall then be rating the Bonds, as shall be applicable, and “A+” from S&P, ifS&P shall then be rating the Bonds, as shall be applicable, (provided that the Fiscal Agent shall be underno obligation and have no responsibility whatsoever to independently determine or verify such ratingother than at the time of delivery). In the event of the use of such a surety, the Fiscal Agent shall beprovided with copies of all documents in regard thereto and shall, to the extent not in conflict with theprovisions of the Fiscal Agent Agreement, conform to the forms thereof for purposes of submitting draws,and making reimbursements, thereon. In the event of the use of such a surety, S&P shall, if S&P shallthen be rating the Series A Bonds, be provided written notice by the Fiscal Agent, of (i) any draw on suchsurety at the time such occurs; and (ii) any substitution or replacement of the then-current surety or suretyprovider as of the date of such substitution or replacement. The Reserve Requirement will be initiallypartially satisfied with the Reserve Fund Surety delivered by the Bond Insurer.

(d) There shall be maintained in the Series B Reserve Account of the Reserve Fund anamount equal to the Reserve Requirement for the Series B Bonds. Notwithstanding the foregoing, in theevent of a redemption or partial defeasance of the Series B Bonds, the Reserve Requirement for the SeriesB Bonds shall thereafter be determined by the District and communicated to the Fiscal Agent in writingand any funds in excess of such predetermined Reserve Requirement for the Series B Bonds shall beutilized as set forth in the Fiscal Agent Agreement.

(e) Moneys in the Series B Reserve Account of the Reserve Fund shall be used solely for thepurpose of (i) making transfers to the Series B Interest Account and/or Series B Principal Account of theBond Fund to pay the principal of and interest on the Series B Bonds when due to the extent that moneysin the Series B Interest Account and the Series B Principal Account of the Bond Fund are insufficienttherefor; (ii) making any required transfer to the Rebate Fund pursuant to the provisions of the FiscalAgent Agreement upon written direction from the District; (iii) paying the principal and interest due onSeries B Bonds in the final Bond Year applicable to the Series B Bonds; and (iv) application to thedefeasance of such Series B Bonds in accordance with the provisions of the Fiscal Agent Agreement. Ifthe amounts in the Series B Interest Account or the Series B Principal Account of the Bond Fund, asprovided for herein, are insufficient to pay the principal of, or interest on the Series B Bonds when due,the Fiscal Agent shall, one Business Day prior to the corresponding Interest Payment Date, withdrawfrom the Series B Reserve Account of the Reserve Fund for deposit in the Series B Interest Account andthe Series B Principal Account of the Bond Fund, moneys necessary for such purpose. Following anytransfer to the Series B Interest Account or the Series B Principal Account of the Bond Fund, the FiscalAgent shall notify the District of the amount needed to replenish the Series B Reserve Account of theReserve Fund to the Reserve Requirement applicable to the Series B Bonds and the District shall includesuch amount as is required at that time to correct such deficiency in the next Special Tax levy to theextent of the permitted maximum Special Tax rates.

(f) The Reserve Requirement for the Series B Bonds, or any portion thereof, may be satisfiedby crediting to the Series B Reserve Account of the Reserve Fund moneys, a letter of credit, a bondinsurance policy, or any other comparable credit facility or any combination thereof, which in theaggregate make funds available in the Series B Reserve Account of the Reserve Fund in an amount equalto the Reserve Requirement applicable to the Series B Bonds; however, the long-term unsecured debt orclaim-paying ability, as the case may be, of the provider of any such letter of credit, bond insurancepolicy or any other comparable credit facility, must, at the time of issuance, have a rating of at least “A1”from Moody's if Moody's shall then be rating the Bonds, as shall be applicable, and “A+” from S&P, ifS&P shall then be rating the Bonds, as shall be applicable, (provided that the Fiscal Agent shall be underno obligation and have no responsibility whatsoever to independently determine or verify such ratingother than at the time of delivery). In the event of the use of such a surety, the Fiscal Agent shall beprovided with copies of all documents in regard thereto and shall, to the extent not in conflict with theprovisions of the Fiscal Agent Agreement, conform to the forms thereof for purposes of submitting draws,

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and making reimbursements, thereon. In the event of the use of such a surety, S&P shall, if S&P shallthen be rating the Series B Bonds, be provided written notice by the Fiscal Agent, of (i) any draw on suchsurety at the time such occurs; and (ii) any substitution or replacement of the then-current surety or suretyprovider as of the date of such substitution or replacement. The Reserve Requirement will be initiallypartially satisfied with the Reserve Fund Surety delivered by the Bond Insurer.

(g) Moneys, if any, held in the Reserve Fund Accounts shall be invested in accordance withthe provisions of the Fiscal Agent Agreement. Any moneys in the Reserve Fund Accounts in excess ofthe corresponding Reserve Requirement shall be withdrawn by the Fiscal Agent two (2) Business Daysprior to each Interest Payment Date and deposited into the Interest Account of the Bond Fund for thecorresponding Series of Bonds and thereafter applied for the purposes specified for such Account.

(h) Notwithstanding anything herein to the contrary, the Fiscal Agent shall transfer to theReserve Fund Account(s), from available moneys in the Special Tax Fund, the amount(s) needed torestore each Reserve Fund Account to the corresponding Reserve Requirement as specified in theprovisions of the Fiscal Agent Agreement. Moneys in the Special Tax Fund shall be deemed available fortransfer to the Reserve Fund Account(s) only if such amounts will not be needed to make the deposit(s)required to be made to the corresponding Interest Account(s) and the corresponding Principal Account(s)of the Bond Fund for the next applicable Interest Payment Date.

(See “SECURITY FOR THE BONDS - Reserve Fund” and “BONDOWNERS’ RISKS – Depletion ofReserve Fund” in the Preliminary Official Statement and “Funds and Accounts - Special Tax Fund”above for more information).

Redemption Fund – The Redemption Fund is established by the Fiscal Agent Agreement andincludes an Optional Redemption Account, a Sinking Fund Redemption Account and a MandatoryRedemption Account. Each of the redemption accounts are used for the temporary retention of moneysallocated to the redemption of the Series A Bonds corresponding to that account. Moneys in each suchaccount shall be applied solely for such redemption purpose (see “THE BONDS – Redemption” in thePreliminary Official Statement).

Administrative Expense Fund - The Administrative Expense Fund is used for the receipt of fundsinitially deposited from the proceeds of the 2015 Special Tax Refunding Bonds, if any, and thereafterfunds transferred from the Special Tax Fund to pay Administrative Expenses during each Fiscal Year.Moneys retained in the Administrative Expense Fund are not pledged for the repayment of interest orprincipal on the 2015 Special Tax Refunding Bonds. Moneys in the Administrative Expense Fund shallbe utilized to pay Administrative Expenses as specified in the Fiscal Agent Agreement. (See“SECURITY FOR THE BONDS – Administrative Expense Fund” in the Preliminary Official Statement).

Costs of Issuance Fund and Costs of Issuance Accounts – The Fiscal Agent Agreementestablishes the Costs of Issuance Fund and the Costs of Issuance Accounts. A portion of the proceeds ofeach Series of the 2015 Special Tax Refunding Bonds will be deposited into the respective Costs ofIssuance Accounts of the Costs of Issuance Fund. Moneys deposited into the respective Costs of IssuanceAccounts of the Costs of Issuance Fund will be expended at the direction of the District for payment ofCosts of Issuance of the Bonds as further set forth in the Fiscal Agent Agreement.

Residual Fund. Moneys in the Residual Fund may be used by the District for acquisition and/orconstruction of School Facilities; to make deposits to the Rebate Fund under the terms of the Fiscal AgentAgreement for the purposes of paying rebatable arbitrage as and when such is due in accordance with theTax Certificate and the Regulations, to pay other obligations of the District, at the option of the District,to pay for Administrative Expenses under the terms of the Fiscal Agent Agreement, or other purposes asset out in the Fiscal Agent Agreement. Moneys on deposit in the Residual Fund are not pledged for

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payment of the principal of, interest on, or premiums of the 2015 Special Tax Refunding Bonds, and arenot subject to any Bondowner’s lien. (See “SECURITY FOR THE BONDS – Residual Fund” in thePreliminary Official Statement).

Rebate Fund - The Rebate Fund is established by the Fiscal Agent Agreement for the receipt andpayment of arbitrage earnings applicable to the Series A Bonds to the United State government asrequired under the terms of the Fiscal Agent Agreement and the Tax Certificate. (See “SECURITY FORTHE BONDS – Payment of Rebate Obligation” in the Preliminary Official Statement).

Investment Earnings - Investment Earnings on each of the Reserve Fund Accounts of the ReserveFund in excess of the corresponding Reserve Requirement shall be transferred to the Interest Account ofthe Bond Fund on a semi-annual basis as further described in the Fiscal Agent Agreement. Interestincome on other funds and accounts as set out in the Fiscal Agent Agreement will be retained in theaccount or fund in which it is earned and shall be applied for the purpose for which such account or fundwas established (except as otherwise specified in the Fiscal Agent Agreement). The Fiscal Agent isrequired to invest and reinvest all moneys held the accounts and funds established under the Fiscal AgentAgreement (in accordance with written directives from a representative of the District) in AuthorizedInvestments and as specified in the Fiscal Agent Agreement (see “SECURITY FOR THE BONDS –Investment of Moneys in Funds” in the Preliminary Official Statement).

Redemption

The Series A Bonds maturing on September 1, 2026, and thereafter, may be redeemed prior tomaturity, in whole or in part, at the option of the District from any source of available funds on any dateon and after September 1, 2025, as set out in the Fiscal Agent Agreement. The Series B Bonds are notsubject to optional redemption prior to maturity. (See “THE BONDS - Redemption” in the PreliminaryOfficial Statement).

The Series A Term Bonds are subject to mandatory redemption from mandatory sinkingpayments deposited into the Sinking Fund Redemption Account to redeem those Outstanding Series ATerm Bonds maturing on September 1, 2038, as specified in the Fiscal Agent Agreement (see “THEBONDS – Redemption” in the Preliminary Official Statement). The Series B Bonds are not subject tomandatory sinking fund redemption prior to maturity.

The Series A Bonds are also subject to mandatory redemption prior to their stated maturities, inwhole, or in part, on any Interest Payment Date for which timely notice can be given under the terms ofthe Fiscal Agent Agreement from moneys on deposit in the Prepayment Account of the Special Tax Fundon the dates and at the redemption prices set forth in the Fiscal Agent Agreement. The Series B Bondsare not subject to mandatory redemption from Special Tax prepayments. (See “THE BONDS -Redemption,” “SECURITY FOR THE BONDS - Special Tax Fund” and “ – Prepaid Special Taxes” inthe Preliminary Official Statement and “Funds and Accounts – Prepayment Account of the Special TaxFund” herein).

The Fiscal Agent shall select the Series 2015 Special Tax Refunding Bonds subject to optionalredemption, mandatory sinking fund redemption and mandatory redemption, as applicable, from PrepaidSpecial Taxes, as applicable, in accordance with the provisions of the Fiscal Agent Agreement (See “THEBONDS - Redemption” in the Preliminary Official Statement).

Covenants

So long as any of the Bonds issued pursuant to the Fiscal Agent Agreement are Outstanding andunpaid, the District makes the following covenants with the Owners under the provisions of the Act and

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the Fiscal Agent Agreement and all Supplements (to be performed by the District or its proper officers,agents or employees), which covenants are necessary, convenient and desirable to secure the 2015 SpecialTax Refunding Bonds; provided, however, that such covenants do not require the District to expend anyfunds or moneys other than the Net Taxes or any moneys deposited in the funds and accounts createdunder the Fiscal Agent Agreement and legally available therefor.

Covenant 1. Punctual Payment. The District will duly and punctually pay, or cause to bepaid, the principal of and interest on every Bond issued pursuant to the Fiscal Agent Agreement, togetherwith the premium thereon, if any be payable, on the date, at the place and in the manner mentioned in theBonds and in accordance with the Fiscal Agent Agreement and any Supplement to the extent Net Taxesare available therefor, and that the payments into the Bond Fund and the Reserve Fund will be made, allin strict conformity with the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfullyobserve and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement andany Supplement and of the Bonds issued under the Fiscal Agent Agreement, and that time of suchpayment 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 Taxrates, the District will comply with all requirements of the Act so as to assure the timely collection of theSpecial Taxes, including, without limitation, the enforcement of delinquent Special Taxes.

On or before each June 1, commencing June 1, 2016, the Fiscal Agent shall provide a writtennotice to the District stating the amounts then on deposit in the various funds and accounts established bythe Fiscal Agent Agreement. The receipt of such notice by the District shall in no way affect theobligations of the District under the following paragraphs. Upon receipt of a copy of such notice, theDistrict shall communicate with the Orange County Treasurer-Tax Collector or other appropriate officialof the County of Orange 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 SpecialTaxes each Fiscal Year, in accordance with the Ordinance, such that the computation of the levy iscomplete before the final date on which the Orange County Treasurer-Tax Collector will accept thetransmission of the Special Tax amounts for the parcels within the District for inclusion on the nextsecured tax roll. Upon the completion of the computation of the amounts of the levy, and approval by theLegislative Body, the District shall prepare or cause to be prepared, and shall transmit to the OrangeCounty Treasurer-Tax Collector, such data as the Orange County Treasurer-Tax Collector requires toinclude the levy of the Special Taxes on the next secured tax roll.

The District shall fix and levy the amount of Special Taxes within the District required for thepayment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuingyear including any necessary replenishment or expenditure of the Reserve Fund for the Bonds, an amountequal to the Administrative Expense Requirement and any additional amounts necessary for expensesincurred in connection with administration or enforcement of delinquent Special Taxes.

The Special Taxes shall be payable and collected in the same manner and at the same time and inthe same installment as the general taxes on real property are payable, and have the same priority, becomedelinquent at the same times and in the same proportionate amounts and bear the same proportionatepenalties and interest after delinquency as do the general taxes on real property; provided, the LegislativeBody may provide for direct collection of the Special Taxes in certain circumstances.

The fees and expenses of the Independent Financial Consultant retained by the District to assist incomputing the levy of the Special Taxes under the terms of the Fiscal Agent Agreement and anyreconciliation of amounts levied to amounts received, as well as the costs and expenses of the District

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(including a charge for District staff time) in conducting its duties under the terms of the Fiscal AgentAgreement, shall be an Administrative Expense under the terms of the Fiscal Agent Agreement.

(See “SECURITY FOR THE BONDS - Special Taxes,” “BONDOWNERS’ RISKS – Property TaxDelinquencies,” “ - Billing of Special Taxes” and “ – Insufficiency of Special Tax” in the PreliminaryOfficial Statement.)

Covenant 3. Commence Foreclosure Proceedings. On or about March 1 and July 1 of eachFiscal Year, the District will compare the amount of Special Taxes theretofore levied in the District to theamount of Special Taxes theretofore received by the District, and:

(A) Individual Delinquencies. If the District determines that (i) any single parcelwithin the District is delinquent in the payment of five (5) or more installments of the SpecialTaxes, then the District shall send, or cause to be sent, a notice of delinquency (and a demand forimmediate payment thereof) to the property owner within forty-five (45) days of suchdetermination, and (if the delinquency remains uncured) the District shall take action to authorizethe commencement of foreclosure proceedings within ninety (90) days of the July 1determination, to the extent permissible under applicable law, and shall thereafter diligentlyprosecute such proceedings in superior court to the extent permitted by law.

(B) Aggregate Delinquencies. If the District determines that the total amount ofdelinquent Special Taxes for the prior Fiscal Year for the District (including the total ofdelinquencies under paragraph (A) above) exceeds five percent (5%) of the total Special Taxesdue and payable for the prior Fiscal Year, the District shall notify, or cause to be notified, allproperty owners who are then delinquent in the payment of Special Taxes (and demandimmediate payment of the delinquency) within forty-five (45) days of such determination, and (tothe extent such delinquencies remain uncured) the District shall take action to authorize thecommencement of foreclosure proceedings within ninety (90) days of such determination againsteach parcel of land within the District with a Special Tax delinquency to the extent permissibleunder applicable law.

(C) Limiting Provision. Notwithstanding the foregoing, however, the District shallnot be required to order, or take action upon, the commencement of foreclosure proceedingsunder subsection (B), above, if such delinquencies, if not remedied, will not result in a draw onthe Reserve Fund such that the Reserve Fund will fall below the Reserve Requirement and nodraw has been made on the Reserve Fund, which has not been restored, such that the ReserveFund shall be funded to at least the Reserve Requirement.

The net proceeds received following a judicial foreclosure sale of land within the Districtresulting from a property owner’s failure to pay the Special Taxes when due are included within the NetTaxes pledged to the payment of principal of and interest on the Special Tax Refunding Bonds under theFiscal Agent Agreement.

The District reserves the right to elect to accept payment from a property owner of at least theenrolled amount of the Special Taxes for a parcel(s) but less than the full amount of the penalties, interest,costs and attorneys’ fees related to the Special Tax delinquency for such parcel(s). The Bondowners aredeemed to have consented to the foregoing reserved right of the District, notwithstanding any provision ofthe Act or other law of the State, or any other term set forth in the Fiscal Agent Agreement to thecontrary. The Bondowners, by their acceptance of the Bonds, have consented to such payment for suchlesser amounts.

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Further, notwithstanding any provision of the Act or other law of the State, or any other term setforth in the Fiscal Agent Agreement to the contrary, in connection with any judicial foreclosureproceeding related to delinquent Special Taxes:

(i) The District has in the Fiscal Agent Agreement expressly been authorized tocredit bid at any foreclosure sale, without any requirement that funds be set aside in the amountso credit bid, in the amount specified in Section 53356.5 of the Act, or such lesser amount asdetermined under clause (ii) below or otherwise under Section 53356.6 of the Act.

(ii) The District may permit, in its sole and absolute discretion, property withdelinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5of the Act, if it determines that such sale is in the interest of the Bondowners. The Bondowners,by their acceptance of the Bonds, have consented to such sale for such lesser amounts (assuch consent is described in Section 53356.6 of the Act), and hereby release the District andthe School District, and their respective officers and agents, from any liability in connectiontherewith. If such sale for lesser amounts would result in less than full payment of principal ofand interest on the Bonds, the District will use its best efforts to seek approval of theBondowners.

The Board has specifically delegated to the School District’s Chief Financial Officer, or suchofficer’s designee(s), all necessary authority in order to:

(a) pursue collection of all such Special Taxes pursuant to the provisions of such Covenant 3and the terms and conditions of the Fiscal Agent Agreement;

(b) contract for such services as necessary for collection of such Special Taxes, including,but not limited to, legal services for any applicable foreclosure proceedings, the costthereof to be borne by the District (subject to Board ratification of any expenditureswhich are not drawn from the Administrative Expense Fund) and the property ownersthat have failed to timely pay such Special Taxes, including all costs, interest, andpenalties consistent with applicable law;

(c) file, or authorize to be filed, actions up to and including legal action(s) necessary tocollect any delinquent Special Taxes including foreclosure of any lien securing suchSpecial Taxes;

(d) that as provided by the Act, authorize the payment of the costs and attorneys’ fees forprosecution of such litigation as is authorized on behalf of the District on redemptionprior to entry of judgment as well as on post-judgment redemption, and the Districthereby authorizes such counsel retained by the District to require payment on theDistrict’s behalf of all costs and all attorneys’ fees incurred in applicable litigation as acondition of such redemption; and/or

(e) in conjunction with counsel retained by the District, and other District consultants,authorize, pursuant to Government Code Section 53356.2: (i) the recording of notices ofintent to remove the delinquent Special Taxes from the tax rolls, and (ii) requests that theapplicable County officials remove current and future delinquent Special Taxes from thetax rolls.

All actions undertaken by the Chief Financial Officer pursuant to the provisions of this Covenantshall be reported to the Board on a regular basis and are subject to the authority of the Board tosubsequently direct different or alternative action(s) in such regard.

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

(See “SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales” and “BONDOWNERS’ RISKS –Foreclosure Proceedings” in the Preliminary Official Statement.).

Covenant 4. Against Encumbrances. The District will not encumber, pledge or place anycharge or lien upon any of the Net Taxes or other amounts pledged to the 2015 Special Tax RefundingBonds superior to, or on a parity with, the pledge and lien created in the Fiscal Agent Agreement for thebenefit of the 2015 Special Tax Refunding Bonds, except as permitted by the Fiscal Agent Agreementand as to bonds issued to fully or partially refund the 2015 Special Tax Refunding Bonds.

Covenant 5. Modification of Maximum Authorized Special Tax. The District covenants thatno modification of the maximum authorized Special Taxes within the District1 shall be approved by theDistrict which would prohibit the District from levying the Special Tax on Developed Property within theDistrict in any Fiscal Year at such a rate as could generate Special Taxes within the District in each FiscalYear at least equal to 110% of Annual Debt Service plus estimated annual Administrative Expenses.

The District further covenants that in the event an ordinance is adopted by initiative pursuant toSection 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter themaximum authorized Special Taxes, it will, to the extent of available District funds therefore, commenceand pursue legal action seeking to preserve its ability to comply with its covenant contained in thepreceding paragraph.

Covenant 6. Protection of Security and Rights of Owners. The District will preserve andprotect the security of the District and the rights of the Owners, and will warrant and defend their rightsagainst all claims and demands of all Persons. From and after the delivery of any of the 2015 Special TaxRefunding Bonds by the District, the 2015 Special Tax Refunding Bonds shall be incontestable by theDistrict.

Covenant 7. Compliance with Law, Completion of Refunding of Prior Bonds. The District willcomply with all applicable provisions of the Act and law in completing the refinancing of the PriorBonds.

Covenant 8. Books and Accounts. The District will keep, or cause to be kept, proper books ofrecords and accounts, separate from all other records and accounts of the 2015 Special Tax RefundingBonds, in which complete and correct entries shall be made of all transactions relating to the Project, thelevy of the Special Tax within the District and the deposits to the Special Tax Fund including thePrepayment Account. Such books of record and accounts shall at all times during business hours besubject to the inspection of the Owners of not less than ten percent (10%) of the principal amount of the2015 Special Tax Refunding Bonds then Outstanding or their representatives authorized in writing.

Covenant 9. Tax Covenant. The District covenants and represents that until the last Series ABonds shall have been fully paid or redeemed, the District will comply with all requirements of the TaxCertificate, the Code and all applicable Regulations, such that the interest on the Series A Bonds willremain excluded from gross income for federal income tax purposes.

Covenant 10. Additional Tax Covenants. Covenant 10, as fully set forth in the Fiscal AgentAgreement, provides for additional covenants of the District in order to preserve and protect the taxexempt status of the Series A Bonds.

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Covenant 11. Further Assurances. The District will adopt, make, execute and deliver any andall such further resolutions, instruments and assurances as may be reasonably necessary or proper to carryout the intention or to facilitate the obligations and covenants under the Fiscal Agent Agreement and anySupplement, and for the better assuring and confirming unto the Owners of the rights and benefitsprovided in the Fiscal Agent Agreement and in any Supplement.

Covenant 12. Additional Opinion(s). The District will not make any change in requirements orprocedures or take any action, as to which change or action the Fiscal Agent Agreement or relateddocuments require an opinion of nationally recognized Bond Counsel, unless it obtains an opinion ofBond Counsel to the effect that (a) interest on the 2015 Special Tax Refunding Bonds was excluded fromgross 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 thechange (except that such opinion need not be given as to any interest for which a similar opinion haspreviously been given and remains in effect subsequent to such change), and (b) assuming continuedcompliance by the District with the covenants as changed, interest on the Series A Bonds is excludedfrom gross income for purposes of federal income taxation.

Covenant 13. Tender of Bonds. The District will not, in collecting the Special Taxes within theDistrict or in processing any such judicial foreclosure proceedings, exercise any authority which it haspursuant to Sections 53340, 53344.1, 53344.2, 53356.1 and 53356.5 of the California Government Codein any manner which would be inconsistent with the interests of the Owners and, in particular, will notpermit the tender of Bonds in full or partial payment of Special Taxes except upon receipt of a certificateof an Independent Financial Consultant that to accept such tender will not result in the District havinginsufficient Net Taxes to pay the principal of and interest on the Bonds remaining Outstanding followingsuch tender.

Covenant 14. Additional Special Tax Refunding Bonds or Obligations. The District shall notissue 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 2015 Special TaxRefunding Bonds; and (ii) subordinate bonds, notes or other similar evidences of indebtedness (see“SECURITY FOR THE BONDS – Additional Bonds for Refunding Purposes Only” in the PreliminaryOfficial Statement).

Covenant 15. Annual Reports.

(a) Annual Reports to the California Debt and Investment Advisory Commission. Not laterthan October 30 of each year, commencing October 30, 2015, and until the October 30 following the finalmaturity of the 2015 Special Tax Refunding Bonds, the District shall supply to the California Debt andInvestment Advisory Commission the information required to be provided thereto pursuant to Section53359.5(b) of the Act, as it may be amended from time to time. Such information shall be made availableto any Owner upon written request to the District accompanied by a fee determined by the District to paythe costs of the District in connection therewith. The District shall in no event be liable to any Owner orany other Person or entity in connection with any error in any such information.

(b) If at any time the Fiscal Agent fails to pay principal or interest due on any scheduledpayment date for the 2015 Special Tax Refunding Bonds, or if funds are withdrawn from the ReserveFund to pay principal or interest on the 2015 Special Tax Refunding Bonds, such that the amount(s) in theReserve Fund are reduced below the Reserve Requirement, the Fiscal Agent shall notify the District inwriting of such failure or withdrawal, and the District shall notify the California Debt and InvestmentAdvisory Commission of such failure or withdrawal within 10 days of the failure to make such paymentor the date of such withdrawal.

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(c) The reporting requirements of such Covenant 15 shall be amended from time to time,without action by the District or the Fiscal Agent to reflect any future amendments to specific sections ofthe Act. The District shall provide the Fiscal Agent with a copy of any such amendment.Notwithstanding the foregoing, any such amendment shall not, in itself, affect the District’s obligationsunder any continuing disclosure documentation provided in connection with the Bonds.

(d) None of the District, its officers, agents, employees or Authorized Representatives, or theFiscal Agent, shall be liable to any person or party for any inadvertent error in reporting the informationcontained in such Covenant 15.

Covenant 16. Minimum Special Tax Levy. In addition to the foregoing covenants, the Districtcovenants to take actions to levy Special Taxes in an amount not less than an amount sufficient, inaddition to payment of principal and interest on the 2015 Special Tax Refunding Bonds and otherrequirements of the Special Tax revenues, subject only to the maximum tax limitations applicable to theSpecial Taxes as set out in the Rate and Method and the proceedings under which the Special Taxes wereauthorized.

Continuing Disclosure Covenant. The District has covenanted and agreed in the Fiscal AgentAgreement that it will comply with and carry out all of its obligations under the District ContinuingDisclosure Agreement. Notwithstanding any other provision of the Fiscal Agent Agreement, failure ofthe District to comply with its obligations under the District Continuing Disclosure Agreement shall notbe considered an event of default under the terms of the Fiscal Agent Agreement, and the sole remedy, inthe event of any failure of the District to comply with the District Continuing Disclosure Agreement, shallbe an action to compel performance thereof. For purposes of such covenant of the Fiscal AgentAgreement, “Beneficial Owners” means any Person which (a) has the power, directly or indirectly, tovote or consent with respect to, or to dispose of ownership of, any Bonds (including Persons holdingBonds through nominees, depositories or other intermediaries), or (b) is treated as the Owner of anyBonds for federal income tax purposes. (See “CONTINUING DISCLOSURE” in the PreliminaryOfficial Statement).

Amendments to Fiscal Agent Agreement

The District may from time to time, and at any time, without notice to, or consent of, any of theOwners, adopt Supplements to the Fiscal Agent Agreement for any of the following purposes:

(a) to cure any ambiguity, to correct or supplement any provision in the Fiscal AgentAgreement which may be inconsistent with any other provision to the Fiscal Agent Agreement, or tomake 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 ofthe Bondowners;

(b) to add to the covenants and agreements of and the limitations and the restrictions uponthe District contained in the Fiscal Agent Agreement which are not contrary to or inconsistent with theFiscal Agent Agreement as theretofore in effect; or

(c) to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respectwhich is not materially adverse to the Bondowners including, but not limited to, providing for the ratingor insuring of the Bonds.

Exclusive of amendments supplemental to the Fiscal Agent Agreement covered by subsection (a)above, the Owners of not less than 60% in aggregate principal amount of the Bonds then Outstandingshall have the right to consent to and approve the adoption by the District of such amendments or orders

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supplemental to the Fiscal Agent Agreement as shall be deemed necessary or desirable by the District forthe purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any ofthe terms or provisions contained in the Fiscal Agent Agreement; provided, however, that nothing in theFiscal Agent Agreement shall permit, or be construed as permitting, (a) an extension of the maturity dateof the principal of, or the payment date of interest on, any Bonds, (b) a reduction in the principal amountof any Bonds or the rate of interest thereon, (c) a preference or priority of any Bonds over any otherBonds, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which arerequired to consent to such Supplement, without, in the case of (a) or (b), the consent of the affectedOwner, or, in the case of (c), the consent of the Owners of all Bonds then Outstanding.

Supplements Requiring Owner Consent. If at any time the District shall desire to adopt aSupplement to the Fiscal Agent Agreement which, pursuant to the terms of the Fiscal Agent Agreement,shall require the consent of the Owners, the District shall so notify the Fiscal Agent and shall deliver tothe Fiscal Agent a copy of the proposed Supplement to be mailed, postage prepaid, to all Owners at theiraddresses as they appear in the Bond Register as provided for in the Fiscal Agent Agreement. Suchnotice shall briefly set forth the nature of the proposed Supplement and shall state that a copy thereof ison file at the Principal Corporate Trust Office of the Fiscal Agent for inspection by all Owners. Thefailure of any Owner to receive such notice shall not affect the validity of such Supplement whenconsented to and approved as provided in the Fiscal Agent Agreement. Whenever at any time within oneyear after the date of the first mailing of such notice the Fiscal Agent shall receive an instrument orinstruments purporting to be executed by the Owners of not less than 60% in aggregate principal amountof the Bonds then Outstanding, which instrument or instruments shall refer to the proposed Supplementdescribed in such notice, and shall specifically consent to and approve the adoption thereof by the Districtsubstantially in the form of the copy thereof referred to in such notice as on file with the Fiscal Agent,such proposed Supplement, when duly adopted by District, shall thereafter become a part of theproceedings for the issuance of the Bonds. In determining whether the Owners of 60% of the aggregateprincipal amount of the Bonds have consented to the adoption of any Supplement, Bonds which areowned by the District or by any person directly or indirectly controlling or controlled by or under thedirect or indirect common control with the District, shall be disregarded and shall be treated as thoughthey were not Outstanding for the purpose of any such determination.

Upon the adoption of any Supplement and the receipt of consent to any such amendment from theOwners of the appropriate aggregate principal amount of Bonds in instances where such consent isrequired pursuant to the provisions of the Fiscal Agent Agreement, the Fiscal Agent Agreement shall be,and shall be deemed to be, modified and amended in accordance therewith, and the respective rights,duties and obligations under the Fiscal Agent Agreement of the District and all Owners of Bonds thenOutstanding shall thereafter be determined, exercised and enforced thereunder, subject in all respects tosuch modifications and amendments. Notwithstanding anything in the Fiscal Agent Agreement to thecontrary, no Supplement shall be entered into which would modify the duties of the Fiscal Agent underthe Fiscal Agent Agreement, without the prior written consent of the Fiscal Agent.

Certain supplements and amendments to the Fiscal Agent Agreement are subject to the priorconsent of the Bond Insurer (see Provisions Relating to Bond Insurance Policy and Reserve FundSurety below).

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Fiscal Agent

The Fiscal Agent is appointed and takes authorized actions under the terms of the Fiscal AgentAgreement. The initial Fiscal Agent may be removed or replaced by the District upon 30 days’ priorwritten notice (except during the continuance of an event of default, as further discussed below) or mayresign in favor of a successor Fiscal Agent. The Fiscal Agent Agreement provides for certain minimumqualifications of the Fiscal Agent and provides for notice and procedures in the event a successor FiscalAgent is required or appointed.

The duties of the Fiscal Agent are specified within the Fiscal Agent Agreement and includemailing interest payments to the Owners, selecting Bonds for redemption pursuant to the terms of theFiscal Agent Agreement, giving notice of redemption and meetings of the Owners, maintaining the BondRegister and maintaining and administering the funds and accounts established pursuant to the FiscalAgent Agreement. The Fiscal Agent also performs all other acts authorized or directed of the FiscalAgent pursuant to the terms of the Fiscal Agent Agreement.

The Fiscal Agent Agreement provides that the recitals of fact and all promises, covenants andagreements contained therein and in the Bonds are to be taken as statements, promises, covenants andagreements of the District, and the Fiscal Agent assumes no responsibility for the correctness of the sameand makes no representations as to the validity or sufficiency of the Fiscal Agent Agreement or theBonds. The Fiscal Agent Agreement provides for certain protections from liability of the Fiscal Agentexcept for its own negligence or willful misconduct, as further specified in the Fiscal Agent Agreement.Included as part of such protections, the Fiscal Agent shall be under no obligation to exercise any of therights or powers vested in it by the Fiscal Agent Agreement at the request, order or direction of any of theOwners pursuant to the provisions of the Fiscal Agent Agreement unless such Owners shall have offeredto the Fiscal Agent security or indemnity acceptable to the Fiscal Agent against the costs, expenses, andliabilities which may be incurred therein or thereby.

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 of any Bond when and as thesame shall become due and payable, whether at maturity as therein expressed or from mandatoryredemption;

(b) Default in the due and punctual payment of the interest on any Bond when and as thesame shall become due and payable; or

(c) Default by the District in the observance of any of the other agreements, conditions orcovenants on its part contained in the Fiscal Agent Agreement or in the Bonds, and the continuation ofsuch default for a period of 30 days after the District shall have been given notice in writing of suchdefault by the Fiscal Agent, provided that if within 30 days the District has commenced curing of thedefault and diligently pursues elimination thereof, such period shall be extended to permit such default tobe eliminated; and provided further, that any noncompliance with the terms of the Continuing DisclosureCovenant, identified in the Fiscal Agent Agreement, shall not be an event of default under the terms of theFiscal Agent Agreement and is limited to the remedies specifically identified therein (see“CONTINUING DISCLOSURE” in the Preliminary Official Statement).

Remedies of Owners. Following the occurrence of an event of default, any Owner shall have theright 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 rightsagainst the District and any of the members, officers and employees of the District, and to compel theDistrict or any such members, officers or employees to perform and carry out their duties under the Actand 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 rightsof the Owners; or

(c) Upon the happening of an event of default (as defined in the Fiscal Agent Agreement), bya suit in equity to require the District and its members, officers and employees to account as the trustee ofan express trust.

Nothing in the Fiscal Agent Agreement, or in the Bonds, shall affect or impair the obligation ofthe District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to therespective Owners of the Bonds at the respective dates of maturity, as provided in the Fiscal AgentAgreement, out of the Net Taxes pledged for such payment, or affect or impair the right of action, whichis also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue ofthe 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 anysubsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequentdefault or breach. No delay or omission by any Owner to exercise any right or power accruing upon anydefault shall impair any such right or power or shall be construed to be a waiver of any such default or anacquiescence therein, and every power and remedy conferred upon the Owners by the Act or by the FiscalAgent Agreement may be enforced and exercised from time to time and as often as shall be deemedexpedient by the Owners.

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

No remedy conferred through the Fiscal Agent Agreement upon or reserved to the Owners isintended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be inaddition to every other remedy given under the Fiscal Agent Agreement or now or thereafter existing, atlaw or in equity or by statute or otherwise, and may be exercised without exhausting and without regardto any other remedy conferred by the Act or any other law.

Application of Net Special Tax Revenues After Default. If an Event of Default shall occur and becontinuing, all Net Taxes and any other funds thereafter received by the Fiscal Agent under any of theprovisions of the Fiscal Agent Agreement shall be applied by the Fiscal Agent as follows and in thefollowing order:

(a) To the payment of any expenses necessary in the opinion of the Fiscal Agent to protectthe interests of the Owners 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 itspowers and duties under the Fiscal Agent Agreement;

(b) To the payment of the principal of and interest then due with respect to the Bonds (uponpresentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, orsurrender thereof if fully paid) subject to the provisions of the Fiscal Agent Agreement, as follows:

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First: To the payment to the Owners entitled thereto of all installments of interest then due inthe order of the maturity of such installments and, if the amount available shall not besufficient to pay in full any installment or installments maturing on the same date, then to thepayment thereof ratably, according to the amounts due thereon, to the Owners entitledthereto, without any discrimination or preference; and

Second: To the payment to the Owners entitled thereto of the unpaid principal of any Bondswhich shall have become due, whether at maturity or by call for redemption, with interest onthe overdue principal at the rate borne by the respective Bonds on the date of maturity orredemption, 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 ofprincipal due on such date to the Owners entitled thereto, without any discrimination orpreference.

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 in the Fiscal AgentAgreement, no Owner 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 orany other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the FiscalAgent written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregateprincipal amount of the Bonds then Outstanding shall have made written request upon the Fiscal Agent toexercise the powers thereinbefore granted or to institute such suit, action or proceeding in its own name,(c) such Owner, or Owners, shall have tendered to the Fiscal Agent security indemnity acceptable to theFiscal Agent 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 daysafter such written request shall have been received by, and such tender of indemnity shall have been madeto, the Fiscal Agent.

Such notification, request, tender of indemnity and refusal or omission are declared within theFiscal Agent Agreement, in every case, to be conditions precedent to the exercise by any Owner of anyremedy thereunder or under law; it being understood and intended that no one or more Owners shall haveany right in any manner whatever by his or their action to affect, disturb or prejudice the security of theFiscal Agent Agreement or the rights of any other Owners, or to enforce any right under the Bonds, theFiscal Agent Agreement, the Act or other applicable law with respect to the Bonds, except in the mannertherein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted,had and maintained in the manner therein provided and for the benefit and protection of all Owners,subject to the provisions of the Fiscal Agent Agreement. (See “BONDOWNERS’ RISKS” in thePreliminary Official Statement).

The Bonds are not subject to acceleration in payment of interest or principal. (See“BONDOWNERS’ RISKS – No Acceleration Provisions” in the Preliminary Official Statement).

Defeasance

If all or a specified portion of the Bonds shall be paid and discharged under the terms of theFiscal Agent Agreement in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest due on the Bonds, as andwhen the same become due and payable;

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(b) by depositing with the Fiscal Agent or a designated bank or trust company as escrowholder, in trust, at or before maturity, money which, together with the amounts then on deposit in theSpecial Tax Fund, the Bond Fund, the Redemption Fund and the Reserve Fund and available for suchpurpose, is fully sufficient to pay the principal of and interest on such Bond as and when the same shallbecome due and payable; or

(c) by depositing with the Fiscal Agent, or a designated bank or trust company as escrowholder, in trust, Federal Securities in which the District may lawfully invest its money, in such amount ascertified by a nationally recognized certified public accountant which will, together with the interest toaccrue thereon and moneys then on deposit in the Special Tax Fund, the Bond Fund, the RedemptionFund and the Reserve Fund available for such purpose, together with the interest to accrue thereon, befully sufficient to pay and discharge the principal of and interest on such Bond as and when the same shallbecome due and payable;

then, notwithstanding that any such Bond shall not have been surrendered for payment, all obligations ofthe District under the Fiscal Agent Agreement, and any Supplement, with respect to such Bond shallcease and terminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Ownersof any such Bonds not so surrendered and paid, all sums due thereon and except for specified covenantsof the District contained and identified in the Fiscal Agent Agreement.

In connection with a defeasance under (b) or (c) above, there shall be provided to the District andthe Fiscal Agent a certificate of a certified public accountant stating its opinion as to the sufficiency of themoneys or securities deposited with the Fiscal Agent, or the designated escrow holder, to pay anddischarge the principal of and interest on the Outstanding Bonds to be defeased in accordance with theprovisions of the Fiscal Agent Agreement, as and when the same shall become due and payable, and anopinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to theeffect that the Bonds being defeased have been legally defeased in accordance with the provisions of theFiscal Agent Agreement. Upon such a defeasance, the Fiscal Agent shall release the rights of the Ownersof such Bonds which have been defeased under the provisions of the Fiscal Agent Agreement and executeand deliver to the District all such instruments as may be desirable to evidence such release, discharge andsatisfaction. In the case of a defeasance under the provisions of the Fiscal Agent Agreement of allOutstanding Bonds, the Fiscal Agent shall pay over or deliver to the District any funds held by the FiscalAgent at the time of a defeasance, which are not required for the purpose of paying and discharging theprincipal of or interest on the Bonds when due. The Fiscal Agent shall, at the written direction andexpense of the District, mail, first-class, postage prepaid, a notice to the Owners whose Bonds have beendefeased, in the form directed by the District, stating that the defeasance has occurred.

Miscellaneous Provisions

Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation ofconsent, or other instrument in writing required or permitted by the Fiscal Agent Agreement to be signedor executed by Owners may be in any number of concurrent instruments of similar tenor, and may besigned or executed by such Owners in person or by their attorneys appointed by an instrument in writingfor that purpose, or by any commercial bank, trust company or other depository for such Bond. Proof ofthe execution of any such instrument, or of any instrument appointing any such attorney, and of theownership of such Bond shall be sufficient for the purposes of the Fiscal Agent Agreement (except asotherwise therein provided), if made in the following manner:

(a) The fact and date of the execution by any Owner or their attorney of any such instrumentand of any instrument appointing any such attorney may be proved by a signature guarantee of any bankor trust company located within the United States of America. Where any such instrument is executed byan officer of a corporation or association or a member of a partnership on behalf of such corporation,

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association or partnership, such signature guarantee shall also constitute sufficient proof of this authority;provided, however, that nothing contained in the Fiscal Agent Agreement shall be construed as limitingthe Fiscal Agent to such proof, it being intended that the Fiscal Agent may accept any other evidence ofthe matters therein stated which the Fiscal Agent may deem sufficient. Any request or consent of theOwner of any Bond shall bind every future Owner of the same Bond in respect to anything done orsuffered to be done by the Fiscal Agent in pursuance of such request or consent; and

(b) As to any Bond, the Person in whose name the same shall be registered in the BondRegister shall be deemed and regarded as the absolute Owner thereof for all purposes, and payment of oron account of the principal of any such Bond, and the interest thereon, shall be made only to or upon theorder of the registered Owner thereof or his legal representative. All such payments shall be valid andeffectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of thesum or sums so paid. The Fiscal Agent shall not be affected by any notice to the contrary.

Provisions Constitute Contract. The provisions of the Fiscal Agent Agreement, including anySupplements thereto, and the Bonds shall constitute a contract between the District and the Owners(“Contract”) and the provisions thereof shall be enforceable by any Owner for the equal benefit andprotection of all Owners similarly situated by mandamus, accounting, mandatory injunction or any othersuit, action or proceeding at law or in equity that is now or may in the Fiscal Agent Agreement beauthorized under the laws of the State of California in any court of competent jurisdiction. The Contractis made under and is to be construed in accordance with the laws of the State of California.

No remedy conferred in the Fiscal Agent Agreement upon any Owner is intended to be exclusiveof any other remedy, but each such remedy is cumulative and in addition to every other remedy and maybe exercised without exhausting and without regard to any other remedy conferred by the Act or any otherlaw of the State of California. No waiver of any default or breach of duty or contract by any Owner shallaffect any subsequent default or breach of duty or contract or shall impair any rights or remedies on saidsubsequent default or breach. No delay or omission of any Owner to exercise any right or power accruingupon any default shall impair any such right or power or shall be construed as a waiver of any suchdefault or acquiescence therein. Every substantive right and every remedy conferred upon the Ownersmay be enforced and exercised as often as may be deemed expedient. In case any suit, action orproceeding to enforce any right or exercise any remedy shall be brought or taken and the Owner shallprevail, said Owner shall be entitled to receive from the Net Taxes reimbursement for reasonable costs,expenses, outlays and attorneys’ fees and should said suit, action or proceeding be abandoned, or bedetermined adversely to the Owners then, and in every such case, the District’s positions, rights andremedies shall be construed in a manner as if such suit, action or proceeding had not been brought ortaken.

After the issuance and delivery of the Bonds, the Fiscal Agent Agreement shall not be subject torepeal, but shall be subject to modification to the extent and in the manner provided in the Fiscal AgentAgreement, but to no greater extent and in no other manner.

Limitation of Rights. Nothing in the Fiscal Agent Agreement or in the Bonds expressed orimplied is intended or shall be construed to give to any Person other than the Fiscal Agent, the Districtand the Bondowners any legal or equitable right, remedy or claim under or in respect to the Fiscal AgentAgreement or any covenant, condition or provision therein or therein contained, and all such covenants,conditions and provisions are and shall be held to be for the sole and exclusive benefit of the FiscalAgent, the District and the Bondowners.

Payment on Non-Business Days. In the event any payment is required to be made pursuant to theterms of the Fiscal Agent Agreement on a day which is not a Business Day, such payment shall be madeon the next succeeding Business Day with the same effect as if made on such non-Business Day.

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Provisions Relating to Bond Insurance Policy and Reserve Fund Surety

The Fiscal Agent Agreement provides for various rights of the Bond Insurer with respect tovarious events and actions, and certain other events (as set out in the Fiscal Agent Agreement) relating tothe Insurance Policy and the Reserve Fund Surety as applicable to the 2015 Special Tax RefundingBonds. The Insurance Policy, and its terms, applies only to the Insured Bonds. These rights include, butare not limited to, the right of the Bond Insurer to receive various notices, the right to control certainactions and remedies in event of a default under the terms of the Fiscal Agent Agreement, the right toapprove or consent to certain actions under the terms of the Fiscal Agent Agreement and the right torequire reimbursement(s) of amounts paid, or costs incurred, under the terms of the Insurance Policyand/or the Reserve Fund Surety, as applicable.

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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

This CONTINUING DISCLOSURE AGREEMENT (the “Disclosure Agreement”) is executed andentered into as of June 1, 2015, by and among Community Facilities District No. 97-1 of the Tustin UnifiedSchool District, a community facilities district organized and existing under and by virtue of the laws of theState of California (the “Community Facilities District”), U.S. Bank National Association, a national bankingassociation organized and existing under and by virtue of the laws of the United States of America, as FiscalAgent (the “Bank”), in its capacity as fiscal agent (the “Fiscal Agent”) and Special District Financing &Administration, LLC (the “Dissemination Agent”);

W I T N E S S E T H :

WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of June 1, 2015, by between theCommunity Facilities District and the Fiscal Agent (the “Fiscal Agent Agreement”), the Community FacilitiesDistrict has issued its Community Facilities District No. 97-1 of the Tustin Unified School District Series 2015Special Tax Refunding Bonds (the “Bonds”); and

WHEREAS, this Disclosure Agreement is being executed and delivered by the Community FacilitiesDistrict, the Fiscal Agent and the Dissemination Agent for the benefit of the owners and beneficial owners ofthe Bonds and in order to assist the Participating Underwriter of the Bonds in complying with Securities andExchange Commission Rule 15c2-12(b)(5);

NOW, THEREFORE, for and in consideration of the mutual premises and covenants hereincontained, the parties hereto agree as follows:

Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executedand delivered by Community Facilities District for the benefit of the owners and beneficial owners of theBonds and in order to assist the Participating Underwriter in complying with Securities and ExchangeCommission (“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 Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Community Facilities Districtpursuant to, and described in, Sections 3 and 4 of this Disclosure Agreement.

“Annual Report Date” shall mean eight months next following the end of the Community FacilitiesDistrict’s fiscal year, which fiscal year end, as of the date of this Disclosure Agreement, is March 1.

“Disclosure Representative” shall mean the Director, Fiscal Services of the School District, or his orher designee(s), or such other officer(s) or employee(s) as the School District, acting on behalf of theCommunity Facilities District, shall designate in writing to the Dissemination Agent and Fiscal Agent fromtime to time.

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“Dissemination Agent” shall mean Special District Financing & Administration, LLC, or anysuccessor Dissemination Agent designated in writing by the Community Facilities District and which has filedwith the Community Facilities District a written acceptance of such designation.

“EMMA System” shall mean the Electronic Municipal Market Access system of the MSRB or suchother electronic system designated by the MSRB (as defined below) or the S.E.C. for compliance with S.E.C.Rule 15c2-12(b).

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

“MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designatedunder the Rule as the repository for filings made pursuant to the Rule.

“Official Statement” means the Official Statement, dated May __, 2015, relating to the Bonds.

“Participating Underwriter” shall mean Piper Jaffray & Co.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the S.E.C. under the Securities Exchange Act of1934, as the same may be amended from time to time.

“School District” shall mean the Tustin Unified School District, Tustin, California.

Section 3. Provision of Annual Reports.

(a) The Community Facilities District shall, or, shall cause the Dissemination Agent to,not later than the Annual Report Date, commencing March 1, 2016, provide to the MSRB through theEMMA System in an electronic format and accompanied by identifying information as prescribed bythe MSRB, to the Fiscal Agent and to the Participating Underwriter an Annual Report which isconsistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15)Business Days prior to said date, the Community Facilities District shall provide the Annual Report tothe Dissemination Agent. The Annual Report may be submitted as a single document or as separatedocuments comprising a package, and may include by reference other information as provided inSection 4 of this Disclosure Agreement; provided that the audited financial statements of theCommunity Facilities District may be submitted separately from the balance of the Annual Report andlater than the date required above for the filing of the Annual Report if not available by that date. Ifthe Community Facilities District’s fiscal year changes, it shall give notice of such change in the samemanner as for a Listed Event under Section 5(c). If the Dissemination Agent has not received a copyof the Annual Report on or before 15 business days prior to March 1 in any year, the DisseminationAgent shall notify the Community Facilities District of such failure to receive the Annual Report. TheCommunity Facilities District shall provide a written certification with each Annual Report furnishedto the Dissemination Agent to the effect that such Annual Report constitutes the Annual Reportrequired to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon suchcertification of the Community Facilities District and shall have no duty or obligation to review suchAnnual Report.

(b) If the Community Facilities District is unable to provide to the MSRB through theEMMA System an Annual Report and to the Participating Underwriter an Annual Report by the daterequired in subsection (a), the Dissemination Agent shall send a notice to the MSRB through theEMMA System in substantially the form attached as Exhibit A.

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(c) The Dissemination Agent shall:

(i) Determine each year prior to the date for providing the Annual Report theelectronic filing requirements of the MSRB for the Annual Reports;

(ii) Provide any Annual Report received by it to the MSRB through the EMMASystem, and also to the Fiscal Agent and the Participating Underwriter as provided herein;and

(iii) If the Dissemination Agent is other than the Community Facilities Districtand to the extent it can confirm such filing of the Annual Report, file a report with theCommunity Facilities District, the Fiscal Agent and the Participating Underwriter certifyingthat the Annual Report has been provided pursuant to this Disclosure Agreement, stating thedate it was provided and confirming that it has been filed with the MSRB through theEMMA System.

Section 4. Content of Annual Reports. The Community Facilities District’s Annual Report shallcontain or incorporate by reference the following:

(a) Audited financial statements, if any are prepared, of the Community FacilitiesDistrict.1 If audited financial statements of the Community Facilities District are to be prepared, butare not available at the time required for filing, unaudited financial statements shall be submitted withthe Annual Report and audited financial statements shall be submitted once available. If auditedfinancial statements are prepared, the audited financial statements will be prepared in accordance withgenerally accepted accounting principles as promulgated to apply to governmental entities from timeto time by the Governmental Accounting Standards Board. If audited financial statements of theCommunity Facilities District are not prepared, no unaudited financial statements need be submitted.For purposes of this section, the financial statements of the School District shall not be deemed to bethe financial statements of the Community Facilities District, unless such audited financial statementscontained specific information as to the Community Facilities District, its revenues, expenses andaccount balances.

(b) The following information:

(i) The principal amount of the Bonds and of additional bonds, if any, includingrefunding bonds issued to refund the Bonds, if any, outstanding as of a date within 60 dayspreceding the Annual Report Date.

(ii) The balance in each of the Special Tax Fund and the Bond Fund as of a datewithin 60 days preceding the Annual Report Date.

(iii) The amount on deposit in the Reserve Fund, and any accounts therein, if any,and a statement of the Reserve Requirement, as of a date within 60 days preceding the AnnualReport Date.

1 The School District has school facilities improvement district bonds outstanding and in connection therewith, theSchool District’s audited financial statements are filed with the MSRB through the EMMA System.

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(iv) The amount, if any, on deposit in any fund or account held under the terms ofthe Fiscal Agent Agreement not referenced in clauses (ii), (iii) or (iv) hereof, as of a datewithin 60 days preceding the Annual Report Date.

(v) Information regarding the estimated annual debt service on the Bonds andany Additional Bonds, and the Special Tax levied at the Debt Service Requirement as definedin the Rate and Method, based upon building permits issued as of the July 1 next precedingthe Annual Report Date, substantially similar to that provided in Table 2 of the OfficialStatement and a statement as to the coverage produced by such levy.

(vi) A summary of the Special Taxes levied on Undeveloped Property, if any, andDeveloped Property (by category) (as defined in the Rate and Method of Apportionment ofSpecial Tax relating to the Community Facilities District) within the Community FacilitiesDistrict, substantially similar to that provided in Table 1 of the Official Statement.

(vii) The assessed value of the property within the Community Facilities District,as shown on the assessment roll of the Orange County Assessor last equalized prior to theSeptember 30 next preceding the Annual Report Date.

(viii) A land ownership summary listing property owners responsible for more than3% of the Special Tax levy, if any, as shown on the assessment roll of the Orange CountyAssessor last equalized prior to the September 30 next preceding the Annual Report Date, asummary of the Special Taxes levied on the property within the Community Facilities Districtowned by such property owners, and the assessed value of such property, as shown on suchassessment roll.

(ix) The percentage of the amount of Special Tax levied for the preceding FiscalYear that remains unpaid as of the September 30 next preceding the Annual Report Date, thenumber of parcels within the Community Facilities District delinquent in payment of SpecialTaxes as of the September 30 next preceding the Annual Report Date, the amount ofdelinquencies, the percent of delinquency in relation to the total Special Tax levy, the lengthof time delinquent and the date on which foreclosure was commenced, or similar informationpertaining to delinquencies deemed appropriate by the Community Facilities District;provided, however, that parcels with delinquencies of $5,000 or less may be grouped togetherand such information may be provided by category.

(x) The status of foreclosure proceedings, if any, and a summary of the results ofany foreclosure sales, if any, as of the September 30 next preceding the Annual Report Date.

(xi) The identity of any property owner representing more than 3% of the SpecialTax levy delinquent in payment of Special Taxes as of the September 30 next preceding theAnnual Report Date and the assessed value of the applicable parcels.

(xii) Whether or not the Alternative Method of Distribution of Tax Levies andCollections and of Tax Sale Proceeds, the “Teeter Plan,” is in effect with respect to theCommunity Facilities District for the then current Fiscal Year.

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(xiii) A copy of any report for or concerning the Community Facilities District asof the immediately preceding October 31 which was required to be filed under State ofCalifornia law.

(c) In addition to any of the information expressly required to be provided underparagraphs (a), (b) and (c) of this Section, the Community Facilities District shall provide such furtherinformation, if any, as may be required pursuant to federal securities laws applicable to suchinformation as is necessary to make the statements required under Sections 4(b) and (c) not materiallymisleading, in the light of the circumstances under which they are made.

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 Community Facilities District or related public entities, whichhave been submitted to the MSRB through the EMMA System or the S.E.C. If the document included byreference is a final official statement, it must be available from the MSRB. The Community Facilities Districtshall clearly identify each such other document so included by reference.

Section 5. Reporting of Listed Events.

(a) Pursuant to the provisions of this Section 5, the Community Facilities District shallgive, or cause to be given in a timely manner, not in excess of ten business days after the occurrence ofthe 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;

(vi) Adverse tax opinions, the issuance by the Internal Revenue Service ofproposed 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;

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(xii) Bankruptcy, insolvency, receivership or similar event of the obligatedperson;(1)

(xiii) The consummation of a merger, consolidation or acquisition involving anobligated person or sale of all or substantially all of the assets of the obligated person, otherthan in the ordinary course of business, the entry into a definitive agreement to undertake suchan action or the termination of a definitive agreement relating to any such actions, other thanpursuant to its terms, if material; and

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

(b) The Dissemination Agent shall, within three business days of obtaining actualknowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative,inform such person of the event and request that the Community Facilities District promptly notify theDissemination Agent in writing whether or not to report the event pursuant to subsection (e). Forpurposes of this Disclosure Agreement, “actual knowledge” of the occurrence of the Listed Eventsdescribed under clauses (ii), (iii), (vi), (x), (xi), (xii), (xiii) and (xiv) above shall mean actualknowledge by an officer of the Dissemination Agent. The Dissemination Agent shall have noresponsibility for determining the materiality of any of the Listed Events.

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

(d) If the Community Facilities District determines that a Listed Event subject to amateriality requirement referenced in clauses (a) (ii), (vi), (vii), (viii), (x), (xiii) or (xiv) would not bematerial under applicable federal securities law, the Community Facilities District shall so notify theDissemination Agent in writing and instruct the Dissemination Agent not to report the occurrencepursuant to subsection (e).

(e) If the Dissemination Agent has been instructed by the Community Facilities Districtto report the occurrence of a Listed Event and has received a notice of the occurrence in a formatsuitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence withthe MSRB through the EMMA System and shall provide a copy of such notice to the ParticipatingUnderwriter.

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

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Section 6. Termination of Reporting Obligation. The Community Facilities District’s, the FiscalAgent’s and the Dissemination Agent’s obligations hereunder shall terminate upon the earliest to occur of (i)the legal defeasance of the Bonds, (ii) prior redemption of the Bonds and/or (iii) payment in full of all theBonds. If such termination occurs prior to the final maturity of the Bonds, the Community Facilities Districtshall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

Section 7. Dissemination Agent. The Community Facilities District may, from time to time,appoint or engage a Dissemination Agent to assist in carrying out its obligations under this DisclosureAgreement and may discharge any such Dissemination Agent, with or without appointing a successorDissemination Agent. The initial Dissemination Agent shall be Special District Financing & Administration,LLC. The Dissemination Agent may resign by providing at least thirty days’ written notice to the CommunityFacilities District and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). TheDissemination Agent shall have no duty to prepare the Annual Report or notice of a Listed Event nor shall theDissemination Agent be responsible for filing any Annual Report or notice of a Listed Event not provided to itby the Community Facilities District in a timely manner and in a form suitable for filing.

Section 8. Amendment; Waiver. Notwithstanding any other provision of this DisclosureAgreement, the Community Facilities District, the Fiscal Agent and the Dissemination Agent may amend thisDisclosure Agreement (and the Fiscal Agent and/or the Dissemination Agent shall agree to any amendment sorequested by the Community Facilities District, so long as such amendment does not adversely affect the rightsor obligations of the Fiscal Agent and/or the Dissemination Agent, as applicable), and any provision of thisDisclosure Agreement 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 mayonly be made in connection with a change in circumstances that arises from a change in legalrequirements, change in law, or change in the identity, nature, or status of an obligated person withrespect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinionof nationally recognized bond counsel, have complied with the requirements of the Rule at the time ofthe primary offering of the Bonds, after taking into account any amendments or interpretations of theRule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by owners of the Bonds inthe manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreementwith the consent of owners, or (ii) does not, in the opinion of nationally recognized 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 amendedpursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing theamended operating data or financial information shall explain, in narrative form, the reasons for theamendment 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 inpreparing financial statements, the first annual financial information for the year in which the change is madeshall present a comparison between the financial statements or information prepared on the basis of the newaccounting principles and those prepared on the basis of the former accounting principles. The comparisonshall include a qualitative discussion of the differences in the accounting principles and the impact of thechange in the accounting principles on the presentation of the financial statements or information in order toprovide information to investors to enable them to evaluate the ability of the Community Facilities District to

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meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of thechange in the accounting principles shall be sent to the MSRB through the EMMA System in the same manneras for a Listed Event under Section 5(b).

Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent

the Community Facilities District from disseminating any other information, using the means of dissemination

set forth in this Disclosure Agreement or any other means of communication, or including any other

information in any Annual Report or any notice of occurrence of a Listed Event, in addition to that which is

required by this Disclosure Agreement. If the Community Facilities 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 Agreement, the Community Facilities District shall have no obligation

under this Disclosure Agreement 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 Community Facilities District or the

Dissemination Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may, at the

written direction of the Participating Underwriter or the owners of at least 25% aggregate principal amount of

Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent, and 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 Community Facilities District, the Fiscal

Agent or the Dissemination Agent to comply with its obligations under this Disclosure Agreement. A default

under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement,

and the sole remedy under this Disclosure Agreement in the event of any failure of the Community Facilities

District, the Fiscal Agent or the Dissemination Agent to comply with this Disclosure Agreement shall be an

action to compel performance.

Section 11. Duties and Liabilities of the Fiscal Agent and the Dissemination Agent. Sections 5.02

and 5.08 of the Fiscal Agent/Bond Registrar Agreement made and entered into with respect to the Bonds (the

“Fiscal Agent Agreement”), by and between the Community Facilities District and the Fiscal Agent, are hereby

made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose)

contained in the Fiscal Agent Agreement, and the Fiscal Agent shall be entitled to the protections, limitations

from liability and indemnities afforded to the Fiscal Agent thereunder. The Fiscal Agent and the

Dissemination Agent shall have only such duties hereunder as are specifically set forth in this Disclosure

Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the

Community Facilities District. The Fiscal Agent shall have no obligation to make any disclosure concerning

the Bonds, the Community Facilities District or any other matter except as expressly set out herein, provided

that no provision of this Disclosure Agreement shall limit the duties or obligations of the Fiscal Agent under

the Fiscal Agent Agreement. The Fiscal Agent and the Dissemination Agent shall have no responsibility for

the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The fact that

the Fiscal Agent has or may have any banking, fiduciary or other relationship with the Community Facilities

District or any other party, apart from the relationship created by the Fiscal Agent Agreement and this

Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has knowledge or notice of any

event or condition relating to the Bonds or the Community Facilities District, except in its respective capacities

under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the

Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder.

Information disclosed hereunder by the Fiscal Agent or the Dissemination Agent may contain such disclaimer

language concerning the Fiscal Agent’s or the Dissemination Agent’s responsibilities hereunder, with respect

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thereto, as the Fiscal Agent or the Dissemination Agent may deem appropriate. The Dissemination Agent may

conclusively rely on the determination of the Community Facilities District as to the materiality of any event

for purposes of Section 5 hereof. Neither the Fiscal Agent nor the Dissemination Agent makes any

representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Fiscal Agent

and the Dissemination Agent shall be paid compensation by the Community Facilities District for their services

provided hereunder in accordance with their schedule of fees, as amended from time to time, and all reasonable

expenses, legal fees and advances made or incurred by the Fiscal Agent and the Dissemination Agent, as

applicable, in the performance of their respective duties hereunder. The Community Facilities District’s

obligations under this Section shall survive the termination of this Disclosure Agreement.

Section 12. Beneficiaries. The Participating Underwriter and the owners and beneficial owners

from time to time of the Bonds shall be third party beneficiaries under this Disclosure Agreement. This

Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Fiscal Agent,

the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of

the Bonds, and shall create no rights in any other person or entity.

Section 13. Notices. Any notice or communications to or among any of the parties to this

Disclosure Agreement shall be given to all of the following and may be given as follows:

If to the Tustin Unified School District

Community 300 South C Street

Facilities District: Tustin, California 92780-3695

Telephone: (714) 730-7301

Telecopier: (714) 731-5399

Attention: Superintendent

If to the U.S. Bank National Association

Fiscal Agent: 633 West Fifth Street, 24th Floor

Los Angeles, California 90071

Attention: Corporate Trust Services

Telephone: (213) 615-6052

Telecopier: (213) 615-6199

If to the Special District Financing & Administration, LLC

Dissemination Agent: 437 West Grand Avenue

Escondido, California 92025

Telephone: (760) 233-2635

Telecopier: (760) 233-2631

Attention: Jeff Hamill

If to the Piper Jaffray & Co.

Participating 2321 Rosecrans Avenue, Suite 3200

Underwriter: El Segundo, CA 90245

Telephone: (310) 297-6010

Telecopier: (310) 297-6001

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Section 14. Severability. In case any one or more of the provisions contained herein shall for any

reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or

unenforceability shall not affect any other provision hereof.

Section 15. State of California Law Governs. The validity, interpretation and performance of this

Disclosure Agreement shall be governed by the laws of the State of California.

Section 16. Counterparts. This Disclosure Agreement may be executed in several counterparts,

each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 17. Merger. Any person succeeding to all or substantially all of the Fiscal Agent’s

corporate trust business shall be the successor Fiscal Agent without the filing of any paper or any further act.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date

first above written.

COMMUNITY FACILITIES DISTRICT NO. 97-1 OFTHE TUSTIN UNIFIED SCHOOL DISTRICT

By: _____________________________________________Authorized Officer

U.S. BANK NATIONAL ASSOCIATION,as Fiscal Agent

By: ___________________________________________Authorized Officer

SPECIAL DISTRICT FINANCING &ADMINISTRATION, LLC, as Dissemination Agent

By: ___________________________________________Authorized Officer

[EXECUTION PAGE OF CONTINUING DISCLOSURE AGREEMENT]

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARDOF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 97-1 of the Tustin Unified School District

Name of Bond Issue: Community Facilities District No. 97-1 of the Tustin Unified School District Series2015 Special Tax Refunding Bonds

Date of Issuance: June 3, 2015

NOTICE IS HEREBY GIVEN that the Tustin Unified School District (the “School District”) has notprovided an Annual Report with respect to the above-named Bonds as required by the Continuing DisclosureAgreement, dated as of June 1, 2015, by and among the Community Facilities District, U.S. Bank NationalAssociation, as Fiscal Agent, and Special District Financing & Administration, LLC, as Dissemination Agent.[The Community Facilities District anticipates that the Annual Report will be filed by ________________.]

Dated: ________, 20__SPECIAL DISTRICT FINANCING &ADMINISTRATION, LLC, as DisseminationAgent, on behalf of Community Facilities DistrictNo. 97-1 of the Tustin Unified School District

cc: Community Facilities District No. 97-1of the Tustin Unified School DistrictPiper Jaffray & Co.U.S. Bank National Association

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APPENDIX E

FORMS OF OPINIONS OF BOND COUNSEL

Upon delivery of the 2015 Series A Bonds, Bowie, Arneson, Wiles & Giannone, Newport Beach,California, Bond Counsel to Community Facilities District No. 97-1 of the Tustin Unified School District,proposes to render their final approving opinion with respect to the 2015 Series A Bonds in substantiallythe following form (see “LEGAL MATTER – Tax Exemption”).

Board of EducationTustin Unified School District300 South C StreetTustin, CA 92780

Re: $82,820,000 Community Facilities District No. 97-1 of the Tustin Unified School District2015 Special Tax Refunding Bonds, Series A (Federally Tax-Exempt)Final Opinion of Bond Counsel

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by CommunityFacilities District No. 97-1 of the Tustin Unified School District (“District”) of $82,820,000 aggregateprincipal amount of bonds designated “Community Facilities District No. 97-1 of the Tustin UnifiedSchool District 2015 Special Tax Refunding Bonds, Series A (Federally Tax-Exempt)” (“Bonds”). TheBonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprisingChapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California),Resolution No. 97-1-86, adopted by the Board of Education of the Tustin Unified School District(“School District”) acting in its capacity as the Legislative Body of the District on April 20, 2015, and theFiscal Agent Agreement executed in connection therewith dated as of June 1, 2015, by and between theDistrict and U.S. Bank National Association (“Fiscal Agent Agreement”). Capitalized terms used hereinand 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 ofthe proceedings in connection with the formation of the District and the issuance of the Bonds (“DistrictProceedings”). We have also examined certificates and representations made by public officials andofficers of the District, the School District and the purchaser of the Bonds, including certificates as tofactual matters, including, but not limited to, the Tax Certificate, as we have deemed necessary to renderthis opinion.

Attention is called to the fact that we have not been requested to examine, and have notexamined, any documents or information relating to the District or the School District other than therecord of the District Proceedings hereinabove referred to, and no opinion is expressed as to any financialor other information, or the adequacy thereof which has been or may be supplied to any purchaser of theBonds. In rendering the opinions set forth herein, we have relied upon the representations of fact andcertifications referred to herein, and we have not undertaken by independent investigation to verify theauthenticity of signatures 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,including, without limitation, covenants compliance with which is necessary to assure that future actionsor events will not cause the interest on the Bonds to be included in gross income for federal income taxpurposes. Failure to comply with certain of such covenants may cause interest on the Bonds to be

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included in gross income for federal income tax purposes retroactive to the date of original issuance of theBonds.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings andcourt decisions and cover certain matters not directly addressed by such authorities. Such opinions may beaffected by actions taken or omitted or events occurring after the date hereof. We have not undertaken todetermine, or to inform any person, whether any such actions are taken or omitted or events do occur orany matters that come to our attention after the date hereof. Accordingly, this opinion speaks only as ofits date and is not intended to, and may not, be relied upon in connection with any such actions, events ormatters. Our engagement with respect to the Bonds has concluded with the issuance thereof and wedisclaim any obligation to update this letter.

In addition, we call attention to the fact that the rights and obligations under the Bonds, the FiscalAgent Agreement and other documents related to the District Proceedings are subject to bankruptcy,insolvency, reorganization, moratorium and other similar laws affecting creditors' rights and remedies, tothe application of equitable principles heretofore or hereafter enacted to the extent constitutionallyapplicable and that their enforcement may also be subject to exercise of judicial discretion in appropriatecases and to limitations on legal remedies against school districts in the State of California. We expressno 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.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency ofthe Official Statement or other offering material relating to the Bonds (except to the extent, if any, statedin the Official Statement) and we express no opinion relating thereto (excepting only matters set forth asour opinion in the Official Statement).

The Fiscal Agent Agreement and other documents related to the District Proceedings refer tocertain requirements and procedures which may be changed and certain actions which may be taken oromitted under the circumstances and subject to terms and conditions set forth in such documents, incertain cases upon the advice or with an approving opinion of nationally recognized bond counsel. Noopinion is expressed herein as to the effect on any Bond or the interest thereon if any such change ismade, 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 suchquestions 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 theBonds. The Bonds constitute legal, valid and binding obligations of the District, payablein accordance with their terms. The Bonds are limited obligations of the District payablesolely from and secured by a pledge of the Net Taxes, and from other funds and accountspursuant 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 fullright, power and authority to levy and pledge the Net Taxes to the Owners of the Bonds.

2. The Fiscal Agent Agreement has been duly and validly authorized, executed anddelivered by, and constitutes a valid and binding obligation of, the District.

3. Interest on the Bonds (including any original issue discount properly allocable to theowner thereof) is excluded from gross income for federal income tax purposes underSection 103 of the Internal Revenue Code of 1986, as amended, and is exempt from Stateof California personal income taxes. Interest on the Bonds is not a specific preferenceitem for purposes of the federal alternative minimum taxes imposed on individuals and

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corporations, although it should be noted that, with respect to corporations, such interestwill be included as an adjustment in the calculation of alternative minimum taxableincome which may affect the alternative minimum tax liability of such corporations. Weexpress no opinion regarding other tax consequences related to the Bonds or to theaccrual 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,

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Upon delivery of the 2015 Series B Bonds, Bowie, Arneson, Wiles & Giannone, Newport Beach,California, Bond Counsel to Community Facilities District No. 97-1 of the Tustin Unified School District,proposes to render their final approving opinion with respect to the 2015 Series B Bonds in substantiallythe following form:

Board of EducationTustin Unified School District300 South C StreetTustin, CA 92780

Re: $9,635,000 Community Facilities District No. 97-1 of the Tustin Unified School District2015 Special Tax Refunding Bonds, Series B (Federally Taxable)Final Opinion of Bond Counsel

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by CommunityFacilities District No. 97-1 of the Tustin Unified School District (“District”) of $9,635,000 aggregateprincipal amount of bonds designated “Community Facilities District No. 97-1 of the Tustin UnifiedSchool District 2015 Special Tax Refunding Bonds, Series B (Federally Taxable)” (“Bonds”). The Bondsare issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprisingChapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California),Resolution No. 97-1-86, adopted by the Board of Education of the Tustin Unified School District(“School District”) acting in its capacity as the Legislative Body of the District on April 20, 2015, and theFiscal Agent Agreement executed in connection therewith dated as of June 1, 2015, by and between theDistrict and U.S. Bank National Association (“Fiscal Agent Agreement”). Capitalized terms used hereinand 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 ofthe proceedings in connection with the formation of the District and the issuance of the Bonds (“DistrictProceedings”). We have also examined certificates and representations made by public officials andofficers of the District, the School District and the purchaser of the Bonds, including certificates as tofactual matters, 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 notexamined, any documents or information relating to the District or the School District other than therecord of the District Proceedings hereinabove referred to, and no opinion is expressed as to any financialor other information, or the adequacy thereof which has been or may be supplied to any purchaser of theBonds. In rendering the opinions set forth herein, we have relied upon the representations of fact andcertifications referred to herein, and we have not undertaken by independent investigation to verify theauthenticity of signatures 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 opinions expressed herein are based on an analysis of existing laws, regulations, rulings andcourt decisions and cover certain matters not directly addressed by such authorities. Such opinions may beaffected by actions taken or omitted or events occurring after the date hereof. We have not undertaken todetermine, or to inform any person, whether any such actions are taken or omitted or events do occur orany matters that come to our attention after the date hereof. Accordingly, this opinion speaks only as ofits date and is not intended to, and may not, be relied upon in connection with any such actions, events ormatters. Our engagement with respect to the Bonds has concluded with the issuance thereof and wedisclaim any obligation to update this letter.

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In addition, we call attention to the fact that the rights and obligations under the Bonds, the Fiscal AgentAgreement and other documents related to the District Proceedings are subject to bankruptcy, insolvency,reorganization, moratorium and other similar laws affecting creditors' rights and remedies, to theapplication of equitable principles heretofore or hereafter enacted to the extent constitutionally applicableand that their enforcement may also be subject to exercise of judicial discretion in appropriate cases andto limitations on legal remedies against school districts in the State of California. We express no opinionwith respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice ofvenue, waiver or severability provisions contained in the foregoing documents.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency ofthe Official Statement or other offering material relating to the Bonds (except to the extent, if any, statedin the Official Statement) and we express no opinion relating thereto (excepting only matters set forth asour opinion in the Official Statement).

The Fiscal Agent Agreement and other documents related to the District Proceedings refer tocertain requirements and procedures which may be changed and certain actions which may be taken oromitted under the circumstances and subject to terms and conditions set forth in such documents, incertain cases upon the advice or with an approving opinion of nationally recognized bond counsel. Noopinion is expressed herein as to the effect on any Bond or the interest thereon if any such change ismade, 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 suchquestions 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 theBonds. The Bonds constitute legal, valid and binding obligations of the District, payablein accordance with their terms. The Bonds are limited obligations of the District payablesolely from and secured by a pledge of the Net Taxes, and from other funds and accountspursuant 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 fullright, power and authority to levy and pledge the Net Taxes to the Owners of the Bonds.

2. The Fiscal Agent Agreement has been duly and validly authorized, executed anddelivered by, and constitutes a valid and binding obligation of, the District.

3. Interest on the Bonds is not excluded from gross income for federal income tax purposesbut is exempt from State of California personal income taxes. We provide no opinion asto any federal income tax consequences relating to the ownership or disposition of, or theaccrual or receipt of interest on, the Bonds. The opinion provided herein by us in our roleas Bond Counsel with respect to the Bonds is not intended or written by us to be used,and it cannot be used, by any purchaser or owners of such Bonds for the purpose ofavoiding penalties that may be imposed on such purchaser or owner. The opinionprovided in this paragraph is provided to support the promotion or marketing of theBonds. Purchasers or owners of the Bonds should seek advice based on the particularcircumstances from an independent tax advisor concerning the tax consequence of theownership of such Bonds.

We express no opinion as to any matter other than as expressly set forth above.

Very truly yours,


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APPENDIX F

BOOK-ENTRY SYSTEM

The following description of the procedures and record keeping with respect to beneficialownership interests in the Bonds, payment of principal of and interest on the Bonds to DirectParticipants, Indirect Participants or Beneficial Owners (as such terms are defined below) of the Bonds,confirmation and transfer of beneficial ownership interests in the Bonds and other Bond-relatedtransactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners ofthe Bonds is based solely on information furnished by DTC to the Community Facilities District which theCommunity Facilities District believes to be reliable, but the Community Facilities District and theUnderwriter do not and cannot make any independent representations concerning these matters and donot take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants,Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect tosuch matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depositoryfor 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 representativeof DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregateprincipal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organizedunder the New York Banking Law, a “banking organization” within the meaning of the New YorkBanking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning ofthe New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisionsof Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and moneymarket instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit withDTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and othersecurities transactions in deposited securities, through electronic computerized book-entry transfers andpledges between Direct Participants’ accounts. This eliminates the need for physical movement ofsecurities 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-ownedsubsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding companyfor DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of whichare registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to theDTC 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 relationshipwith 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 andExchange Commission. More information about DTC can be found at www.dtcc.com. The informationon such website is not incorporated herein by such reference or otherwise.

Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actualpurchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and IndirectParticipants’ records. Beneficial Owners will not receive written confirmation from DTC of theirpurchase. Beneficial Owners are, however, expected to receive written confirmations providing details ofthe transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participantthrough which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the

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Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting onbehalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownershipinterests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC areregistered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may berequested by an authorized representative of DTC. The deposit of the Bonds with DTC and theirregistration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficialownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflectonly the identity of the Direct Participants to whose accounts such Bonds are credited, which may or maynot be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keepingaccount of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by DirectParticipants to Indirect Participants, and by Direct Participants and Indirect Participants to BeneficialOwners will be governed by arrangements among them, subject to any statutory or regulatoryrequirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certainsteps to augment the transmission to them of notices of significant events with respect to the Bonds, suchas redemptions, tenders, defaults, and proposed amendments to the Bonds documents. For example,Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for theirbenefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, BeneficialOwners may wish to provide their names and addresses to the Fiscal Agent and request that copies ofnotices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed,DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in suchmaturity to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect tothe Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Underits usual procedures, DTC mails an Omnibus Proxy to the Community Facilities District as soon aspossible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights tothose Direct Participants to whose accounts the Bonds are credited on the record date (identified in alisting attached to the Omnibus Proxy).

Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requestedby an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts uponDTC’s receipt of funds and corresponding detail information from the Community Facilities District orthe Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC’s records.Payments by Participants to Beneficial Owners will be governed by standing instructions and customarypractices, 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 theCommunity Facilities District, subject to any statutory or regulatory requirements as may be in effectfrom time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or suchother nominee as may be requested by an authorized representative of DTC) is the responsibility of theCommunity Facilities District or the Fiscal Agent, disbursement of such payments to Direct Participantswill be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will bethe responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any timeby giving reasonable notice to the Community Facilities District or the Fiscal Agent. Under such

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circumstances, in the event that a successor depository is not obtained, Bond certificates are required to beprinted and delivered.

The Community Facilities District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, the Bond certificates willbe printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtainedfrom sources that the Community Facilities District believes to be reliable, but the Community FacilitiesDistrict takes no responsibility for the accuracy thereof.

Discontinuance of DTC Services

In the event that (a) DTC determines not to continue to act as securities depository for the Bonds,or (b) the Community Facilities District determines that DTC shall no longer act and delivers a writtencertificate to the Fiscal Agent to that effect, then the Community Facilities District will discontinue theBook-Entry System with DTC for the Bonds. If the Community Facilities District determines to replaceDTC with another qualified securities depository, the Community Facilities District will prepare or directthe preparation of a new single separate, fully-registered Bond for each maturity of the Bonds registeredin the name of such successor or substitute securities depository as are not inconsistent with the terms ofthe Fiscal Agent Agreement. If the Community Facilities District fails to identify another qualifiedsecurities depository to replace the incumbent securities depository for the Bonds, then the Bonds shall nolonger be restricted to being registered in the Bond registration books in the name of the incumbentsecurities depository or its nominee, but shall be registered in whatever name or names the incumbentsecurities depository or its nominee transferring or exchanging the Bonds shall designate.

In the event that the Book-Entry System is discontinued, the following provisions would alsoapply: (i) the Bonds will be made available in physical form, (ii) principal of, and redemption premiums,if any, on the Bonds will be payable upon surrender thereof at the trust office of the Fiscal Agentidentified in the Fiscal Agent Agreement, and (iii) the Bonds will be transferable and exchangeable asprovided in the Fiscal Agent Agreement.

The Community Facilities District and the Fiscal Agent do not have any responsibility orobligation to DTC Participants, to the persons for whom they act as nominees, to Beneficial Owners, orto any other person who is not shown on the registration books as being an owner of the Bonds, withrespect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the paymentby DTC or any DTC Participant of any amount in respect of the principal of, redemption price of orinterest on the Bonds; (iii) the delivery of any notice which is permitted or required to be given toregistered owners under the Fiscal Agent Agreement; (iv) the selection by DTC or any DTC Participantof any person to receive payment in the event of a partial redemption of the Bonds; (v) any consent givenor other action taken by DTC as registered owner; or (vi) any other matter arising with respect to theBonds or the Fiscal Agent Agreement. The Community Facilities District and the Fiscal Agent cannotand do not give any assurances that DTC, DTC Participants or others will distribute payments ofprincipal of or interest on the Bonds paid to DTC or its nominee, as the registered owner, or any noticesto the Beneficial Owners or that they will do so on a timely basis or will serve and act in a mannerdescribed in this Official Statement. The Community Facilities District and the Fiscal Agent are notresponsible or liable for the failure of DTC or any DTC Participant to make any payment or give anynotice to a Beneficial Owner in respect to the Bonds or any error or delay relating thereto.


APPENDIX G

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

G-1


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