NEW ISSUE—BOOK-ENTRY-ONLY NO RATING

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

$9,115,000COMMUNITY FACILITIES DISTRICT NO. 2005-5

OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICTSERIES 2012 SPECIAL TAX BONDS

Dated: Delivery Date Due: September 1, as shown below

This Official Statement describes bonds that are being issued by Community Facilities District No. 2005-5 of the Moreno Valley Unified School District (the “District”). The Community Facilities District No. 2005-5 of the Moreno Valley Unified School District Series 2012 Special Tax Bonds (the “Bonds”) are being issued by the District to finance directly or indirectly certain school, water, and sewer facilities (the “Facilities”) of benefit to the District, to fund a reserve fund securing the Bonds, and to pay costs of issuance of the Bonds.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California)(the “Act”), and pursuant to Resolution No. 2011-12-13 adopted by the Board of Education of the Moreno Valley Unified School District (the “School District”), acting as the legislative body of the District, on January 17, 2012, and that certain Fiscal Agent Agreement with respect to the Bonds to be entered into by and between the District and U.S. Bank National Association, as Fiscal Agent for the Bonds (the “Fiscal Agent”), dated as of February 1, 2012 (the “Fiscal Agent Agreement”). Pursuant to the Act, the Board of Education, acting as the legislative body of the District, and the qualified electors previously authorized total bonded indebtedness of the District in an amount not to exceed $25,000,000. The Bonds are the first series of bonds to be issued under this authorization; additional bonds may be issued on a parity with the Bonds upon the satisfaction of the conditions set forth in the Fiscal Agent Agreement.

The Bonds are secured under the Fiscal Agent Agreement and are payable from Net Taxes (as defined herein) derived from certain annual Special Taxes (as defined herein) to be levied on taxable property and from certain other funds pledged under the Fiscal Agent Agreement, all as further described herein. The Special Taxes are to be levied according to the rate and method of apportionment approved by the Board of Education of the School District and the qualified electors within the District, as permanently reduced pursuant to a resolution of the Board of Education of the School District, acting as the legislative body of the District. See “SOURCES OF PAYMENT FOR THE BONDS” and Appendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”

The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds will be payable commencing September 1, 2012 and semiannually thereafter on each March 1 and September 1. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. See “THE BONDS – General Provisions” and Appendix G – “BOOK-ENTRY ONLY SYSTEM.”

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

The Bonds are subject to optional redemption, special mandatory redemption from prepaid Special Taxes and mandatory sinking fund redemption prior to maturity as set forth herein. See “THE BONDS – Redemption.”

THE BONDS ARE NOT RATED BY ANY RATING AGENCY, AND INVESTMENT IN THE BONDS INVOLVES SIGNIFICANT RISKS THAT ARE NOT APPROPRIATE FOR CERTAIN INVESTORS. CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUE. SEE THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED “SPECIAL RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN EVALUATING THE INVESTMENT QUALITY OF THE BONDS.

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision.

MATURITY SCHEDULE(See Inside Cover Page)

The Bonds are offered when, as and if issued, and received by the Underwriter subject to the approval as to their legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel. Certain legal matters will be passed on for the District and the School District by Bowie, Arneson, Wiles & Giannone, as special counsel to said entities. Certain legal matters will be passed upon for the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, as Disclosure Counsel, and for the Underwriter by McFarlin & Anderson LLP, Laguna Hills, California, as Underwriter’s Counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities of DTC on or about February 16, 2012.

Dated: February 1, 2012

STONE & YOUNGBERG A DIVISION OF STIFEL NICOLAUS

MATURITY SCHEDULE

COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THEMORENO VALLEY UNIFIED SCHOOL DISTRICT

SERIES 2012 SPECIAL TAX BONDS$3,165,000 Serial Bonds

Maturity Date (September 1) Principal Amount Interest Rate Yield CUSIP No.†

2012 $240,000 1.000% 1.000% 616874JG92013 30,000 1.750 1.750 616874JH72014 40,000 2.250 2.250 616874JJ32015 50,000 2.750 2.750 616874JK02016 60,000 3.000 3.000 616874JL82017 75,000 3.250 3.250 616874JM62018 85,000 3.250 3.500 616874JN42019 100,000 3.750 3.750 616874JP92020 115,000 4.000 4.000 616874JQ72021 130,000 4.000 4.150 616874JR52022 145,000 4.125 4.300 616874JS32023 165,000 4.250 4.450 616874JT12024 185,000 4.375 4.550 616874JU82025 205,000 4.500 4.650 616874JV62026 225,000 4.500 4.750 616874JW42027 245,000 4.625 4.850 616874JX22030 325,000 5.000 5.100 616874KA02031 355,000 5.500 4.250(1) 616874KB82032 390,000 5.250 5.300 616874KC6

$570,000 5.000% Term Bonds due September 1, 2029, Yield: 5.000% CUSIP No. † 616874JZ7 $885,000 5.375% Term Bonds due September 1, 2034, Yield: 5.500% CUSIP No. † 616874KD4

$4,495,000 5.500% Term Bonds due September 1, 2041, Yield: 5.625% CUSIP No. † 616874KE2

† CUSIP® is a registered trademark of the American Bankers Association. Copyright© 2012 Standard & Poor’s, A Division of

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

(1) Yield to call at par on March 1, 2022.

MORENO VALLEY UNIFIED SCHOOL DISTRICTCOUNTY OF RIVERSIDESTATE OF CALIFORNIA

BOARD OF EDUCATION

Tracey B. Vackar, PresidentCleveland Johnson, Vice President

Jesus M. Holguin, ClerkMike Rios, MemberRick Sayre, Member

SCHOOL DISTRICT STAFF

Dr. Judy D. White, SuperintendentMays Kakish, Chief Business Official

BOND COUNSEL

Bowie, Arneson, Wiles & GiannoneNewport Beach, California

DISCLOSURE COUNSEL

Stradling Yocca Carlson & Rauth,a Professional CorporationSan Francisco, California

SPECIAL TAX CONSULTANT

Special District Financing & Administration LLCEscondido, California

REAL ESTATE APPRAISER

Harris Realty AppraisalNewport Beach, California

FISCAL AGENT

U.S. Bank National AssociationLos Angeles, California

Except where otherwise indicated, all information contained in this Official Statement has been providedby the School District and the District. No dealer, broker, salesperson or other person has been authorized by theSchool District, the District, the Fiscal Agent or the Underwriter to give any information or to make anyrepresentations in connection with the offer or sale of the Bonds other than those contained in this Official Statementand, if given or made, such other information or representations must not be relied upon as having been authorizedby the School District, the District, the Fiscal Agent or the Underwriter. This Official Statement does not constitutean offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in anyjurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds.Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether ornot expressly so described in this Official Statement, are intended solely as such and are not to be construed asrepresentations of fact. This Official Statement, including any supplement or amendment to this Official Statement,is intended to be deposited with the Electronic Municipal Market Access System of the Municipal SecuritiesRulemaking Board, which can be found at www.emma.msrb.org.

The information set forth in this Official Statement which has been obtained from third party sources isbelieved to be reliable but is not guaranteed as to accuracy or completeness by the School District or the District.The information and expressions of opinion in this Official Statement are subject to change without notice, andneither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, createany implication that there has been no change in the affairs of the School District or the District or any other partiesdescribed in this Official Statement since the date of this Official Statement. All summaries of the Fiscal AgentAgreement or other documents are made subject to the provisions of such documents respectively and do not purportto be complete statements of any or all of such provisions. Reference is made by this Official Statement to suchdocuments on file with the School District for further information. While the School District maintains an internetwebsite for various purposes, none of the information on that website is incorporated by reference herein or intendedto assist investors in making any investment decision or to provide any continuing information with respect to theBonds or any other bonds or obligations of the School District. Any such information that is inconsistent with theinformation set forth in this Official Statement should be disregarded.

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

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

Certain statements included or incorporated by reference in this Official Statement constitute“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of theUnited States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminologyused such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-lookingstatements include, but are not limited to, certain statements contained in the information under the caption “THECOMMUNITY FACILITIES DISTRICT.”

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

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAYOVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKETPRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL INTHE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANYTIME.

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

TABLE OF CONTENTSPage

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INTRODUCTION.........................................................................................................................................................1Changes Since Date of Preliminary Official Statement..........................................................................................1Purpose of the Bonds..............................................................................................................................................2The District.............................................................................................................................................................2Forward Looking Statements..................................................................................................................................3Sources of Payment for the Bonds .........................................................................................................................3Limited Appraisal Report .......................................................................................................................................4Description of the Bonds ........................................................................................................................................5Tax Exemption .......................................................................................................................................................5Professionals Involved in the Offering ...................................................................................................................5Continuing Disclosure ............................................................................................................................................6Bond Owners’ Risks...............................................................................................................................................6Other Information...................................................................................................................................................6

ESTIMATED SOURCES AND USES OF FUNDS .....................................................................................................7

THE BONDS.................................................................................................................................................................7General Provisions .................................................................................................................................................7Debt Service Schedule............................................................................................................................................8Redemption ............................................................................................................................................................9Registration, Transfer and Exchange....................................................................................................................12

SOURCES OF PAYMENT FOR THE BONDS.........................................................................................................12Limited Obligations..............................................................................................................................................12Special Taxes........................................................................................................................................................13Proceeds of Foreclosure Sales ..............................................................................................................................16Special Tax Fund..................................................................................................................................................17Bond Fund ............................................................................................................................................................18Reserve Fund........................................................................................................................................................19Administrative Expense Fund ..............................................................................................................................19Surplus School Facilities Fund .............................................................................................................................19Investment of Moneys in Funds ...........................................................................................................................20Payment of Rebate Obligation..............................................................................................................................20Estimated Debt Service Coverage ........................................................................................................................20Special Tax Levies and Delinquencies .................................................................................................................20Issuance of Additional Bonds...............................................................................................................................21

THE COMMUNITY FACILITIES DISTRICT ..........................................................................................................23General Description of the District.......................................................................................................................23Formation and Authorization................................................................................................................................23Description of Authorized Facilities.....................................................................................................................24Direct and Overlapping Indebtedness...................................................................................................................25Limited Appraisal Report .....................................................................................................................................28Estimated Value-To-Lien Ratios ..........................................................................................................................29Largest Taxpayers ................................................................................................................................................30

THE MORENO VALLEY UNIFIED SCHOOL DISTRICT......................................................................................31Introduction ..........................................................................................................................................................31Administration......................................................................................................................................................31Average Daily Attendance ...................................................................................................................................32General Economic and Demographic Information Regarding the School District...............................................32

SPECIAL RISK FACTORS........................................................................................................................................32Risks of Real Estate Secured Investments Generally ...........................................................................................32Risks Related to Current Market Conditions........................................................................................................33Economic Uncertainty ..........................................................................................................................................33

TABLE OF CONTENTS (continued)Page

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State Budget .........................................................................................................................................................33Limited Obligations..............................................................................................................................................33Insufficiency of Special Taxes .............................................................................................................................34Natural Disasters ..................................................................................................................................................35Hazardous Substances ..........................................................................................................................................35Payment of the Special Tax is not a Personal Obligation of the Property Owners...............................................36Land Values..........................................................................................................................................................36Parity Taxes, Special Assessments and Land Development Costs.......................................................................37Disclosures to Future Purchasers..........................................................................................................................37Special Tax Delinquencies ...................................................................................................................................38FDIC/Federal Government Interests in Properties ...............................................................................................38Bankruptcy and Foreclosure.................................................................................................................................39No Acceleration Provision ...................................................................................................................................40Loss of Tax Exemption ........................................................................................................................................40IRS Audit of Tax-Exempt Bond Issues ................................................................................................................41Limited Secondary Market ...................................................................................................................................41Proposition 218.....................................................................................................................................................41Ballot Initiatives ...................................................................................................................................................42Limitations on Remedies ......................................................................................................................................42

CONTINUING DISCLOSURE...................................................................................................................................42

TAX MATTERS .........................................................................................................................................................43Opinion of Bond Counsel .....................................................................................................................................43Original Issue Discount; Premium Bonds ............................................................................................................44Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption ................44IRS Audit of Tax-Exempt Bond Issues ................................................................................................................44Information Reporting and Backup Withholding .................................................................................................45

LEGAL MATTERS ....................................................................................................................................................45

ABSENCE OF LITIGATION .....................................................................................................................................45

NO RATING ...............................................................................................................................................................45

UNDERWRITING ......................................................................................................................................................45

FINANCIAL INTERESTS..........................................................................................................................................46

PENDING LEGISLATION.........................................................................................................................................46

ADDITIONAL INFORMATION................................................................................................................................47

APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX........................................A-1

APPENDIX B LIMITED APPRAISAL REPORT ...............................................................................................B-1

APPENDIX C FORM OF OPINION OF BOND COUNSEL ..............................................................................C-1

APPENDIX D GENERAL INFORMATION CONCERNING THE REGION ...................................................D-1

APPENDIX E SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT............ E-1

APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT ........................................................ F-1

APPENDIX G BOOK-ENTRY ONLY SYSTEM................................................................................................G-1

MORENO VALLEY UNIFIED SCHOOL DISTRICT (Riverside County, California)

LOS ANGELES COUNTY

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$9,115,000COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THE

MORENO VALLEY UNIFIED SCHOOL DISTRICTSERIES 2012 SPECIAL TAX BONDS

INTRODUCTION

The purpose of this Official Statement, which includes the cover page, the table of contents and theappendices (collectively, the “Official Statement”), is to provide certain information concerning the issuanceby Community Facilities District No. 2005-5 of the Moreno Valley Unified School District (the “District”) ofits Series 2012 Special Tax Bonds (the “Bonds”) in the aggregate principal amount of $9,115,000. Theproceeds of the Bonds will be used to finance certain school facilities (the “School Facilities”) for the MorenoValley Unified School District (the “School District”), to finance the acquisition and construction of certainwater and sewer facilities (the “EMWD Facilities”) owned by the Eastern Municipal Water District(“EMWD”), to fund a reserve fund for the Bonds, and to pay costs of issuance on the Bonds. See“ESTIMATED SOURCES AND USES OF FUNDS.”

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982,as amended (Sections 53311 et seq. of the Government Code of the State of California) (the “Act”), andpursuant to Resolution No. 2011-12-13 (the “Resolution of Issuance”) adopted by the Board of Education ofthe School District (the “Board”) on behalf of the District on January 17, 2012, and that certain Fiscal AgentAgreement to be entered into by and between the District and U.S. Bank National Association, as Fiscal Agent(the “Fiscal Agent”), dated as of February 1, 2012 (the “Fiscal Agent Agreement”). Pursuant to the Act, theBoard of Education, acting as the legislative body of the District, and the qualified electors previouslyauthorized total bonded indebtedness of the District in an amount not to exceed $25,000,000. The Bonds arethe first series of bonds to be issued under this authorization; additional bonds may be issued on a parity withthe Bonds upon the satisfaction of the conditions set forth in the Fiscal Agent Agreement. See “SOURCES OFPAYMENT FOR THE BONDS – Issuance of Additional Bonds.”

The Bonds are secured under the Fiscal Agent Agreement by a pledge of and lien upon Net Taxes (asdefined herein) levied on parcels within the District and all moneys in the Special Tax Fund (other than theAdministrative Expense Account therein) as described the Fiscal Agent Agreement. See “SOURCES OFPAYMENT FOR THE BONDS.”

The Bonds are being issued and delivered pursuant to the provisions of the Act, the Resolution ofIssuance, and the Fiscal Agent Agreement. The Bonds are being sold pursuant to a Bond Purchase Agreementbetween the Underwriter and the District. For more complete information, see “THE BONDS – GeneralProvisions.”

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 Official Statementand the documents summarized or described herein. A full review should be made of the entire OfficialStatement. The sale and delivery of Bonds to potential investors is made only by means of the entire OfficialStatement. All capitalized terms used in this Official Statement and not defined shall have the meaning setforth in Appendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT– DEFINITIONS.”

Changes Since Date of Preliminary Official Statement

Subsequent to the publication of the Preliminary Official Statement regarding the Bonds, datedJanuary 19, 2012, updated information regarding ownership of property within the District has becomeavailable. Accordingly, the updated information has been incorporated in Table 5 appearing at page 30 of thisOfficial Statement. See “THE COMMUNITY FACILITIES DISTRICT – Largest Taxpayers.”

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Purpose of the Bonds

Proceeds of the Bonds will be used (i) to finance the School Facilities, (ii) to finance, directly orindirectly, the EMWD Facilities, (iii) to fund a Reserve Fund for the Bonds, and (iv) to pay the costs of issuingthe Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “THE COMMUNITY FACILITIESDISTRICT – Description of Authorized Facilities.”

The District

The District was formed on August 15, 2006 and the Bonds are being issued pursuant to the Act, theResolution of Issuance, and the Fiscal Agent Agreement. The Act was enacted by the California legislature toprovide an alternative method of financing certain public capital facilities and services, especially indeveloping areas of the State. Any local agency (as defined in the Act) may establish a community facilitiesdistrict to provide for and finance the cost of eligible public facilities and services. Generally, the legislativebody of the local agency which forms a community facilities district acts on behalf of such district as itslegislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with theother provisions of the Act, a legislative body of a local agency may issue bonds for a community facilitiesdistrict and may levy and collect a special tax within such district to repay such indebtedness.

Pursuant to the Act, on June 27, 2006 the Board adopted Resolution No. 2005-06-100 (the“Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax onthe taxable property within the District. On June 27, 2006 the Board also adopted ResolutionNo. 2005-06-101, stating its intention to incur bonded indebtedness in an aggregate principal amount not toexceed $25,000,000 for the purpose of financing the design, acquisition, construction, leasing, expansion,improvement, or rehabilitation of certain public facilities (the “Facilities”) to serve the area within the Districtand its neighboring areas. See “THE COMMUNITY FACILITIES DISTRICT – Description of AuthorizedFacilities.”

Subsequent to a noticed public hearing, the Board adopted Resolution No. 2006-07-12 on August 15,2006 (the “Resolution of Formation”) which established the District, authorized the levy of a special tax withinthe District, determined the necessity to incur bonded indebtedness within the District, and called an electionwithin the District on the proposition of incurring bonded indebtedness, levying a special tax and setting anappropriations limit within the District.

On August 15, 2006, pursuant to Resolution No. 2006-07-11, the Board approved the School FacilitiesFunding and Mitigation Agreement by and among the School District, Hearthstone Multi-Asset Entity B, L.P.,a California limited partnership (“Hearthstone”), and Beazer Homes Holding Corp., a Delaware corporation(“Beazer”), dated as of August 17, 2006, which was subsequently amended and restated in its entirety by thatcertain First Amended and Restated School Facilities Funding and Mitigation Agreement (the “AmendedMitigation Agreement”) by and among the School District, the District, and Beazer, dated as of January 17,2012.

On August 15, 2006, also pursuant to Resolution No. 2006-07-11, the Board approved the executionof a joint community facilities agreement by and among the School District, EMWD, Hearthstone, and Beazer(the “Joint Community Facilities Agreement”). The Amended Mitigation Agreement and the JointCommunity Facilities Agreement provide the terms for financing the EMWD Facilities and the SchoolFacilities (collectively, the “Facilities”).

On August 15, 2006, an election was held within the District at which the landowners eligible to voteapproved the issuance of bonds for the District in an amount not to exceed $25,000,000. A Notice of SpecialTax Lien was recorded in the office of the County Recorder on August 21, 2006 as DocumentNo. 2006-0613827. On September 12, 2006, the Board, acting as the legislative body of the District, adoptedOrdinance No. 2006-07-15 (the “Ordinance”) which authorizes the levy of a special tax pursuant to the Rate

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and Method of Apportionment of Special Tax within the District approved at the August 15, 2006 election (the“Rate and Method”), a copy of which is attached hereto as Appendix A. On January 17, 2012, the Boardadopted Resolution No. 2011-12-15, which resolution permanently reduced the special taxes to be levied onproperty within the District as set forth therein and as reflected in the Amended Mitigation Agreement, basedon changes which occurred relative to the expected development of property within the District and pursuant tocertain provisions of the Act. An Amended Notice of Special Tax Lien for the reduced Special Taxes wasrecorded in the office of the County Recorder on January 31, 2012. See “SOURCES OF PAYMENT FORTHE BONDS – Special Taxes.”

The District is located in the City of Moreno Valley, California (“Moreno Valley”). Incorporated in1984, Moreno Valley is located in the northwest portion of the County of Riverside (the “County”). TheDistrict is located south of Highway 60, east of Nason Street in the vicinity of the intersection of EucalyptusAvenue and Fir Avenue in Moreno Valley. The District consists of three geographic tax zones identified asZone A, Zone B, and Zone C in the Rate and Method.

Subsequent to the formation of the District and the proceedings described above, Beazer acquired allof the interests of Hearthstone in property within the District and has developed and sold 334 dwelling unitsconsisting of 205 units within Zone A and 129 units within Zone B. These dwelling units were built between2006 and 2009, with the last merchant sales of such units occurring in 2010. See Appendix B – “LIMITEDAPPRAISAL REPORT.” Beazer is not currently actively developing the property in Zone C and the Bondshave been sized such that it is not expected that Special Taxes will be levied on the property within Zone C topay debt service on the Bonds. The District does not expect to levy Special Taxes on the property withinZone C until that property is developed. See “SOURCES OF PAYMENT FOR THE BONDS – SpecialTaxes” and “SOURCES OF PAYMENT FOR THE BONDS – Issuance of Additional 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 Litigation Reform Actof 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A ofthe United States Securities Act of 1933, as amended. Such statements are generally identifiable by theterminology used such as a “plan,” “expect,” “estimate,” “project,” “budget” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under thecaptions “THE COMMUNITY FACILITIES DISTRICT” and Appendix B – “LIMITED APPRAISALREPORT.”

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

Sources of Payment for the Bonds

Special Taxes. As used in this Official Statement, the term “Special Tax” is the Special Tax of theDistrict described in the Rate and Method which has been authorized to be levied upon certain land within theDistrict pursuant to the Act, as permanently reduced pursuant to Resolution No. 2011-12-15. See “SOURCESOF PAYMENT FOR THE BONDS – Special Taxes” and Appendix A – “RATE AND METHOD OFAPPORTIONMENT OF SPECIAL TAX.” Under the Fiscal Agent Agreement, the District has pledged torepay Bonds from the Special Tax revenues levied within the District beginning in Fiscal Year 2011-12 and

4

remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) andfrom amounts in the Special Tax Fund established under the Fiscal Agent Agreement.

The Net Taxes are the primary security for the repayment of the Bonds. In the event that the SpecialTaxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds arecertain amounts held by the Fiscal Agent in the Special Tax Fund and the Reserve Fund, to the limited extentdescribed in the Fiscal Agent Agreement. See “SOURCES OF PAYMENT FOR THE BONDS – ReserveFund.”

Foreclosure Proceeds. The Community Facilities District has also covenanted in the Fiscal AgentAgreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels withdelinquent installments of the Special Taxes. For a more detailed description of the foreclosure covenant, see“SOURCES OF PAYMENT FOR THE BONDS – Proceeds of Foreclosure Sales.”

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOLDISTRICT, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THECOUNTY OF RIVERSIDE, STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISIONTHEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES,NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARENOT GENERAL OR SPECIAL OBLIGATIONS OF THE SCHOOL DISTRICT OR GENERALOBLIGATIONS OF THE DISTRICT, BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICTPAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE FISCAL AGENTAGREEMENT AS MORE FULLY DESCRIBED HEREIN.

Additional Bonds and Liens. Under the terms of the Fiscal Agent Agreement, the District may issueadditional bonds secured by the Net Taxes on a parity with the Bonds (“Additional Bonds”) if certainconditions are met. See “SOURCES OF PAYMENT FOR THE BONDS – Issuance of Additional Bonds.”Additional Bonds may be issued by means of a supplement to the Fiscal Agent Agreement and without anyrequirement for the consent of any Bond owners. See Appendix E – “SUMMARY OF CERTAINPROVISIONS OF THE FISCAL AGENT AGREEMENT.” Other taxes and/or special assessments with liensequal in priority to the continuing lien of the Special Taxes have been levied and may also be levied in thefuture on the property within the District which could adversely affect the willingness of the landowners to paythe Special Taxes when due. See “SPECIAL RISK FACTORS – Parity Taxes, Special Assessments and LandDevelopment Costs.”

Limited Appraisal Report

An MAI appraisal of the land and existing improvements within the District was prepared by HarrisRealty Appraisal of Newport Beach, California (the “Appraiser”). The appraisal is dated December 7, 2011,and entitled “Limited Appraisal – Community Facilities District No. 2005-5 of the Moreno Valley UnifiedSchool District Series 2012 Special Tax Bonds” (the “Limited Appraisal Report”). See Appendix B –“LIMITED APPRAISAL REPORT.” The Limited Appraisal Report provides a mass appraisal analysis forZone A and Zone B and a static residual analysis for Zone C to help in establishing the reasonableness of theaggregate fiscal year 2011-12 assessed values for Zones A, B and C. As reflected in the Limited AppraisalReport, the aggregate minimum market value of the property within the District as of December 1, 2011, is$66,020,000. See “THE COMMUNITY FACILITIES DISTRICT – Limited Appraisal Report.”

The School District and the District make no representation as to the accuracy of the LimitedAppraisal Report. See “THE COMMUNITY FACILITIES DISTRICT – Limited Appraisal Report” and “–Estimated Value-to-Lien Ratios.” There is no assurance that the property within the District can be sold for theprices set forth in the Limited Appraisal Report or that any parcel can be sold for a price sufficient to pay theSpecial Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “THE

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COMMUNITY FACILITIES DISTRICT,” “SPECIAL RISK FACTORS – Land Values” and Appendix B –“LIMITED APPRAISAL REPORT.”

Description of the Bonds

The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede &Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available toactual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 or any integralmultiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who areor act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physicaldelivery of the Bonds. In the event that the book-entry-only system described herein is no longer used withrespect to the Bonds, the Bonds will be registered and transferred in accordance with the Fiscal AgentAgreement. See Appendix G – “BOOK-ENTRY ONLY SYSTEM.”

Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC.Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of suchpayments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix G –“BOOK-ENTRY ONLY SYSTEM.”

The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinkingfund redemption as described herein. See “THE BONDS – Redemption.” For a more complete descriptionsof the Bonds and the basic documentation pursuant to which they are being sold and delivered, .“THEBONDS” and Appendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENTAGREEMENT.”

Tax Exemption

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 courtdecisions, and assuming, among other matters, the accuracy of certain representations and compliance withcertain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes underSection 103 of the Internal Revenue Code of 1986, as amended (“Code”). In the further opinion of BondCounsel interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimumtaxes imposed on individuals and corporations, although Bond Counsel observes that such interest is includedas an adjustment in the calculation of federal corporate alternative minimum taxable income and may thereforeaffect a corporation’s alternative minimum tax liabilities. In the further opinion of Bond Counsel, interest onthe Bonds is exempt from State of California personal income taxation. Bond Counsel expresses no otheropinion regarding or concerning any other tax consequences related to the ownership or disposition of, or theaccrual or receipt of interest on, the Bonds. See “TAX MATTERS – Opinion of Bond Counsel.”

Set forth in Appendix C is the form of opinion Bond Counsel is expected to deliver in connection withthe issuance of the Bonds. For a more complete discussion of such opinion and certain other tax consequencesincident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see “TAXMATTERS.”

Professionals Involved in the Offering

U.S. Bank National Association, Los Angeles, California, will act as Fiscal Agent under the FiscalAgent Agreement. Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of StifelNicolaus, is the Underwriter of the Bonds. Bowie, Arneson, Wiles & Giannone, Newport Beach, California isacting as Bond Counsel to the District with respect to the Bonds. Stradling Yocca Carlson & Rauth, aProfessional Corporation, San Francisco, California is acting as Disclosure Counsel to the District inconnection with the Bonds. Certain legal matters will be passed on for the District and the School District by

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Bowie, Arneson, Wiles & Giannone, as special counsel to such entities, and for the Underwriter by McFarlin& Anderson LLP, Laguna Hills, California, as Underwriter’s Counsel. Other professional services have beenperformed by Harris Realty Appraisal of Newport Beach, California, as the Appraiser, and Special DistrictFinancing & Administration LLC, Escondido, California, as Special Tax Consultant and initial disseminationagent under the Continuing Disclosure Agreement, dated as of February 1, 2012, by and between the SpecialTax Consultant and the District (the “Continuing Disclosure Agreement”).

For information concerning respects in which certain of the above-mentioned professionals, advisors,counsel and consultants may have a financial or other interest in the offering of the Bonds, see “FINANCIALINTERESTS.”

Continuing Disclosure

The District has agreed to provide, or cause to be provided, to the Electronic Municipal MarketAccess System of the Municipal Securities Rulemaking Board (the “MSRB”), which can be found atwww.emma.msrb.org (“EMMA”), certain financial information and operating data. The District has furtheragreed to provide notice to EMMA of certain listed events. These covenants have been made in order to assistthe Underwriter in complying with Rule 15c2-12 (“Rule 15c2-12”) adopted by the Securities and ExchangeCommission (the “SEC”). See “CONTINUING DISCLOSURE” and Appendix F – “FORM OFCONTINUING DISCLOSURE AGREEMENT” for a form of the Continuing Disclosure Agreement. TheDistrict has never before been subject to any undertaking to provide annual reports or notices of specifiedevents pursuant to Rule 15c2-12. The School District has, in the past, failed to timely file certain informationrequired in annual reports or notices of significant events as required under prior undertakings pursuant to Rule15c2-12. The School District has since filed all such information and notices and is current with respect to itsobligations entered into in connection with Rule 15c2-12.

Bond Owners’ Risks

Certain events could affect the ability of the District to pay the principal of and interest on the Bondswhen due. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion ofcertain factors which should be considered, in addition to other matters set forth herein, in evaluating aninvestment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchaseof the Bonds involves significant risks, and the Bonds may not be appropriate investments for certaininvestors. See “SPECIAL RISK FACTORS.”

Other Information

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

Brief descriptions of the Bonds and the Fiscal Agent Agreement are included in this OfficialStatement. Such descriptions and information do not purport to be comprehensive or definitive. All referencesherein to the Fiscal Agent Agreement, the Bonds and the constitution and laws of the State as well as theproceedings of the School Board, acting as the legislative body of the District, are qualified in their entirety byreferences to such documents, laws and proceedings, and with respect to the Bonds, by reference to the FiscalAgent Agreement. Capitalized terms not otherwise defined herein shall have the meanings set forth in theFiscal Agent Agreement.

Copies of the Fiscal Agent Agreement, the Limited Appraisal Report and other documents andinformation are available for inspection and (upon request and payment to the District of a charge for copying,mailing and handling) for delivery from the School District at 25634 Alessandro Boulevard, Moreno Valley,California 92553, Attention: Chief Business Official.

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ESTIMATED SOURCES AND USES OF FUNDS

The following table sets forth the expected sources and uses of Bond proceeds.

Sources of Funds:Principal Amount of Bonds $9,115,000.00less: Original Issue Discount (114,255.30)less: Underwriter’s Discount (136,725.00)

Total Sources $8,864,019.70Uses of Funds:

School Facilities Account of the Construction Fund $4,836,477.06EMWD Account of the Construction Fund 2,961,830.60Costs of Issuance Account of the Construction Fund(1) 251,090.36Reserve Fund 814,621.68

Total Uses $8,864,019.70

(1) Includes Bond Counsel fees, Special Tax Consultant fees, Fiscal Agent fees, printing costs and other issuance costs.Source: The Underwriter.

THE BONDS

General Provisions

The Bonds will be dated as of their date of delivery and will bear interest at the rates per annum setforth on the inside cover page hereof, payable semiannually on each September 1 and March 1, commencingon September 1, 2012 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates setforth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form indenominations of $5,000 or any integral multiple thereof.

Interest will be calculated on the basis of a 360 day year comprised of twelve 30 day months. Intereston any Bond will be payable from the Interest Payment Date next preceding the date of authentication of thatBond, unless (i) such date of authentication is an Interest Payment Date, in which event interest will be payablefrom such date of authentication; (ii) the date of authentication is after a Record Date but prior to theimmediately succeeding Interest Payment Date, in which event interest will be payable from the InterestPayment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior tothe close of business on the first Record Date, in which event interest will be payable from the date of theBonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on thatBond will be payable from the last Interest Payment Date to which the interest has been paid or made availablefor payment.

Interest on any Bond will be paid to the person whose name appears as its owner in the registrationbooks held by the Fiscal Agent on the close of business on the Record Date. Interest will be paid by check ofthe Fiscal Agent mailed by first class mail, postage prepaid, to the Bondowner at its address on the registrationbooks. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 inaggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds toan account designated by the Bondowner in the United States.

Principal of the Bonds and any premium due upon redemption is payable upon presentation andsurrender of the Bonds at the principal corporate trust office of the Fiscal Agent in Los Angeles, California.

The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co.,as nominee DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds maybe purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. So long asDTC is the securities depository all payments of principal and interest on the Bonds will be made to DTC and

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will be paid to the Beneficial Owners in accordance with DTC’s procedures and the procedures of DTC’sParticipants. See Appendix G – “BOOK-ENTRY-ONLY SYSTEM.”

Debt Service Schedule

The following table presents the annual debt service on the Bonds (including sinking fundredemption), assuming there are no optional or special mandatory redemptions. See “SOURCES OFPAYMENT FOR THE BONDS” and “THE BONDS – Redemption.”

Period Ending(September 1) Principal Interest Total

2012 $240,000.00 $247,575.52 $487,575.522013 30,000.00 454,662.50 484,662.502014 40,000.00 454,137.50 494,137.502015 50,000.00 453,237.50 503,237.502016 60,000.00 451,862.50 511,862.502017 75,000.00 450,062.50 525,062.502018 85,000.00 447,625.00 532,625.002019 100,000.00 444,862.50 544,862.502020 115,000.00 441,112.50 556,112.502021 130,000.00 436,512.50 566,512.502022 145,000.00 431,312.50 576,312.502023 165,000.00 425,331.26 590,331.262024 185,000.00 418,318.76 603,318.762025 205,000.00 410,225.00 615,225.002026 225,000.00 401,000.00 626,000.002027 245,000.00 390,875.00 635,875.002028 270,000.00 379,543.76 649,543.762029 300,000.00 366,043.76 666,043.762030 325,000.00 351,043.76 676,043.762031 355,000.00 334,793.76 689,793.762032 390,000.00 315,268.76 705,268.762033 425,000.00 294,793.76 719,793.762034 460,000.00 271,950.00 731,950.002035 500,000.00 247,225.00 747,225.002036 545,000.00 219,725.00 764,725.002037 590,000.00 189,750.00 779,750.002038 635,000.00 157,300.00 792,300.002039 685,000.00 122,375.00 807,375.002040 740,000.00 84,700.00 824,700.002041 800,000.00 44,000.00 844,000.00Total $9,115,000.00 $10,137,225.60 $19,252,225.60

Source: The Underwriter.

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Redemption

Optional Redemption. The Bonds may be redeemed prior to maturity at the option of the District onany Interest Payment Date on or after September 1, 2012, in whole or in part from such maturities as areselected by the District in writing and by lot within a maturity, at the redemption prices set forth below, whichare expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the dateof redemption:

Redemption Dates Redemption Price

September 1, 2012 through September 1, 2019 103%March 1, 2020 and September 1, 2020 102March 1, 2021 and September 1, 2021 101March 1, 2022 and thereafter 100

Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to specialmandatory redemption prior to their stated maturities, in whole or in part from such maturities as are selectedby the District in writing and by lot within a maturity, on any Interest Payment Date for which timely noticemay be given, in integral multiples of $5,000 from monies on deposit in the Prepayment Account of theSpecial Tax Fund pursuant to the Fiscal Agent Agreement, plus amounts transferred from the Reserve Fundpursuant to the Fiscal Agent Agreement, upon payment of the redemption prices set forth below, expressed asa percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:

Redemption Dates Redemption Price

September 1, 2012 through September 1, 2019 103%March 1, 2020 and September 1, 2020 102March 1, 2021 and September 1, 2021 101March 1, 2022 and thereafter 100

Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2029 (the “2029 TermBonds”) are subject to mandatory redemption prior to maturity on September 1, 2028, and on eachSeptember 1 thereafter to and including September 1, 2029, in accordance with the schedule set forth below.The 2029 Term Bonds shall be redeemed from Mandatory Sinking Payments that have been deposited oneBusiness Day prior to each March 1 and September 1, commencing March 1, 2028, into the Sinking FundRedemption Account of the Redemption Fund pursuant to the Fiscal Agent Agreement.

2029 Term Bonds

Sinking Fund Redemption Date(September 1)

MandatorySinking Payments

2028 $270,000.002029 (Maturity) 300,000.00

In the event of a partial optional redemption or special mandatory redemption of the 2029 TermBonds, each of the remaining Mandatory Sinking Payments for 2029 Term Bonds, as applicable, will bereduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, pursuant to calculationsmade by the Fiscal Agent.

The Bonds maturing on September 1, 2034 (the “2034 Term Bonds”) are subject to mandatoryredemption prior to maturity on September 1, 2033, and on each September 1 thereafter to and includingSeptember 1, 2034, in accordance with the schedule set forth below. The 2034 Term Bonds shall be redeemedfrom Mandatory Sinking Payments that have been deposited one Business Day prior to each March 1 and

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September 1, commencing March 1, 2033, into the Sinking Fund Redemption Account of the RedemptionFund pursuant to the Fiscal Agent Agreement.

2034 Term Bonds

Sinking Fund Redemption Date(September 1)

MandatorySinking Payments

2033 $425,000.002034 (Maturity) 460,000.00

In the event of a partial optional redemption or special mandatory redemption of the 2034 TermBonds, each of the remaining Mandatory Sinking Payments for 2034 Term Bonds, as applicable, will bereduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, pursuant to calculationsmade by the Fiscal Agent.

The Bonds maturing on September 1, 2041 (the “2041 Term Bonds”) are subject to mandatoryredemption before maturity on September 1, 2035, and on each September 1 thereafter to and includingSeptember 1, 2041, in accordance with the schedule set forth below. The 2041 Term Bonds shall be redeemedfrom Mandatory Sinking Payment amounts that have been deposited one Business Day prior to each March 1and September 1, commencing March 1, 2035, into the Sinking Fund Redemption Account of the RedemptionFund pursuant to the Fiscal Agent Agreement.

2041 Term Bonds

Sinking Fund Redemption Date(September 1)

MandatorySinking Payments

2035 $500,000.002036 545,000.002037 590,000.002038 635,000.002039 685,000.002040 740,000.002041 (Maturity) 800,000.00

In the event of a partial optional redemption or special mandatory redemption of the 2041 TermBonds, each of the remaining Mandatory Sinking Payments for 2041 Term Bonds, as applicable, will bereduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, pursuant to calculationsmade by the Fiscal Agent.

Selection of Bonds for Redemption. If less than all of the Outstanding Bonds are to be redeemed, theportion of any such Bond of a denomination of more than $5,000 to be redeemed will be in the principalamount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, theFiscal Agent will treat such Bond as representing that number of Bonds of $5,000 denomination which isobtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. In the event thatBonds are to be redeemed pursuant to optional redemption and mandatory sinking fund redemption on thesame date, or mandatory sinking fund redemption and special mandatory redemption on the same date, theFiscal Agent will first select the Bonds to be redeemed pursuant to mandatory sinking fund redemption andwill then select the Bonds to be redeemed pursuant to either optional redemption or special mandatoryredemption in accordance with the District’s written direction provided pursuant to the Fiscal AgentAgreement.

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The Fiscal Agent will promptly notify the District of the Bonds, or portions thereof, selected forredemption by sending the District a copy of the notice required pursuant to the Fiscal Agent Agreement.

Purchase in Lieu of Redemption. In lieu of, or partially in lieu of, any optional redemption,mandatory sinking fund redemption, or special mandatory redemption, monies deposited in an account of theRedemption Fund may be used to purchase the Outstanding Bonds that were to be redeemed with such fundsin the manner provided. Purchases of Outstanding Bonds may be made by the District prior to the selection ofBonds for redemption by the Fiscal Agent, at public or private sale as and when and at such prices as theDistrict may in its discretion determine but only at prices (including brokerage or other expenses) not morethan par plus accrued interest, and, in the case of funds in the Optional Redemption Account, the applicablepremium to be paid in connection with the proposed redemption. Any accrued interest payable upon thepurchase of Bonds may be paid from the Interest Account of the Bond Fund for payment of interest on the nextfollowing Interest Payment Date.

Notice of Redemption. When the Fiscal Agent receives notice from the District of its election toredeem Bonds, or when the Fiscal Agent is required to redeem Bonds, the Fiscal Agent will give notice, in thename of the District of the redemption of such Bonds. Such notice of redemption will: (a) specify the CUSIPnumbers and serial numbers of the Bonds selected for redemption, except that where all the Bonds or all Bondsof a single maturity are subject to redemption, the serial numbers thereof need not be specified; (b) state theoriginal issue date, the interest rate and the maturity date of the Bond selected for redemption; (c) state the datefixed for redemption; (d) state the redemption price; (e) state the place or places where the Bonds are to beredeemed; and (f) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is tobe redeemed. Such notice will further state that, on the date fixed for redemption, there will become due andpayable on each Bond or portion thereof called for redemption the principal thereof, together with anypremium, and interest accrued to the redemption date, and that, from and after such date, interest thereon willcease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, theFiscal Agent will mail by first class mail a copy of such notice, postage prepaid, to the respective Ownersthereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond ofnotice of such redemption will not be a condition precedent thereto, and neither failure to receive such noticenor any defect therein will affect the validity of the proceedings for the redemption of such Bond, or thecessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemptionhas been given as provided in the Fiscal Agent Agreement will be conclusive as against all parties, and it willnot be open to any Owner to show that he or she failed to receive notice of such redemption.

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

The District has the right to provide a conditional notice of optional redemption to any Bondowner,and to rescind any optional redemption for any reason on any date prior to the redemption date by writtennotice to the Bondowner of any Bond previously called for optional redemption.

Notice of rescission of optional redemption will be provided in the same manner notice of optionalredemption is originally provided. The actual receipt by any Bondowner of notice for such rescission will notbe a condition precedent to rescission, and failure to receive such notice or any defect in such notice will notaffect the validity of the rescission. The District will not have any liability to the Bondowners, or any otherparty, as a result of the District’s decision to rescind a redemption of the Bonds pursuant to the provisions ofthe Fiscal Agent Agreement.

Effect of Redemption. When notice of redemption has been given, and when the amount necessaryfor the redemption of the Bonds called for redemption is set aside for that purpose in the Redemption Account,

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the Bonds designated for redemption will become due and payable on the date fixed for redemption, and uponpresentation and surrender of the Bonds at the place specified in the notice of redemption, and no interest willaccrue on the Bonds called for redemption from and after the redemption date, and the owners of the redeemedBonds, after the redemption date, may look for the payment of principal and premium, if any, of such Bonds orportions of Bonds only to the Redemption Account and shall have no rights, except with respect to thepayment of the redemption price from the Redemption Account.

Registration, Transfer and Exchange

Registration. The Fiscal Agent will keep sufficient books for the registration and transfer of theBonds. The ownership of the Bonds will be established by the Bond registration books held by the FiscalAgent.

Transfer or Exchange. Whenever any Bond is surrendered for registration of transfer or exchange,the Fiscal Agent will authenticate and deliver a new Bond or Bonds of the same maturity, for a like aggregateprincipal amount of authorized denominations; provided that the Fiscal Agent will not be required to registertransfers or make exchanges of (i) Bonds for a period of 15 days next preceding the date of any selection of theBonds to be redeemed, or (ii) any Bonds chosen for redemption.

SOURCES OF PAYMENT FOR THE BONDS

Limited Obligations

The Bonds are special, limited obligations of the District payable only from amounts pledged underthe Fiscal Agent Agreement applicable to the District and from no other sources.

The Net Taxes of the District are the primary security for the repayment of the Bonds. Under theFiscal Agent Agreement, the District has pledged to repay the Bonds from Net Taxes (which are Special Taxrevenues remaining after the payment of the Administrative Expenses of up to $33,784.87, increasing by 2%each fiscal year beginning in Fiscal Year 2012-13 (the “Administrative Expenses Requirement”)) and fromamounts held in the Special Tax Fund established under the Fiscal Agent Agreement.

Special Tax revenues include the proceeds of the Special Taxes received by the District, including anyscheduled payments and prepayments thereof and the net proceeds of the redemption of delinquent SpecialTaxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount ofsaid lien, and penalties and interest thereon.

In the event that the Special Tax revenues are not received when due, the only sources of fundsavailable to pay the debt service on the Bonds are amounts held by the Fiscal Agent in the Special Tax Fund(other than the Administrative Expense Requirement), the Bond Fund, the Reserve Fund, and foreclosureproceeds resulting from the sale of delinquent parcels if and when available. Notwithstanding any provisioncontained in the Fiscal Agent Agreement to the contrary, Net Taxes deposited in the Administrative ExpenseFund, the Rebate Fund and the Surplus School Facilities Fund will no longer be considered to be pledged tothe Bonds and the Administrative Expense Fund, the Construction Fund, the Rebate Fund and the SurplusSchool Facilities Fund will not be construed as trust funds held for the benefit of the Bondowners. Thefacilities constructed and acquired with the proceeds of the Bonds are not in any way pledged to pay, orsecurity for, the debt service on the Bonds. Any proceeds of condemnation or destruction of any facilitiesfinanced with the proceeds of the Bonds are not pledged to pay the debt service on any Bonds and are free andclear of any lien or obligation imposed under the Fiscal Agent Agreement.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOLDISTRICT, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN), THECOUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION

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THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NOOTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDSARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE SCHOOL DISTRICT OR GENERALOBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLESOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE FISCAL AGENTAGREEMENT AS MORE FULLY DESCRIBED HEREIN.

Special Taxes

Authorization and Pledge. On August 15, 2006, pursuant to the request of the landowners at suchtime and the provisions of the Act, the School District established the District. The qualified electors of theDistrict approved the Rate and Method on August 15, 2006. The District is authorized to issue bondedindebtedness and to levy special taxes to pay debt service on the Bonds and to fund school, water and sewerfacilities. Pursuant to such proceedings, the Special Tax may be levied and collected against all TaxableProperty (as defined below) within the District for school, water and sewer facilities costs according to theRate and Method, a copy of which is set forth in Appendix A – “RATE AND METHOD OFAPPORTIONMENT OF SPECIAL TAX.” Capitalized terms used in the following paragraphs but not definedherein have the meanings given them in the Rate and Method.

On January 17, 2012, the Board adopted Resolution No. 2011-12-15, which resolution permanentlyreduced the special taxes levied on property within the District as set forth therein and as reflected in theAmended Mitigation Agreement, based on changes which occurred relative to the expected development ofproperty within the District and pursuant to certain provisions of the Act. See “SOURCES OF PAYMENTFOR THE BONDS – Special Taxes.”

The District has covenanted in the Fiscal Agent Agreement that each year, beginning in Fiscal Year2011-12, it will levy Special Taxes up to the maximum rates permitted under the Rate and Method, aspermanently reduced pursuant to Resolution No. 2011-12-15, in an amount sufficient, together with otheramounts on deposit in the Special Tax Fund, to pay (i) the principal of and interest on any Outstanding Bondsand Additional Bonds, (ii) any amounts necessary to replenish the Reserve Fund to the Reserve Requirement,and (iii) the Administrative Expense Requirement.

The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant tothe Rate and Method, as permanently reduced pursuant to Resolution No. 2011-12-15. See “SOURCES OFPAYMENT FOR THE BONDS – Special Taxes” and Appendix A – “RATE AND METHOD OFAPPORTIONMENT OF SPECIAL TAX” hereto. There is no assurance that the Special Tax proceeds will, inall circumstances, be adequate to pay the principal of and interest on the Bonds when due. See “SPECIALRISK FACTORS – Insufficiency of Special Taxes.”

Rate and Method. The Rate and Method provides the means by which the Board may annually levythe Special Taxes within the District up to the applicable Maximum Special Tax, as permanently reducedpursuant to Resolution No. 2011-12-15. The Bonds are to be issued to fund school, water and sewer facilities,and the Bonds are secured by the Net Taxes. The Rate and Method provides that the Special Tax shall belevied on all Assoessor’s Parcels classified as Developed Property for a maximum of 35 years and not laterthan Fiscal Year 2045-46. A copy of the Rate and Method is included in Appendix A hereto.

Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that foreach Fiscal Year, all Assessor’s Parcels of Taxable Property within the District shall be classified asDeveloped Property, Undeveloped Property, Public Property or Property Owner Association Property and shallbe subject to Special Taxes in accordance with the Rate and Method.

(i) “Developed Property” means, for each Fiscal Year, all Taxable Property for which a buildingpermit for new construction was issued prior to May 1 of the prior Fiscal Year.

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(ii) “Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified asDeveloped Property as shown on the equalized roll of the County which is available on or about July 1 of theFiscal Year.

(iii) “Taxable Property” means all of the Assessor’s Parcels within the boundaries of the Districtwhich have not been prepaid pursuant to Section J of the Rate and Method or, which are not exempt from theSpecial Tax pursuant to law or Section E of the Rate and Method.

(iv) “Exempt Property” means an amount of property which is either Public Property or PropertyOwner Association Property which is exempt from the Special Tax, provided, however, that no suchclassification shall reduce the sum of all Taxable Property to less than 32.26 Acres in Zone A, 11.52 Acres inZone B, and 7.70 Acres in Zone C.

Maximum Special Tax Rate.

Developed Property. The Maximum Special Tax for each Assessor’s Parcel of Residential Propertythat is classified as Developed Property will be the greater of (i) the amount derived by application of theAssigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. Currently, there isno Non-Residential Property within the District, but if and when there is such property, the Maximum SpecialTax for each Assessor’s Parcel of Non-Residential Property will be the Assigned Special Tax described inTable 1 of the Rate and Method.

The Assigned Special Tax for each Assessor’s Parcel of Residential Developed Property for FiscalYear 2011-12 is $2,122.82 per dwelling unit for property within Zone A and $1,698.25 per dwelling unit forproperty within Zone B. Pursuant to Resolution No. 2011-12-15, the Assigned Special Tax for eachAssessor’s Parcel of Residential Developed Property for Fiscal Year 2012-13 will be $2,118.36 per dwellingunit for property within Zone A and $1,694.67 per dwelling unit for property within Zone B. The AssignedSpecial Tax escalates by two percent annually. There is currently no Developed Property in Zone C. SeeAppendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”

The Backup Special Tax for Fiscal Year 2011-12 is $2,135.39 per dwelling unit for Zone A and$1,674.59 per dwelling unit for Zone B. The Backup Special Tax for Fiscal Year 2012-13 is expected to be$2,178.10 per dwelling unit for Zone A and $1,708.08 per dwelling unit for Zone B. The Backup Special Taxescalates by two percent annually. There is currently no Developed Property in Zone C.

See Appendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” foradditional details regarding the determination of Backup Special Tax amounts within the District.

Undeveloped Property. The Maximum Special Tax for Undeveloped Property within the District inFiscal Year 2011-12 is $13,489.69 per Acre for Zone A, $19,016.90 per Acre for Zone B, and $42,878.99 perAcre for Zone C. The Maximum Special Tax for Undeveloped Property within the District in Fiscal Year2012-13 is expected to be $13,759.49 per Acre for Zone A, $19,397.23 per Acre for Zone B, and $43,736.57per Acre for Zone C. The Maximum Special Tax for Undeveloped Property escalates by two percent annually.Zone C consists of 29.08 Acres of Undeveloped Property. Neither Zone A nor Zone B contain anyUndeveloped Property.

Method of Apportionment. The School District shall levy the Special Tax as follows:

First: The Special Tax shall be levied on each Assessor’s Parcel of Developed Property at theapplicable Assigned Special Tax;

Second: If additional moneys are needed to satisfy the Special Tax Requirement after the first stephas been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped

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Property including Public Property and Property Owner Association Property which is not then exempt at up to100% of the Maximum Special Tax for Undeveloped Property; and

Third: If additional moneys are needed to satisfy the Special Tax Requirement after the first two stepshave been completed, then the levy of the Special Tax on each Assessor’s Parcel of Developed Property whoseMaximum Special Tax is determined through the application of the Backup Special Tax shall be increasedProportionately from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor’sParcel.

Prepayment of Special Taxes in Full. The Maximum Special Tax obligation may only be prepaidand permanently satisfied by an Assessor’s Parcel of Developed Property, Undeveloped Property for which abuilding permit has been issued, and Public Property and/or Property Owner Association Property that is notExempt Property pursuant to Section E of the Rate and Method. The Maximum Special Tax obligationapplicable to such Assessor’s Parcel may be fully prepaid and the obligation of the Assessor’s Parcel to pay theSpecial Tax permanently satisfied as described in the Rate and Method; provided that a prepayment may bemade only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time ofprepayment. The Prepayment Amount for an Assessor’s Parcel shall be determined as specified in Section J ofAppendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”

Prepayment of Special Taxes in Part. The Maximum Special Tax on an Assessor’s Parcel ofDeveloped Property or an Assessor’s Parcel of Undeveloped Property for which a building permit has beenissued may be partially prepaid, provided an Assessor’s Parcel of Developed Property may only be partiallyprepaid prior to or concurrent with the close of escrow of a sale to the initial home buyer. The amount of theprepayment shall be determined as specified in Section J of Appendix A – “RATE AND METHOD OFAPPORTIONMENT OF SPECIAL TAX.”

Collection of Special Taxes. The Special Taxes are levied by the District and collected by theTreasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes.The District may, however, collect the Special Taxes at a different time or in a different manner if necessary tomeet its financial obligations.

The District has made certain covenants in the Fiscal Agent Agreement for the purpose of ensuringthat the current maximum Special Tax rate and method of collection of the Special Taxes are not altered in amanner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on theBonds and Administrative Expenses when due. First, the District has covenanted that no modification of themaximum authorized Special Taxes in the District will be approved by the District unless it is confirmed inwriting, by an Independent Financial Consultant, that, immediately subsequent to such modifications theamount of the maximum Special Taxes on Developed Property (as defined in the Rate and Method), pursuantto the Act and the applicable resolutions and ordinances of the District is at least 1.10 times Maximum AnnualDebt Service plus Administrative Expenses on all Outstanding Bonds and any Additional Bonds expected tobe issued. Second, the District has further covenanted that, in the event an ordinance is adopted by initiativepursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwisealter the maximum authorized Special Taxes, the District will, to the extent of available District fundstherefore, commence and pursue legal action seeking to preserve its ability to comply with its covenantcontained in the preceding sentence. See “SPECIAL RISK FACTORS – Proposition 218.”

Although the Special Taxes constitute liens on taxed parcels within the District, they do not constitutea personal indebtedness of the owners of property within the District. Moreover, other liens for taxes andassessments already exist on the property located within the District and others could come into existence inthe future in certain situations without the consent or knowledge of the School District or the landowners in theDistrict. See “SPECIAL RISK FACTORS – Parity Taxes, Special Assessments and Land DevelopmentCosts.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or

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that they will pay such taxes even if financially able to do so, all as more fully described in the section of thisOfficial Statement entitled “SPECIAL RISK FACTORS.”

Proceeds of Foreclosure Sales

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the SpecialTax, the District may order the institution of a Superior Court action to foreclose the lien therefor withinspecified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicialforeclosure sale. Under the provisions of the Act, such judicial foreclosure action is not mandatory.

Under the Fiscal Agent Agreement, in order to determine if there are delinquencies with respect to thepayment of the Special Taxes, no later than March 1 and July 1 in every year (each, a “reconciliation date”)commencing March 1, 2012, the District shall reconcile or cause to be reconciled the amount of Special Taxeslevied to the amount of Special Taxes theretofore reported by the County as paid and received. No later thanforty-five (45) days after a reconciliation date, commencing on the first reconciliation date in 2012, the Districtshall send or cause to be sent a notice of delinquency to all property owners reported to be delinquent in thepayment of the Special Taxes as of the reconciliation date.

The fees and expenses of the Independent Financial Consultant retained by the District to assist incomputing the levy of the Special Taxes pursuant to the Fiscal Agent Agreement and any reconciliation ofamounts levied to amounts received, as well as the costs and expenses of the District (including a charge forSchool District staff time) in conducting its duties pursuant to the Fiscal Agent Agreement shall be anAdministrative Expense pursuant to the Fiscal Agent Agreement.

In addition, under the Fiscal Agent Agreement, not later than August 1 of each Fiscal Year,commencing August 1, 2012, the District will compare the amount of Special Taxes theretofore levied in theprior Fiscal Year in the District to the amount of Special Taxes theretofore reported by the County as paid andreceived and proceed as follows:

Individual Delinquencies. If the District determines that (i) any single parcel is subject to a SpecialTax delinquency in the aggregate amount of $7,000 or more or (ii) any owner owns one or more parcelssubject to a Special Tax delinquency in an aggregate amount of $7,000 or more, then the District shall send orcause to be sent a notice of delinquency (and a demand for immediate payment) to the property owner within45 days of such determination, and (if the delinquency remains uncured) the Board shall provide for thecommencement of foreclosure proceedings by Board action within 120 days following the District’sdelinquency determination to the extent permissible under applicable law.

Aggregate Delinquencies. If the District determines that the total amount of delinquent Special Taxesfor the prior Fiscal Year for the District (including the total individual delinquencies described above) exceeds5% of the total Special Taxes due and payable for the prior Fiscal Year, the District shall notify or cause to benotified property owners who are then delinquent in the payment of Special Taxes (and demand immediatepayment of the delinquency) within 45 days of such determination, and the Board shall provide for thecommencement of foreclosure proceedings by Board action within 120 days following the District’sdelinquency determination to the extent permissible under applicable law. See Appendix E – “SUMMARYOF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.”

If foreclosure is necessary and other funds (including amounts in the Reserve Fund) have beenexhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have endedwith the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delaysassociated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of thefederal government and other factors beyond the control of the School District and the District. See“SPECIAL RISK FACTORS – Bankruptcy and Foreclosure.” Moreover, no assurances can be given that thereal property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the

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proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See “SPECIAL RISKFACTORS – Land Values.” Although the Act authorizes the District to cause such an action to becommenced and diligently pursued to completion, the Act does not impose on the District or the SchoolDistrict any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there isno other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will havethe same lien priority as is provided for ad valorem taxes.

Special Tax Fund

Pursuant to the Fiscal Agent Agreement, the Special Taxes and other amounts constituting GrossTaxes collected by the District at any time (exclusive of Prepaid Special Taxes received which shall bedeposited into the Prepayment Account of the Special Tax Fund) shall be transferred no later than 10 days afterreceipt thereof to the Fiscal Agent and shall be held in trust in the Special Tax Fund (exclusive of theAdministrative Expense Requirement) for the benefit of the Bondowners and shall, exclusive of PrepaidSpecial Taxes held in the Prepayment Account, be transferred or applied to the funds and accounts set forthbelow, in the priority set forth below and at the times and in the amounts and in accordance with the FiscalAgent Agreement:

(i) To the Administrative Expense Fund, an amount specified in writing by the District,up to the Administrative Expense Requirement of $33,784.87 for Fiscal Year 2011-12 (which shallincrease 2% per Fiscal Year commencing Fiscal Year 2012-13).

(ii) To the Interest Account of the Bond Fund, an amount such that the balance in theInterest Account one Business Day prior to each Interest Payment Date shall be equal to theinstallment of interest due on the Bonds on said Interest Payment Date. Moneys in the InterestAccount shall be used for the payment of interest on the Bonds as the same become due.

(iii) To the Principal Account of the Bond Fund, an amount up to the amount needed tomake the principal payment due on the Bonds during the current Bond Year (as defined in the FiscalAgent Agreement).

(iv) To the Sinking Fund Redemption Account of the Redemption Fund, an amount up tothe amount needed to make the Mandatory Sinking Payments due on the Bonds during the currentBond Year.

(v) To the Reserve Fund, the amount, if any, necessary to replenish the Reserve Fund tothe Reserve Requirement.

(vi) Provided all the amounts due in the current Bond Year are funded under (ii), (iii),(iv) and (v) above, to the extent there are additional Administrative Expenses to the AdministrativeExpense Fund in the amount specified in writing by the District required to bring the balance thereinto the amount needed to pay such expenses.

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

(viii) Any remaining Special Taxes and other amounts constituting Gross Taxes, if any,shall remain in the Special Tax Fund until the end of the Bond Year. Provided there are no SpecialTaxes levied on Undeveloped Property in the current Fiscal Year or projected to be levied onUndeveloped Property in the next Fiscal Year, as verified in writing by an Authorized Representativeto the Fiscal Agent, at the end of the Bond Year any remaining funds in the Special Tax Fund, whichare not required to cure a delinquency in the payment of principal and interest on the Bonds (includingpayment of Mandatory Sinking Payments due during the current Bond Year), to restore the Reserve

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Fund as provided for in (v), above, or to pay current or pending Administrative Expenses as providedfor in (i) and (vi) above, shall be deposited in the Surplus School Facilities Fund and used inaccordance with the Fiscal Agent Agreement and shall be free and clear of any lien thereon or pledgeunder the Fiscal Agent Agreement; provided, any funds which are required to cure any suchdelinquency described above shall be retained in the Special Tax Fund and expended or transferred, atthe 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 all feesand expenses of the Fiscal Agent have been paid, moneys in the Special Tax Fund will be transferred to theDistrict by the Fiscal Agent and may be used by the District for any lawful purpose under the proceedingsundertaken in connection with the formation of the District and the issuance of the Bonds.

Prepayment Account of the Special Tax Fund. Prepaid Special Taxes collected by the District (netof any costs of collection) shall be transferred, no later than 10 days after receipt thereof, to the Fiscal Agentand the District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in the Prepayment Accountof the Special Tax Fund. The Prepaid Special Taxes shall be held in trust in the Prepayment Account for thebenefit of the Bonds and shall be transferred by the Fiscal Agent to the Mandatory Redemption Account of theRedemption Fund to call Bonds on the next Interest Payment Date for which notice can be given in accordancewith the special mandatory redemption provisions of the Fiscal Agent Agreement and shall be applied to callBonds pursuant to the Fiscal Agent Agreement. Moneys representing the Prepaid Special Taxes shall beinvested in accordance with the provisions of the Fiscal Agent Agreement. Investment earnings on amounts inthe Prepayment Account not needed to redeem the Bonds pursuant to special mandatory redemption provisionsof the Fiscal Agent Agreement shall be transferred to the Special Tax Fund by the Fiscal Agent at the time oftransfer of the Prepaid Special Taxes to the Mandatory Redemption Account of the Redemption Fund.

Investment. Moneys in each account in the Special Tax Fund will be invested and deposited by theDistrict as described in “Investment of Moneys in Funds” below. Interest earnings and profits resulting fromsuch investment and deposit will be retained in the applicable account in the Special Tax Fund to be used forthe purposes thereof and as otherwise directed under the Fiscal Agent Agreement.

Bond Fund

One Business Day prior to each Interest Payment Date, commencing with the September 1, 2012Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund, or the Reserve Fund in theevent that sufficient moneys are unavailable in the Special Tax Fund, and deposit in the Principal Account andthe Interest Account of the Bond Fund an amount equal to all of the principal and all of the interest due andpayable on the Bonds on the ensuing Interest Payment Date, less amounts on hand in the Bond Fund availableto pay principal and/or interest on such Bonds. Notwithstanding the foregoing, amounts in the Bond Fundresulting from transfers from the Construction Fund pursuant to the Fiscal Agent Agreement shall be used topay the principal of and interest on such Bonds prior to the use of any other amounts in the Bond Fund for suchpurpose. The Fiscal Agent shall apply moneys in the Interest Account and Principal Account to the paymentof interest and principal, respectively, on the Bonds on each Interest Payment Date.

Moneys in the Bond Fund shall be invested in accordance with the provisions of the Fiscal AgentAgreement. All investment earnings and profits resulting from such investment shall be retained in theaccounts established for the Bonds in the Bond Fund and used to pay principal of and interest on the Bonds.Upon final maturity of the Bonds and the payment of all principal of and interest on the Bonds, any moneysremaining in the Bond Fund shall be transferred to the Special Tax Fund.

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Reserve Fund

In order to further secure the payment of principal of and interest on the Bonds, certain proceeds of theBonds will be deposited into the Reserve Fund in an amount equal to the Reserve Requirement (see“ESTIMATED SOURCES AND USES OF FUNDS”). Reserve Requirement is defined in the Fiscal AgentAgreement to mean with respect to the Bonds, an amount, as of any date of calculation, equal to the least of(i) 10% of the original principal amount of the Bonds, (ii) Maximum Annual Debt Service on the Bonds, or(iii) 125% of average Annual Debt Service on the Bonds. In the event of a redemption or partial defeasance ofBonds, the Reserve Requirement will in connection therewith be re-determined by the District andcommunicated to the Fiscal Agent in writing and any funds in excess of such re-determined ReserveRequirement will be utilized as set forth in the Fiscal Agent Agreement. If Special Taxes are prepaid andBonds are to be redeemed with the proceeds of such prepayment, a proportionate amount in the Reserve Fund(determined on the basis of the principal of Bonds to be redeemed and the original principal of the Bonds, butnot in excess of the amount of funds available as a result of the re-determination of the Reserve Requirement)will be applied to the redemption of the Bonds as provided in the Fiscal Agent Agreement.

Moneys in the Reserve Fund will be invested and deposited as described in “Investment of Moneys inFunds” below. Moneys in the Reserve Fund in excess of the Reserve Requirement (exclusive of ExcessInvestment Earnings) will be withdrawn on each March 1 and transferred to the Interest Account of the BondFund, and any remaining excess will be transferred to the Principal Account of the Bond Fund, or to theSinking Fund Redemption Account of the Redemption Fund to the extent required to make any principalpayment or Mandatory Sinking Payments on the following September 1, all as provided in the Fiscal AgentAgreement.

The Fiscal Agent shall transfer Excess Investment Earnings from Reserve Fund earnings upon writtendirection of the District pursuant to the provisions of the Fiscal Agent Agreement.

See Appendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENTAGREEMENT” for a description of the timing, purpose and manner of disbursements from the Reserve Fund.

Administrative Expense Fund

The Fiscal Agent will receive the transfer of Special Taxes from the District from the Special TaxFund and deposit in the Administrative Expense Fund amounts to pay Administrative Expenses as describedabove 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.

Surplus School Facilities Fund

Moneys in the Surplus School Facilities Fund may be used by the District for acquisition and/orconstruction of the School Facilities, to make deposits to the Rebate Fund under the Fiscal Agent Agreementfor the purposes of paying rebatable arbitrage as and when such is due in accordance with the Tax Certificateand the Regulations, or, at the option of the District, for the payment of principal of or interest on the Bonds, orfor the optional redemption of any of the Bonds.

Pursuant to the Fiscal Agent Agreement, moneys on deposit in the Surplus School Facilities Fund arenot pledged for payment of the principal of, or interest or premium on, the Bonds, and are not subject to anyBondholder’s lien.

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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 by theFiscal Agent will be invested by the Fiscal Agent in Authorized Investments (as defined below or in the FiscalAgent Agreement), as directed by an Authorized Representative, that mature prior to the date on which suchmoneys are required to be paid out under the Fiscal Agent Agreement. Moneys in the Reserve Fund may beinvested in Authorized Investments which provide liquidity needed to satisfy any calls on funds in the ReserveFund. Such liquidity shall provide that at least one half of the moneys in the Reserve Fund shall be availablefor draw in advance of any Interest Payment Date, except in the case of guaranteed investment contracts whichmay have a longer term. Such Authorized Investments shall not have a final maturity of greater than threeyears (except for guaranteed investments contracts through which moneys in the Reserve Fund may beinvested for a longer period). In the absence of any direction from an Authorized Representative, subject toother limitations set forth in the Fiscal Agent Agreement, the Fiscal Agent will invest, to the extent reasonablypracticable, any such moneys in a taxable or tax-exempt government money market portfolio mutual fund asdescribed in clause (j) of the definition of Authorized Investments (including funds for which the Fiscal Agentor its affiliates or subsidiaries provide investment advisory or other management services). See Appendix E –“SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” for a definition of“Authorized Investments.”

Payment of Rebate Obligation

The District is required to calculate excess investment earnings in accordance with the requirementsset forth in the Fiscal Agent Agreement. If necessary, the District may use amounts in the Reserve Fund inexcess of the Reserve Requirement, amounts on deposit in the Administrative Expense Fund and other fundsavailable to the District to satisfy rebate obligations.

Estimated Debt Service Coverage

The principal amount of the Bonds has been established to produce debt service coverage on theBonds from Assigned Special Taxes on Developed Property within Zone A and Zone B of at least 110%, netof the $33,784.87 Administrative Expenses Requirement escalating 2% each fiscal year beginning in FiscalYear 2012-13. The District may levy up to the Maximum Special Tax rates on Taxable Property within theDistrict. See “– Special Taxes – Maximum Special Tax Rate” and “– Special Taxes – Method ofApportionment.”

While the District does not expect to levy Special Taxes on Undeveloped Property, if delinquenciesare high, the District may levy Special Taxes on Undeveloped Property. See “– Special Taxes – MaximumSpecial Tax Rate” and “– Special Taxes – Method of Apportionment.” Additionally, under the terms of theFiscal Agent Agreement, the District may issue Additional Bonds secured by the Net Taxes on a parity withthe Bonds if certain conditions are met which could result in a portion of debt service on the Bonds becomingpayable from Special Taxes levied on Undeveloped Property. See “SOURCES OF PAYMENT FOR THEBONDS – Issuance of Additional Bonds.”

Special Tax Levies and Delinquencies

Special Taxes within the District were first levied in Fiscal Year 2007-08, and have only been leviedon Developed Property in each successive fiscal year. Table 1 below summarizes the annual secured tax levieswithin the District and the amount delinquent as of June 30 for the previous four Fiscal Years. Futuredelinquencies could increase as a result of factors such as changes in the local or national economy, increasesin the mortgage rates and/or increases in the unemployment rate in the area. See “SPECIAL RISK FACTORS– Special Tax Delinquencies.”

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TABLE 1COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THE

MORENO VALLEY UNIFIED SCHOOL DISTRICTSpecial Tax Levy and Delinquencies(1)

Fiscal Year

Number ofParcelsLevied

Total TaxLevied

Fiscal YearAmount

Delinquent asof June 30(2)

%DelinquentJune 30(2)

AmountCollected asof 12/10/11

RemainingDelinquency as

of 12/10/11

RemainingDelinquency

Rate as of12/10/11

2007-08 148 $257,302.24 $34,320.01 13.34% $257,302.24 $0.00 0.00%

2008-09 198 358,867.80 34,606.54 9.64 358,867.80 0.00 0.00

2009-10 269 497,036.06 10,405.93 2.09 495,403.76 1,632.30 0.33

2010-11 334 641,419.16 1,040.59 0.16 641,419.16 0.00 0.00

2011-12 334 654,251.06 N/A N/A 320,120.28 7,005.25(3) 2.14(3)

(1) Reflects only Special Tax levies, collections, and delinquencies with respect to Zone A and Zone B.(2) Amount delinquent as of June 30 in the fiscal year in which the Special Taxes were levied for Zones A and B only.(3) Reflects only the amount delinquent with respect to the first installment of such Special Taxes and the rate of delinquency

with respect to such first installment. Between December 10, 2011, and January 17, 2012, special taxes in respect of oneadditional parcel were paid, lowering the amount delinquent to $6,156.13 and the delinquency rate to 1.88%.

Source: Special District Financing & Administration LLC.

Issuance of Additional Bonds

The District may issue additional obligations entitled to a lien on the Special Taxes under the FiscalAgent Agreement which are secured on a parity with the Bonds (“Additional Bonds”), subject to the maximumaggregate principal amount of $25,000,000 of such debt authorized in connection with the formation of theDistrict. See “THE COMMUNITY FACILITIES DISTRICT – Formation and Authorization.” Following theissuance of the Bonds, $15,885,000 of such authorization will remain available. Additional Bonds may onlybe issued pursuant to a Supplemental Fiscal Agent Agreement (a “Supplement”) in accordance with certainprovisions and requirements set forth in the Fiscal Agent Agreement, including, but not limited to:

Minimum Debt Service Coverage. The District must receive one or more certificates from one ormore Independent Financial Consultants which, when taken together, certify that the amount of themaximum Special Taxes that may be levied in each remaining Bond Year on all parcels of TaxableProperty that are not known by the District to be delinquent in the payment of any Special Taxes,assessments or ad valorem property taxes then due and owing is at least the sum of (i) theAdministrative Expense Requirement, plus (ii) 1.10 times the Annual Debt Service for eachcorresponding Bond Year on all Outstanding Bonds and the Additional Bonds proposed to be issued.For purposes of making this certification, the Independent Financial Consultants may rely on anyreports or certificates as may be acceptable to the District and the underwriter of the proposedAdditional Bonds.

Minimum Value-to-Lien Ratio. The “District Value” (as defined below) must be at least five timesthe sum of:

(i) the principal amount of all Outstanding Bonds, plus

(ii) the principal amount of the Additional Bonds proposed to be issued, plus

(iii) the principal amount of any fixed assessment liens on Taxable Property in the District, plus

(iv) a Proportionate Share of the outstanding principal amount of all other special tax bondspayable at least partially from special taxes to be levied on the Taxable Property in theDistrict (“Overlapping Bonds”), defined and determined by multiplying the outstandingprincipal amount of the Overlapping Bonds by the following fraction: the amount of

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special taxes securing the Overlapping Bonds levied on the Taxable Property in theDistrict, divided by the total amount of special taxes securing the Overlapping Bonds (in eachcase to be determined based upon the maximum special taxes that could be levied in the yearin which estimated annual debt service on the Overlapping Bonds occurs).

The term “District Value” for purposes of this subparagraph means the value (includingboth land and improvements) of all parcels of Taxable Property in the District that are not known bythe District to be delinquent in the payment of any Special Taxes, assessments or ad valorem propertytaxes then due and owing. District Value will be determined by reference to either or somecombination of (i) an appraisal prepared by an MAI appraiser selected by the District, with a date ofvalue no earlier than 90 days before the date the proposed Additional Bonds would be issued, or(ii) the assessed values shown on the last equalized County assessor’s property tax rolls.

Neither the School District nor the District will be liable to the Owners or any otherperson or entity with respect to any appraisal provided for purposes of meeting this requirement orby reason of any exercise of discretion made by any appraiser in connection with thisrequirement.

Minimum Value-to-Lien Ratio for Undeveloped Property. The “Undeveloped Property Value”(as defined below) for Undeveloped Property must be at least three times the sum of:

(i) the Proportionate Share of the principal amount of all Outstanding Bonds, plus

(ii) the Proportionate Share of the principal amount of the Additional Bonds proposed to beissued that are attributable to Undeveloped Property, plus

(iii) the principal amount of any fixed assessment liens on Undeveloped Property, plus

(iv) the Proportionate Share of the outstanding principal amount of all other special tax bondspayable at least partially from special taxes to be levied on Undeveloped Property.

For purposes of this requirement, “Proportionate Share” is determined by multiplying the outstandingprincipal amount of the bonds in question by the following fraction: the amount of special taxes securingthose bonds levied only on Undeveloped Property in the District, divided by the total amount of specialtaxes securing those bonds (in each case to be determined based upon the estimated special taxes to belevied in the year in which maximum annual debt service on the bonds occurs) levied on all property withinthe respective community facilities district.

The term “Undeveloped Property Value” for purposes of this requirement means the value(including both land and improvements) of all parcels of Undeveloped Property that are not known by theDistrict to be delinquent in the payment of any Special Taxes, assessments or ad valorem property taxes thendue and owing. Undeveloped Property Value will be determined by reference to either or some combination of(i) an appraisal prepared by an MAI appraiser selected by the District, with a date of value no earlier than90 days before the date the proposed Additional Bonds would be issued, or (ii) the assessed values shown onthe last equalized County assessor’s property tax rolls.

Neither the School District nor the District will be liable to the Owners or any other person orentity with respect to any appraisal provided for purposes of meeting this requirement or by reason of anyexercise of discretion made by any appraiser in connection with this requirement.

Deposit to Reserve Fund. The Supplement may provide for the establishment of separatefunds and accounts, and must provide for a deposit in the Reserve Fund so that the balance in theReserve Fund, including the account established for the Additional Bonds, is equal to the ReserveRequirement on the Delivery Date for the Additional Bonds.

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District Certification. The District will file with the Fiscal Agent a certificate of a DistrictRepresentative certifying that the conditions precedent to the issuance of the Additional Bonds setforth in the Fiscal Agent Agreement have been satisfied. The District Representative executing thiscertificate may conclusively rely upon such certificates of the Fiscal Agent, the IndependentFinancial Consultant, appraisers, owners of property within the District, and others selected with duecare, without the need for independent inquiry or certification.

See Appendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENTAGREEMENT.”

THE COMMUNITY FACILITIES DISTRICT

General Description of the District

The District was organized in 2006 by the Board under the Act to provide for the financing of publicimprovements to meet the needs of new development. Beazer and Hearthstone, the qualified electors withinthe boundaries of the District, being the then owners of all the property in the District, authorized the Districtto incur bonded indebtedness to finance certain public facilities to meet the needs of new development withinthe District and approved the Rate and Method for the District and authorized the levy of the Special Tax.

The District is located in Moreno Valley. Incorporated in 1984, Moreno Valley is located in thenorthwest portion of the County of Riverside (the “County”). The District is located south of Highway 60, eastof Nason Street in the vicinity of the intersection of Eucalyptus Avenue and Fir Avenue in Moreno Valley.The District consists of three geographic tax zones identified as Zone A, Zone B, and Zone C in the Rate andMethod.

Although, like all of Southern California, the land within the District is subject to seismic activity, it isnot located in a designated Earthquake Study Zone as determined by the California State Geologist. However,the land in the District is located approximately 3 miles from the San Jacinto Fault Zone, which is a State ofCalifornia Alquist-Priolo Earthquake Fault Zone. See “SPECIAL RISK FACTORS – Natural Disasters.”

Formation and Authorization

Pursuant to the Act, on June 27, 2006, the Board adopted Resolution No. 2005-06-100 (the“Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax onthe taxable property within the District. On June 27, 2006, the Board also adopted ResolutionNo. 2005-06-101, stating its intention to incur bonded indebtedness in an aggregate principal amount not toexceed $25,000,000 for the purpose of financing the design, acquisition, construction, leasing, expansion,improvement, or rehabilitation of certain public facilities (the “Facilities”) to serve the area within the Districtand its neighboring areas. See “THE COMMUNITY FACILITIES DISTRICT – Description of AuthorizedFacilities.”

Subsequent to a noticed public hearing, the Board adopted Resolution No. 2006-07-12 on August 15,2006, (the “Resolution of Formation”) which established the District, authorized the levy of a special taxwithin the District, determined the necessity to incur bonded indebtedness within the District, and called anelection within the District on the proposition of incurring bonded indebtedness, levying a special tax andsetting an appropriations limit within the District.

On August 15, 2006, pursuant to Resolution No. 2006-07-11, the Board approved the School FacilitiesFunding and Mitigation Agreement by and among the School District, Hearthstone Multi-Asset Entity B, L.P.,a California limited partnership (“Hearthstone”), and Beazer Homes Holding Corp., a Delaware corporation(“Beazer”), dated as of August 17, 2006, which was subsequently amended and restated in its entirety by thatcertain First Amended and Restated School Facilities Funding and Mitigation Agreement (the “Amended

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Mitigation Agreement”) by and among the School District, the District, and Beazer, dated as of January 17,2012.

On August 15, 2006, also pursuant to Resolution No. 2006-07-11, the Board approved the executionof a joint community facilities agreement by and among the School District, the Eastern Municipal WaterDistrict (“EMWD”), Hearthstone, and Beazer (the “Joint Community Facilities Agreement”). The AmendedMitigation Agreement and the Joint Community Facilities Agreement provide the terms for financing theFacilities.

On August 15, 2006, an election was held within the District at which the landowners eligible to voteapproved the issuance of bonds for the District in an amount not to exceed $25,000,000. A Notice of SpecialTax Lien was recorded in the office of the County Recorder on August 21, 2006, as DocumentNo. 2006-0613827. On September 12, 2006, the Board, acting as the legislative body of the District, adoptedOrdinance No. 2006-07-15 (the “Ordinance”) which authorizes the levy of a special tax pursuant to the Rateand Method of Apportionment of Special Tax within the District approved at the August 15, 2006, election(defined above as the “Rate and Method”), a copy of which is attached hereto as Appendix A.

Subsequent to the formation of the District, Beazer acquired all of the interests of Hearthstone inproperty within the District and has developed and sold 334 dwelling units consisting of 205 units withinZone A and 129 units within Zone B. These dwelling units were built between 2006 and 2009, with the lastmerchant sales of such units occurring in 2010. See Appendix B – “LIMITED APPRAISAL REPORT.”Beazer is not currently actively developing the property in Zone C and the Bonds have been sized such that itis not expected that Special Taxes will be levied on the property within Zone C to pay debt service on theBonds. The District does not expect to levy Special Taxes on the property within Zone C until that property isdeveloped. See “SOURCES OF PAYMENT FOR THE BONDS – Special Taxes” and “SOURCES OFPAYMENT FOR THE BONDS – Issuance of Additional Bonds.” A detailed description of the propertywithin the District as of the date of the Limited Appraisal Report is included in Appendix B – “LIMITEDAPPRAISAL REPORT.”

On January 17, 2012, the Board adopted Resolution No. 2011-12-15, which resolution permanentlyreduced the special taxes to be levied on property within the District as set forth therein and as reflected in theAmended Mitigation Agreement, based on changes which occurred relative to the expected development ofproperty within the District and pursuant to certain provisions of the Act. See “SOURCES OF PAYMENTFOR THE BONDS – Special Taxes.”

Description of Authorized Facilities

The Facilities authorized to be constructed and acquired by the District with the proceeds of the Bondsor Additional Bonds, if any, include (i) school facilities with an estimated useful life of five years or longer,including sites and site improvements (including landscaping, access roadways, drainage, sidewalks andgutters, utility lines, playground areas and equipment), classrooms, recreational facilities, on-site office spaceat a school, central support and administrative facilities, interim housing and transportation facilities needed bythe School District in order to serve the student population to be generated as a result of development of theproperty within the District and (ii) water and sewer facilities to be owned and operated by EMWD, and mayinclude in each case the attributable costs of engineering, design, planning, materials testing, coordination,construction staking and construction, together with the expenses related to issuance and sale of any “debt,” asdefined in Section 53317(d) of the Act, including underwriters’ discount, appraisals, market studies, reservefund, capitalized interest, bond counsel, special tax consultant, bond and official statement printing,administrative expenses of the School District, the District and the fiscal agent related to the District and anysuch debt and all other incidental expenses.

Pursuant to the Fiscal Agent Agreement, $7,798,307.66 of proceeds of the Bonds will be depositedinto the Construction Fund, of which amount $4,836,477.06 will be deposited into the School Facilities

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Account of the Construction Fund and will be available to the School District for financing school facilitiesdescribed above, and $2,961,830.60 will be deposited into the EMWD Account of the Construction Fund andwill be available to EMWD for financing water and sewer facilities or be paid to Beazer as reimbursement ofprior advances to finance such facilities. See “ESTIMATED SOURCES AND USES OF FUNDS.”

Direct and Overlapping Indebtedness

The ability of an owner of land within the District to pay the Special Taxes could be affected by theexistence of other taxes and assessments imposed upon the property. These other taxes and assessments thatconsist of the direct and overlapping debt in the District are set forth in Table 2 below, (the “Debt Report”).The Debt Report sets forth those entities which have issued debt and does not include entities which only levyor assess fees, charges, ad valorem taxes or special taxes. See Tables 3A and 3B for information regardingother entities levying taxes, assessments or other charges on property in the District. The Debt Report includesthe principal amount of the Bonds, as if they were outstanding on the effective date of the table. The DebtReport has been derived from data assembled and reported to the District by California Municipal Statistics,Inc. and Special District Financing & Administration LLC. The District, the School District and theUnderwriter have not independently verified the information in the Debt Report and do not guarantee itscompleteness or accuracy.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

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TABLE 2COMMUNITY FACILITIES DISTRICT NO. 2005-5

OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICTDIRECT AND OVERLAPPING DEBT

2011-12 Local Secured Assessed Valuation: $78,882,109

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 1/1/12Metropolitan Water District General Obligation Bonds 0.003% $6,760Riverside Community College District General Obligation Bonds 0.105 242,401Moreno Valley Unified School District General Obligation Bonds 0.752 315,716Moreno Valley Unified School District Community Facilities District No. 2005-5 100.000 9,115,000 (1)

Eastern Municipal Water DistrictImprovement District No. U-22 General Obligation Bonds 3.779 154,070

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $9,833,947

OVERLAPPING GENERAL FUND DEBT: % Applicable(2)

Riverside County General Fund Obligations 0.033% $220,654Riverside County Pension Obligations 0.033 121,092Riverside County Board of Education Certificates of Participation 0.033 1,668Moreno Valley Unified School District Certificates of Participation 0.636 130,126City of Moreno Valley General Fund Obligations 0.548 412,918

TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $886,458Less: Riverside County supported obligations 4,327

TOTAL NET OVERLAPPING GENERAL FUND DEBT $882,131

GROSS COMBINED TOTAL DEBT $10,720,405 (3)

NET COMBINED TOTAL DEBT $10,716,078

Ratios to 2011-12 Assessed Valuation:Direct Debt...............................................................................11.56%Total Direct and Overlapping Tax and Assessment Debt..........12.47%Gross Combined Total Debt......................................................13.59%Net Combined Total Debt .........................................................13.58%

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

(1) Excludes the Bonds described herein.(2) Based on redevelopment adjusted all property assessed valuation of $47,474,550.(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded

capital lease obligations.Source: California Municipal Statistics, Inc. and Special District Financing & Administration LLC.

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Tables 3A and 3B below set forth the estimated total effective tax rates for a typical single familyhome within the District, based upon Fiscal Year 2011-12 tax rates and minimum market value. See “THECOMMUNITY FACILITIES DISTRICT – Limited Appraisal Report.” Tables 3A and 3B also set forth thoseentities with fees, charges, ad valorem taxes and special taxes regardless of whether those entities have issueddebt.

TABLE 3ACOMMUNITY FACILITIES DISTRICT NO. 2005-5

OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICTESTIMATED FISCAL YEAR 2011-12 TAX RATES

ZONE A

APPRAISED VALUATION AND PROPERTY TAXES

Total Appraised Minimum Market Value Zone A(1) $43,740,000Number of Dwelling Units 205Average Appraised Minimum Market Value $213,366Average Home Size(1) 2,667

AD VALOREM PROPERTY TAXES(2)

Percent ofTotal Assessed

Valuation

ExpectedAmount to be

Levied

General Purpose 1.00000% $2,133.66Moreno Valley Unified School 0.04096 87.39Riverside City Community College 0.01700 36.27Metro Water East 1301999 0.00370 7.89EMWD IMP DST U-22 0.03000 64.01

ASSESSMENTS, SPECIAL TAXES, AND PARCEL CHARGES

Flood Control Stormwater / Cleanwater 3.78CSA 152- Moreno Valley Stormwater 8.14Moreno Valley CFD 1 Neighbor Park MNT 120.00Moreno Valley USD EMWD CFD No. 2005-5(2) 2,076.82Moreno Valley CS Zone A 87.50Moreno Valley CS Zone B 24.74Moreno Valley CS Zone C 9.00Moreno Valley CS Zone E 397.00Moreno Valley Fed Mandated NPDES 108.00MWD Standby East 6.94EMWD Standby-Combined Charge 25.00

PROJECTED TOTAL PROPERTY TAXES $5,196.14

Projected Total Effective Tax Rate (as % of Appraised Value) 2.43532%

(1) The Appraised Minimum Market Value is sourced from the Limited Appraisal Dated December 2011.(2) The actual amount levied for Fiscal Year 2011-12 was $2,122.82 per dwelling unit for Zone A. The levy amount shown

above represents what the Fiscal Year 2011-12 tax rate would have been if it had been reduced consistent with the reduction ofthe Assigned Special Tax to be applicable for the 2012-13 Fiscal Year. See “SOURCES OF PAYMENT FOR THE BONDS– Special Taxes.”

Source: Special District Financing & Administration LLC.

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TABLE 3BCOMMUNITY FACILITIES DISTRICT NO. 2005-5

OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICTESTIMATED FISCAL YEAR 2011-12 TAX RATES

ZONE B

APPRAISED VALUATION AND PROPERTY TAXES

Total Appraised Minimum Market Value Zone B(1) $21,480,000Number of Dwelling Units 129Average Appraised Minimum Market Value $166,512Average Home Size(1) 1,914

AD VALOREM PROPERTY TAXES(2)

Percent ofTotal Assessed

Valuation

ExpectedAmount to be

Levied

General Purpose 1.00000% $1,665.12Moreno Valley Unified School 0.04096 68.20Riverside City Community College 0.01700 28.31Metro Water East 1301999 0.00370 6.16EMWD IMP DST U-22 0.03000 49.95

ASSESSMENTS, SPECIAL TAXES, AND PARCEL CHARGES

Flood Control Stormwater / Cleanwater 2.46CSA 152- Moreno Valley Stormwater 8.14Moreno Valley CFD 1 Neighbor Park MNT 120.00Moreno Valley USD EMWD CFD No. 2005-5(2) 1,661.44Moreno Valley CS Zone A 87.50Moreno Valley CS Zone B 24.74Moreno Valley CS Zone C 9.00Moreno Valley CS Zone E 397.00Moreno Valley Fed Mandated NPDES 108.00MWD Standby East 6.94EMWD Standby-Combined Charge 25.00

PROJECTED TOTAL PROPERTY TAXES $4,267.96

Projected Total Effective Tax Rate (as % of Appraised Value) 2.56315%

(1) The Appraised Minimum Market Value is sourced from the Limited Appraisal Dated December 2011.(2) The actual amount levied for Fiscal Year 2011-12 was $1,698.25 per dwelling unit for Zone B. The levy amount shown above

represents what the Fiscal Year 2011-12 tax rate would have been if it had been reduced consistent with the reduction of theAssigned Special Tax to be applicable for the 2012-13 Fiscal Year. See “SOURCES OF PAYMENT FOR THE BONDS –Special Taxes.”

Source: Special District Financing & Administration LLC.

Limited Appraisal Report

In order to provide more current information with respect to the value of the property within theDistrict, the School District engaged Harris Realty Appraisal, the Appraiser, to prepare the Limited AppraisalReport. The School District instructed the Appraiser to prepare its analysis and report in conformity withDistrict-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 andrevised in 2004 by the commission now known as California Debt and Investment Advisory Commission. Acopy of the Limited Appraisal Report is included as Appendix B to this Official Statement.

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The purpose of the Limited Appraisal Report was solely to help in establishing whether or not thecurrent Fiscal Year 2011-12 aggregate assessed values of property within each of the Zones of the District arereasonable as of the date of valuation, December 1, 2011. As indicated in the Limited Appraisal Report, theFiscal Year 2011-12 aggregate assessed values of property within Zone A, Zone B, and Zone C were$52,427,455, $25,654,815, and $799,839, respectively. Subject to the contingencies, assumptions and limitingconditions set forth in the Limited Appraisal Report, the Appraiser concluded that, as of December 1, 2011, theminimum market value of the property within Zone A was not less than $43,740,000, the minimum marketvalue of the property within Zone B was not less than $21,480,000, and the minimum market value of theproperty within Zone C was not less than $800,000.

Reference is made to Appendix B for a complete list of the assumptions and limiting conditions and afull discussion of the appraisal methodology and the basis for the Appraiser’s opinions. In the event that anyof the contingencies, assumptions and limiting conditions are not actually realized, the value of the propertywithin the District may be less than the amount reported in the Limited Appraisal Report. In any case, therecan be no assurance that any portion of the property within the District would actually sell for the amountindicated by the Limited Appraisal Report.

The Limited Appraisal Report merely indicates the Appraiser’s opinion as to the minimum marketvalue of the property referred to therein as of the date and under the conditions specified therein. TheAppraiser’s opinion reflects conditions prevailing in the applicable market as of the date of value. The housingmarket in Southern California and the County, like that in the country generally, has deteriorated significantlyover the past several years. The Appraiser’s opinion does not predict the future value of the subject property,and there can be no assurance that market conditions will not further adversely change in the future.

It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District andthe School District a certification to the effect that no events or occurrences have come to the attention of theAppraiser subsequent to the date of the Limited Appraisal Report that would substantially change theMinimum Market Values of the property within the District reported in the Limited Appraisal Report.

The president of the Appraiser, who was actively involved in the preparation of the Limited AppraisalReport, has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for thesale of land-secured municipal bonds. The Appraiser was selected by the School District and has no materialrelationships with the School District, District or the owners of the land within the District other than therelationship represented by the engagement to prepare the Limited Appraisal Report and other similarengagements for the School District.

Estimated Value-To-Lien Ratios

Table 4 below incorporates the values assigned to parcels in Zone A and Zone B in the LimitedAppraisal Report, the estimated principal amount of the Bonds allocable to such parcels and the estimatedappraised value-to-lien ratios for such parcels based on the Limited Appraisal Report. Table 4 calculates theappraised value-to-lien ratios based only upon the principal amount of the Bonds and does not include theoverlapping general obligation debt described in Table 2 above. The estimated appraised District-wide value-to-lien ratio including all Developed Property and Undeveloped Property as of December 1, 2011, andincluding the Bonds in such calculation is 7.24-to-1. However, the estimated appraised value-to-lien ratiowithin the District including only property classified as Developed Property as of December 1, 2011 andincluding the Bonds in such calculation is 7.16-to-1. See Table 4 below. In the Annual Reports providedpursuant to the Continuing Disclosure Agreement, Table 4 will not be updated based on appraised value, butsimilar information will be provided based on current assessed value.

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TABLE 4COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THE

MORENO VALLEY UNIFIED SCHOOL DISTRICTESTIMATED APPRAISED VALUE-TO-LIEN RATIOS FOR TAXABLE PARCELS

IN THE DISTRICT AS OF DECEMBER 1, 2011BASED ON LIMITED APPRAISAL REPORT

Zone/Type(1)

Numberof

Parcels

Fiscal Year2011-12

Actual SpecialTax

Percentage ofFiscal Year

2011-12 ActualSpecial Tax

BondsOutstanding(2)

Total AppraisedValue(3)

EstimatedAppraisedValue-to-

LienRatio(4)

Zone A Developed 205 $435,178 66.5% $6,062,884 $43,740,000 7.21:1Zone B Developed 129 219,073 33.5 3,052,116 21,480,000 7.04:1Zone C Undeveloped 274(5) -- -- -- 800,000 N/A

Total 608 $654,251 100.0% $9,115,000 $66,020,000 7.24:1

(1) Pursuant to the Rate and Method, property is classified as Developed Property if a building permit was issued as of May 1,2011. Property is classified as Undeveloped Property for Fiscal Year 2011-12 if no building permit has been issued as ofMay 1, 2011.

(2) Reflects the Bonds to be issued, allocated based on the actual Fiscal Year 2011-12 levy. For purposes of this Table 4, thegeneral obligation debt as shown in Table 2 for Metropolitan Water District, Riverside Community College District, theSchool District, and Eastern Municipal Water District Improvement District No. U-22 is not included.

(3) Minimum Market Value based on the Limited Appraisal Report.(4) Aggregate appraised value to lien ratio. Ratio calculated by dividing Total Appraised Value column by the sum of the

Bonds Outstanding column.(5) Consisting of an aggregate of 29.08 gross acres.Source: Special District Financing & Administration LLC.

Largest Taxpayers

Table 5 below lists the property taxpayers within the District measured by the percentage of FiscalYear 2011-12 Special Tax levy. Based on the ownership status as of January 13, 2012, assuming no additionalsales within the District, the top two taxpayers will be responsible for approximately 3.37% of the Fiscal Year2011-12 Special Tax levy, with no other taxpayer responsible for more than 0.65% of such levy.

TABLE 5COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THE

MORENO VALLEY UNIFIED SCHOOL DISTRICTTOP TAXPAYERS(1)

Property Owner (1)Number of

Parcels TaxedFiscal Year 2011-12Actual Special Tax

Percentage of Fiscal Year2011-12 Special Tax

Federal National Mortgage Assn 7 $14,435.16 2.21%Back Home Loans Servicing 4 7,642.12 1.17Individual Owners(2) 323 632,173.78 96.63Total 334 $654,251.06 100.00%

(1) Based on Ownership information as of January 13, 2012, as provided by the Riverside County Tax Assesor.(2) No more than two parcels are attributed to each of the remaining owners; and no such owner represents more than 0.65% of

the total levy.Source: Special District Financing & Administration LLC.

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THE MORENO VALLEY UNIFIED SCHOOL DISTRICT

The information in this section concerning the operations of the School District is provided assupplementary information only, and it should not be inferred from the inclusion of this information in thisOfficial Statement that the principal of or interest on the Bonds is payable from the general fund, or any otherfunds, of the School District. See “SOURCES OF PAYMENT FOR THE BONDS.”

Introduction

The School District was organized as a unified school district of the State in 1962 and provides publiceducation for grades kindergarten through twelve within an area of approximately forty-three square mileslocated in the County. During the 2010-11 fiscal year, the School District operated twenty-three elementaryschools (with total enrollment of 16,278 students), six middle schools (with total enrollment of 8,240 students),five high schools (with total enrollment of 10,583 students), one charter school (with enrollment of 127students), and three other alternative schools (with total enrollment of 960 students). Total enrollment for theSchool District is projected to be 35,896 in Fiscal Year 2011-12.

Unless otherwise indicated, the following financial, statistical and demographic data has beenprovided by the School District. Additional information concerning the School District and copies of the mostrecent and subsequent audited financial reports of the School District may be obtained by contacting: MorenoValley Unified School District, 2564 Alessandro Boulevard, Moreno Valley, California 92553, telephone(951) 571-7500, Attention: Chief Business Official.

Administration

The School District is governed by a five-member Board of Education (the “Board”), each member ofwhich is elected to a four-year term. Elections for positions to the Board are held every two years, alternatingbetween two and three available positions. Current members of the Board, together with their office and thedate their current term expires, are listed below:

MORENO VALLEY UNIFIED SCHOOL DISTRICTBoard of Education

Name Office Current Term Expires

Tracey B. Vackar President December, 2012Cleveland Johnson Vice President December, 2014Jesus M. Holguin Clerk December, 2014Mike Rios Member December, 2014Rick Sayre Member December, 2012

The Superintendent of the School District is responsible for administering the affairs of the SchoolDistrict in accordance with the policies of the Board. Brief biographies of the Superintendent and the ChiefBusiness Official of the School District are listed below:

Judy D. White, Ed.D., Superintendent. Dr. Judy D. White began her tenure as the Superintendent ofMoreno Valley Unified School District on February 14, 2011. She has over 33 years of experience ineducation, most recently as the Deputy Superintendent of the San Bernardino City Unified School District. Dr.White earned a B.A. in Sociology from Occidental College, an M.A. in Education from California StateUniversity San Bernardino and an Ed.D. in Educational Leadership from Azusa-Pacific University.

Mays Kakish, Chief Business Official. Mays Kakish was appointed Chief Business Official of theSchool District effective April 4, 2011. Ms. Kakish previously served as the Assistant Superintendent,Business Services of the Beaumont Unified School District for five years. She has over 11 years experience in

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public education. Ms. Kakish holds a B.S. from California State University San Bernardino, San Bernardino,California.

Average Daily Attendance

The following table shows the average daily attendance (“A.D.A.”) for the School District over thelast seven Fiscal Years and projected A.D.A. for the current Fiscal Year.

MORENO VALLEY UNIFIED SCHOOL DISTRICTAverage Daily Attendance

Fiscal Years 2004-05 Through 2011-12

Fiscal YearAverage Daily

Attendance

2004-05 34,1312005-06 34,3852006-07 34,7552007-08 34,5622008-09 33,8992009-10 34,1572010-11 33,0502011-12(1) 33,039

(1) Projected.Source: The School District.

General Economic and Demographic Information Regarding the School District

See Appendix D – “GENERAL INFORMATION CONCERNING THE REGION” hereto for generalinformation regarding the economy in the region of the District, including data concerning the City of MorenoValley and the County of Riverside.

SPECIAL RISK FACTORS

The purchase of the Bonds involves significant risks that are not appropriate investments for certaininvestors. The following is a discussion of certain risk factors which should be considered, in addition to othermatters set forth herein, in evaluating the investment quality of the Bonds. The Bonds have not been rated by arating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be acomplete statement of all factors which may be considered as risks in evaluating the credit quality of theBonds. The occurrence of one or more of the events discussed herein could adversely affect the ability orwillingness of property owners in the District to pay their Special Taxes when due. Such failures to paySpecial Taxes could result in the inability of the District to make full and punctual payments of debt service onthe Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect thevalue of the property in the District and the value of the Bonds in the secondary market. See “– Land Values”and “– Limited Secondary Market.”

Risks of Real Estate Secured Investments Generally

The Bond owners 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 District, the supply of or demand for competitive propertiesin such area, and the market value of residential property or buildings and/or sites in the event of sale orforeclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including,

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without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscalpolicies; and (iii) natural disasters (including, without limitation, earthquakes, fires and floods), which mayresult in uninsured losses.

No assurance can be given that the individual homeowners will pay Special Taxes in the future or thatthey will be able to pay such Special Taxes on a timely basis. See “– Bankruptcy and Foreclosure” below, fora discussion of certain limitations on the School District’s ability to pursue judicial proceedings with respect todelinquent parcels.

Risks Related to Current Market Conditions

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

Economic Uncertainty

The Bonds are being issued at a time of economic uncertainty and volatility. Unemployment rateshave (i) decreased to approximately 15.8% for the City of Moreno Valley as of October 2011 (not seasonallyadjusted) as compared to 16.9% for calendar year 2010 (not seasonally adjusted) and (ii) decreased toapproximately 13.7% (not seasonally adjusted) for Riverside County as of October 2011 as compared to 14.7%for calendar year 2010 (not seasonally adjusted). The District cannot predict how long these conditions willlast or whether to what extent they may affect the ability of homeowners to pay Special Taxes or themarketability of the Bonds.

State Budget

As a result of the slow State and United States of America economies, the State is experiencingserious budgetary shortfalls for the current and prior fiscal years. The effect of the State revenue shortfalls onthe local or State economy or on the demand for, or value of, the property within the Community FacilitiesDistrict cannot be predicted.

Limited Obligations

The Bonds and interest thereon are not payable from the general funds of the School District. Exceptwith respect to the Special Taxes, neither the faith and credit nor the taxing power of the District or the SchoolDistrict is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the FiscalAgent Agreement, no owner of the Bonds may compel the exercise of any taxing power by the District or theSchool District or force the forfeiture of any School District or District property. The principal of, premium, ifany, and interest on the Bonds are not a debt of the School District or a legal or equitable pledge, charge, lienor encumbrance upon any of the School District’s or the District’s property or upon any of the SchoolDistrict’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged underthe Fiscal Agent Agreement.

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Insufficiency of Special Taxes

Under the Rate and Method, the annual amount of Special Tax to be levied on each taxable parcel inthe District will generally be based on the land use class to which a parcel of Developed Property is assigned.See Appendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” and “SOURCESOF PAYMENT FOR THE BONDS – Special Taxes.”

The Bonds have been sized to produce debt service coverage on the Bonds from Assigned SpecialTaxes from Developed Property within Zone A and Zone B the District of at least 110%, net of the $33,784.87Administrative Expenses Requirement escalating 2% each fiscal year beginning in Fiscal Year 2012-13.Additionally, if necessary due to delinquencies, extraordinary Administrative Expenses or otherwise, SpecialTaxes up to the maximum Special Taxes could be levied on Undeveloped Property within the District,including Zone C. Notwithstanding that the maximum Special Taxes that may be levied in the District exceedsdebt service due on the Bonds, the Special Taxes collected could be inadequate to make timely payment ofdebt service either because of nonpayment or because property becomes exempt from taxation as permitted inthe Rate and Method.

In addition, the District may issue Additional Bonds, in an amount up to $15,885,000 which would beentitled to a lien on the Special Taxes secured on a parity with the Bonds. Any such issuance of AdditionalBonds may reduce the amount of Special Taxes available to pay debt service on the Bonds. See “SOURCESOF PAYMENT FOR THE BONDS – Issuance of Additional Bonds.”

In order to pay debt service on the Bonds, it is necessary that the Special Taxes be paid in a timelymanner. Should the Special Taxes not be paid on time, the District has established a Reserve Fund in anamount equal to the Reserve Requirement to pay debt service on the Bonds to the extent other funds are notavailable. See “SOURCES OF PAYMENT FOR THE BONDS – Reserve Fund.” The District has covenantedto maintain in the Reserve Fund an amount equal to the Reserve Requirement subject, however, to thelimitation that the District may not levy the Special Tax in the District in any fiscal year at a rate in excess ofthe maximum amounts permitted under the Rate and Method, as permanently reduced pursuant to ResolutionNo. 2011-12-15. As a result, if a significant number of delinquencies occurs, the District could be unable toreplenish the Reserve Fund to the Reserve Requirement due to the limitations on the maximum Special Tax. Ifsuch defaults were to continue in successive years, the Reserve Fund could be depleted and a default on theBonds could occur.

The District has covenanted that, under certain conditions, it will institute foreclosure proceedings tosell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. Ifforeclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not berequired to, advance the amount of the delinquent Special Tax to protect its security interest. See “SOURCESOF PAYMENT FOR THE BONDS – Proceeds of Foreclosure Sales” for provisions which apply in the eventof such foreclosure and which the District is required to follow in the event of delinquencies in the payment ofthe Special Tax.

In the event that sales or foreclosures of property are necessary, there could be a delay in payments toowners of the Bonds (if the Reserve Fund has been depleted) pending such sales or the prosecution of suchforeclosure proceedings and receipt by the District on behalf of the District of the proceeds of sale. TheDistrict may adjust the future Special Tax levied on taxable parcels in the District, subject to the limitation onthe maximum Special Tax, to provide an amount required to pay interest on, principal of, and redemptionpremiums, if any, on the Bonds, and the amount, if any, necessary to replenish the Reserve Fund to an amountequal to the Reserve Requirement and to pay all current expenses. There is, however, no assurance that thetotal amount of the Special Tax that could be levied and collected against taxable parcels in the District will beat all times sufficient to pay the amounts required to be paid by the Fiscal Agent Agreement, even if theSpecial Tax is levied at the maximum Special Tax rates. See “– Bankruptcy and Foreclosure” for a discussionof potential delays in foreclosure actions.

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The Rate and Method governing the levy of the Special Tax expressly exempts certain property ownedby public agencies and other exempt entities in the District. See “SOURCES OF PAYMENT FOR THEBONDS – Special Taxes – Developed and Undeveloped Property; Exempt Property” and Section E ofAppendix A – “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” If for any reasonproperty within the District becomes exempt from taxation by reason of ownership by a non-taxable entitysuch as the federal government or another public agency, subject to the limitations of the maximum authorizedrates, the Special Tax will be reallocated to the remaining taxable properties within the District. This wouldresult in the owners of such property paying a greater amount of the Special Tax and could have an adverseimpact upon the ability and willingness of the owners of such property to pay the Special Tax when due.

The Act provides that, if any property within the District not otherwise exempt from the Special Tax isacquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continueto be levied on and enforceable against the public entity that acquired the property. In addition, the Actprovides that, if property subject to the Special Tax is acquired by a public entity through eminent domainproceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were aspecial assessment and be paid from the eminent domain award. The constitutionality and operation of theseprovisions of the Act have not been tested in the courts. Due to problems of collecting taxes from publicagencies, if a substantial portion of land within the District was to become owned by public agencies,collection of the Special Tax might become more difficult and could result in collections of the Special Taxwhich might not be sufficient to pay principal of and interest on the Bonds when due and a default could occurwith respect to the payment of such principal and interest.

Natural Disasters

The District, like all California communities, may be subject to unpredictable seismic activity, fires,floods, or other natural disasters. Southern California is a seismically active area. Seismic activity representsa potential risk for damage to buildings, roads, bridges and property within the District. In addition, landsusceptible to seismic activity may be subject to liquefaction during the occurrence of such event. Accordingto the County, the property within the District is not located in an Alquist Priolo Earthquake Study Zone and isnot located within one-half mile of an active earthquake fault. The property within the District liesapproximately 3 miles from the San Jacinto Fault. Additionally, the District is not located in a flood plainarea.

In the event of a severe earthquake, fire, flood or other natural disaster, there may be significantdamage to both property and infrastructure in the District. As a result, a substantial portion of the propertyowners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in theDistrict could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds offoreclosure sales in the event of delinquencies in the payment of the Special Taxes.

Hazardous Substances

The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. Ingeneral, the owners and operators of a parcel may be required by law to remedy conditions of the parcelrelating to releases or threatened releases of hazardous substances. The Federal ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” orthe “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws withregard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operatoris obligated to remedy a hazardous substance condition of property whether or not the owner or operator hasanything to do with creating or handling the hazardous substance. The effect, therefore, should any of thetaxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by thecosts of remedying the condition, because the purchaser, upon becoming the owner, will become obligated toremedy the condition just as is the seller.

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Further, it is possible that liabilities may arise in the future with respect to any of the parcels resultingfrom the existence, currently, on the parcel of a substance presently classified as hazardous but which has notbeen released or the release of which is not presently threatened, or may arise in the future resulting from theexistence, currently on the parcel of a substance not presently classified as hazardous but which may in thefuture be so classified. Further, such liabilities may arise not simply from the existence of a hazardoussubstance but from the method of handling it. All of these possibilities could significantly affect the value of aparcel that is realizable upon a delinquency and the willingness or ability of the owner of any parcel to pay theSpecial Tax installments.

The value of the taxable property within the District, as set forth in the various tables in this OfficialStatement, does not reflect the presence of any hazardous substance or the possible liability of the owner (oroperator) for the remedy of a hazardous substance condition of the property. The District has notindependently verified, but is not aware, that any owner (or operator) of any of the parcels within the Districthas such a current liability with respect to any such parcel. However, it is possible that such liabilities docurrently exist and that the District is not aware of them.

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

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

Land Values

The value of the property within the District is a critical factor in determining the investment qualityof the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy isto commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay theSpecial Taxes. Reductions in property values due to a downturn in the economy, physical events such asearthquakes, fires or floods, stricter land use regulations, delays in development or other events will adverselyimpact the security underlying the Special Taxes. See “THE COMMUNITY FACILITIES DISTRICT –Estimated Value-to-Lien Ratios.”

The Appraiser has estimated, on the basis of certain definitions, assumptions and limiting conditionscontained in the Limited Appraisal Report, that as of December 1, 2011, the minimum market value of the landand improvements within Zone A and Zone B aggregated $65,220,000 and the minimum market value of theland and improvements within the District aggregated $66,020,000. The Limited Appraisal Report is based ona number of assumptions and limiting conditions as stated in Appendix B – “LIMITED APPRAISALREPORT.” The Limited Appraisal Report does not reflect any possible negative impact which could occurwith respect to property within the District by reason of an economic downturn, the presence of hazardoussubstances or other adverse soil conditions within the District, future slow or no growth voter initiatives, anypotential limitations on development occurring due to time delays, an inability of any landowner to obtain anyneeded development approval or permit, the listing of endangered species or the determination that habitat forendangered or threatened species exists within the District, or other similar situations.

Prospective purchasers of the Bonds should not assume that the land and improvements within theDistrict could be sold for the amount stated in the Limited Appraisal Report at a foreclosure sale for delinquentSpecial Taxes. In arriving at the estimate of market value, the Appraiser assumes that any sale will be sold in acompetitive market after a reasonable exposure time, and assuming that neither the buyer or seller is underduress, which is not always present in a foreclosure sale. See Appendix B for a description of otherassumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Anyevent which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value ofthe land within the District from that estimated by the Appraiser.

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The assessed values set forth in this Official Statement do not represent market values arrived atthrough an appraisal process and generally reflect only the sales price of a parcel when acquired by its currentowner, adjusted annually by an amount determined by the County Assessor, generally not to exceed anincrease of more than 2% per fiscal year. No assurance can be given that a parcel could actually be sold for itsassessed value.

No assurance can be given that any bid will be received for a parcel with delinquent Special Taxesoffered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquentSpecial Taxes. See Appendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENTAGREEMENT.”

Parity Taxes, Special Assessments and Land Development Costs

Property within the District is subject to taxes and assessments imposed by other public agencies alsohaving jurisdiction over the land within the District. See “THE COMMUNITY FACILITIES DISTRICT –Direct and Overlapping Indebtedness.”

The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of landon which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes andspecial assessments levied by other agencies and is co-equal to and independent of the lien for general propertytaxes regardless of when they are imposed upon the same property. The Special Taxes have priority over allexisting and future private liens imposed on the property except, possibly, for liens or security interests held bythe Federal Deposit Insurance Corporation. See “– Bankruptcy and Foreclosure.”

Neither the District nor the School District have control over the ability of other entities anddistricts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from allor a portion of the property within the District. In addition, the landowners within the District may,without the consent or knowledge of the District, petition other public agencies to issue publicindebtedness secured by special taxes and ad valorem taxes or assessments. Any such special taxes orassessments may have a lien on such property on a parity with the Special Taxes and could reduce theestimated value-to-lien ratios for the property within the District described herein. See “SOURCES OFPAYMENT FOR THE BONDS” and “THE COMMUNITY FACILITIES DISTRICT – Direct andOverlapping Indebtedness” and “– Estimated Value to Lien Ratios.”

Disclosures to Future Purchasers

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

The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospectivepurchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence andmaximum amount of such special tax using a statutorily prescribed form. California Civil CodeSection 1102.6b requires that in the case of transfers other than those covered by the above requirement, theseller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in aformat prescribed by statute. Failure by an owner of the property to comply with the above requirements, or

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failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, couldadversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Special Tax Delinquencies

Under provisions of the Act, the Special Taxes, from which funds necessary for the payment ofprincipal of, and interest on, the Bonds are derived, will be billed to the properties within the District on theregular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. The Actcurrently provides that such Special Tax installments are due and payable, and bear the same penalties andinterest for non-payment, as do ad valorem property tax installments.

See “SOURCES OF PAYMENT FOR THE BONDS – Proceeds of Foreclosure Sales” andAppendix E – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” for adiscussion of the provisions which apply, and procedures which the District is obligated to follow under theFiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See “– Bankruptcyand Foreclosure” for a discussion of the policy of the Federal Deposit Insurance Corporation regarding thepayment of special taxes and assessment and limitations on the District’s ability to foreclosure on the lien ofthe Special Taxes in certain circumstances.

FDIC/Federal Government Interests in Properties

The ability of the District to collect interest and penalties specified by the Act and to foreclose the lienof delinquent Special Taxes may be limited in certain respects with regard to parcels in which the FDIC, orother federal government entities such as Fannie Mae, Freddie Mac, the Drug Enforcement Agency, theInternal Revenue Service or other federal agency, has or obtains an interest.

In the case of the FDIC, in the event that any financial institution making a loan which is secured byparcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to theDistrict may be constrained. The FDIC’s policy statement regarding the payment of state and local realproperty taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by avalid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determinesthat abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally willnot pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest,nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where theResolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, thePolicy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDICwill not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDICpay or recognize liens for any penalties, fines or similar claims imposed for the non-payment of taxes.

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

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

In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by afederal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a

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

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interestin the parcel and the 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 pay delinquenttaxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgageinterest. For a discussion of risks associated with taxable parcels within the District becoming owned by thefederal government, federal government entities or federal government sponsored entities, see “– Insufficiencyof Special Taxes.”

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

Bankruptcy and Foreclosure

Bankruptcy, insolvency and other laws generally affecting creditors rights could adversely impact theinterests of owners of the Bonds in at least two ways. First, the payment of property owners’ taxes and theability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursuejudicial foreclosure 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 “SOURCES OF PAYMENTFOR THE BONDS – Proceeds of Foreclosure Sales.” In addition, the prosecution of a foreclosure could bedelayed due to many reasons, including crowded local court calendars or lengthy procedural delays.

Secondly, the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from beingapplied to pay the principal of and interest on the Bonds and/or to redeem Bonds and moneys on deposit in theRevenue Fund from being applied to pay debt service of on the Bonds if bankruptcy proceedings were broughtby or against property owner or their successors and if the court found that any of such landowners had aninterest in such moneys within the meaning of Section 541(a)(1) of the Bankruptcy Code.

Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, theamount and priority of any Special Tax lien could be modified if the value of the property falls below the valueof the lien. If the value of the property is less than the lien, such excess amount could be treated as anunsecured claim by the bankruptcy court. In addition, bankruptcy of a person or entity with an interest in theapplicable property could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delaywould increase the likelihood of a delay or default in payment of delinquent Special Tax installments and thepossibility of delinquent Special Tax installments not being paid in full.

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 valorem propertytaxes levied by Snohomish County in the State of Washington after the date that the property owner filed apetition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property.

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Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxesimposed after the filing of the bankruptcy petition were declared to be “administrative expenses” of thebankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose onthe property and retain all the proceeds of the sale except the amount of the pre-petition taxes.

The Bankruptcy Reform Act of 1994 (the “Bankruptcy Reform Act”) included a provision whichexcepts from the Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for anad valorem property tax imposed by . . . a political subdivision of a state if such tax comes due after the filingof the petition by a debtor in bankruptcy court.” This amendment effectively makes the Glasply holdinginoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale ofthe Glasply ruling could still result in the treatment of post-petition special taxes as “administrative expenses,”rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings.

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

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

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 the rightsof creditors generally.

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

No Acceleration Provision

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 or in the eventinterest on the Bonds becomes included in gross income for federal income tax purposes. Pursuant to theFiscal Agent Agreement, an owner is given the right for the equal benefit and protection of all owners of theBonds similarly situated to pursue certain remedies described in Appendix E – “SUMMARY OF CERTAINPROVISIONS OF THE FISCAL AGENT AGREEMENT.”

Loss of Tax Exemption

As discussed under the caption “TAX MATTERS” herein, interest on the Bonds could becomeincludable in gross income for purposes of federal income taxation retroactive to the date the Bonds wereissued as a result of future acts or omissions of the District in violation of its covenants in the Fiscal AgentAgreement with respect to compliance with certain provisions of the Internal Revenue Code of 1986. Shouldsuch an event of taxability occur, the Bonds are not subject to early redemption and will remain outstandinguntil maturity or until redeemed under the redemption provisions contained in the Fiscal Agent Agreement.

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IRS Audit of Tax-Exempt Bond Issues

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

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 District has committed toprovide certain statutorily required financial and operating information, there can be no assurance that suchinformation will be available to Bondowners on a timely basis. See “CONTINUING DISCLOSURE.” Anyfailure to provide annual financial information, if required, 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 a credit rating for the Bonds or because of adverse history or economic prospectsconnected with a particular issue, secondary marketing practices in connection with a particular issue aresuspended or terminated. Additionally, prices of issues for which a market is being made will depend uponthen prevailing circumstances. Such prices could be substantially different from the original purchase price.

Proposition 218

An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”) wasapproved by the voters of the State at the November 5, 1996 general election. The Initiative addedArticle XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary” of theInitiative prepared by the California Attorney General, the Initiative limits “the authority of local governmentsto impose taxes and property-related assessments, fees and charges.” The provisions of the Initiative as theymay relate to community facilities district are subject to interpretation by the courts. The Initiative couldpotentially impact the Special Taxes available to the District to pay the principal of and interest on the Bondsas described below.

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 or charge.”The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter therate and method of apportionment of an existing special tax. However, the Act prohibits a legislative bodyfrom adopting any resolution to reduce the rate of any special tax or terminate the levy of any special taxpledged to repay any debt incurred pursuant to the Act unless such legislative body determines that thereduction or termination of the special tax would not interfere with the timely retirement of that debt. OnJuly 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854,which states that:

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

Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferredon the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timelyretirement of the Bonds.

It may be possible, however, for voters or the Board of Education acting as the legislative body of theDistrict to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the

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Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below theexisting levels. 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. Therefore, no assurancecan be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to themaximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedingsunder the Act to reduce the maximum Special Tax rates on parcels of Developed Property within the District.In connection with the foregoing covenant, the Board of Education has made a legislative finding anddetermination that any elimination or reduction of Special Taxes below the foregoing level would interferewith the timely retirement of the Bonds. The District also has covenanted that, in the event an initiative isadopted which purports to alter the Rate and Method, it will commence and pursue legal action in order topreserve its ability to comply with the foregoing covenant. However, no assurance can be given as to theenforceability of the foregoing covenants.

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

Ballot Initiatives

Articles XIII A, XIII B, XIII C and XIII D were adopted pursuant to measures qualified for the ballotpursuant to California’s constitutional initiative process and the State Legislature has in the past enactedlegislation which has altered the spending limitations or established minimum funding provisions for particularactivities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative canrepeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from thereferendum requirements does not apply to initiatives. From time to time, other initiative measures could beadopted by California voters or legislation enacted by the legislature. The adoption of any such initiative orlegislation might place limitations on the ability of the State, the School District, or local districts to increaserevenues or to increase appropriations or on the ability of the Developers within the District to complete theremaining proposed development within the District.

Limitations on Remedies

Remedies available to the owners of the Bonds 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-exemptstatus of interest on the Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal AgentAgreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization,fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement ofcreditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations onremedies against public agencies in the State of California. The Bonds are not subject to acceleration. Thelack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation ormodification of the rights of the owners.

CONTINUING DISCLOSURE

Pursuant to a Continuing Disclosure Agreement with Special District Financing & AdministrationLLC, as dissemination agent, the District has agreed to provide, or cause to be provided, to the ElectronicMunicipal Market Access System of the Municipal Securities Rulemaking Board, which can be found atwww.emma.msrb.org, on an annual basis by March 1 of each fiscal year beginning March 1, 2012 certainfinancial information and operating data concerning the District. The District has further agreed to providenotice to EMMA of certain listed events. These covenants have been made in order to assist the Underwriter

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in complying with Rule 15c2-12 adopted by the SEC. The inclusion of this information does not mean that theBonds are secured by any resources or property of the School District or the District other than Net Taxes andother amounts held under the Fiscal Agent Agreement. See “SOURCES OF PAYMENT FOR THE BONDS”and “SPECIAL RISK FACTORS – Limited Obligations.” The District has never before been subject to anyundertaking to provide annual reports or notices of specified events pursuant to Rule 15c2-12. The SchoolDistrict has, in the past, failed to timely file certain information required in annual reports or notices ofsignificant events as required under prior undertakings pursuant to Rule 15c2-12. The School District hassince filed all such information and notices and is current with respect to its obligations entered into inconnection with Rule 15c2-12. The full text of the Continuing Disclosure Agreement is set forth inAppendix F.

TAX MATTERS

Opinion of Bond Counsel

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 courtdecisions, and assuming, among other matters, the accuracy of certain representations and compliance withcertain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes underSection 103 of the Internal Revenue Code of 1986, as amended (the “Code”). In the further opinion of BondCounsel interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimumtaxes imposed on individuals and corporations, although Bond Counsel observes that such interest is includedas an adjustment in the calculation of federal corporate alternative minimum taxable income and may thereforeaffect a corporation’s alternative minimum tax liabilities.

The opinions of Bond Counsel set forth in the preceding paragraph are subject to the condition that theDistrict complies with all requirements of the Code, that must be satisfied subsequent to the issuance of theBonds in order that such interest be, or continue to be, excluded from gross income for federal income taxpurposes. The District has covenanted to comply with each such requirement. Failure to comply with certainof such requirements may cause the inclusion of such interest in gross income for federal income tax purposesto be retroactive to the date of issuance of the Bonds. The Fiscal Agent Agreement and other relateddocuments refer to certain requirements, covenants and procedures which may be changed and certain actionsthat may be taken, upon the advice or with an opinion of nationally recognized bond counsel. No opinion isexpressed by Bond Counsel as to the effect on any Bond or the interest thereon if any such change is made oraction is taken upon the advice or approval of counsel other than Bond Counsel.

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

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

See Appendix C – “FORM OF OPINION OF BOND COUNSEL” for the proposed form of theopinion 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 any of the District, the School District, asapplicable, or the Owners regarding the tax-exempt status of the Bonds in the event of an audit examination bythe Internal Revenue Service. Under current procedures, parties other than the District or the School District,as applicable, including the Owners, would have little, if any, right to participate in the audit examinationprocess. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt

44

Bonds is difficult, obtaining an independent review of Internal Revenue Service positions with which theDistrict legitimately disagrees may not be practicable. Any action of the Internal Revenue Service, includingbut not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of Bondspresenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may causethe District, School District or the Owners to incur significant expense.

Original Issue Discount; Premium Bonds

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid atmaturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term ofsuch Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properlyallocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income forfederal income tax purposes and State of California personal income taxes. For this purpose, the issue price ofa particular maturity of the Bonds is in 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 in thecapacity of underwriters, placement agents or wholesalers). The original issue discount with respect to anymaturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interestrate compounded semiannually (with straight-line interpolations between compounding dates). The accruingoriginal issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upondisposition (including sale, redemption, or payment on maturity) of such Bonds. Owners of the Bonds shouldconsult their own tax advisors with respect to the tax consequences of ownership of the Bonds with originalissue discount, including the treatment of purchases who do not purchase such Bonds in the original offering tothe public at the first price at which a substantial amount of such Bonds is sold to the public.

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

Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption

Future legislative proposals, if enacted into law, clarification of the Code or court decisions may causeinterest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to orexempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full currentbenefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals,clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds.Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposedfederal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion.

IRS Audit of Tax-Exempt Bond Issues

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

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Information Reporting and Backup Withholding

Information reporting requirements apply to interest (including original issue discount) paid afterMarch 31, 2007, on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied ifthe interest recipient completes, and provides the payor with, a Form W-9, “Request for TaxpayerIdentification Number and Certification,” or unless the recipient is one of a limited class of exempt recipients,including corporations. A recipient not otherwise exempt from information reporting who fails to satisfy theinformation reporting requirements will be subject to “backup withholding,” which means that the payor isrequired to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code.For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives itspayments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connectionwith the establishment of such account, as generally can be expected, no backup withholding should occur. Inany event, backup withholding does not affect the excludability of the interest on the Bonds from gross incomefor Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed asa refund or a credit against the owner’s federal income tax once the required information is furnished to theInternal Revenue Service. Bond Counsel provides no opinion concerning such reporting or withholding withrespect to the Bonds.

LEGAL MATTERS

The legal opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel,approving the validity of the Bonds in substantially the form set forth as Appendix C hereto, will be madeavailable to purchasers at the time of original delivery. Certain legal matters will be passed upon for theDistrict by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, asDisclosure Counsel and for the Underwriter by McFarlin & Anderson LLP, Laguna Hills, California, ascounsel to the Underwriter. Bond Counsel and Disclosure Counsel express no opinion to the owners of theBonds as to the accuracy, completeness or fairness of this Official Statement or other offering materialsrelating to the Bonds and expressly disclaim any duty to advise the Owners of the Bonds as to matters relatedto the Official Statement.

ABSENCE OF LITIGATION

No litigation is pending or threatened concerning the validity of the Bonds and a certificate of theDistrict to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds.Neither the School District nor the District is aware of any litigation pending or threatened which questions theexistence of the District or the School District or contests the authority of the District to levy and collect theSpecial Taxes or to issue and retire the Bonds.

NO RATING

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

UNDERWRITING

The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated dba Stone &Youngberg, a Division of Stifel Nicolaus (the “Underwriter”). The Underwriter has agreed to purchase theBonds at a price of $8,864,019.70 (being $9,115,000.00 aggregate principal amount thereof, less original issuediscount of $114,255.30 and less Underwriter’s discount of $136,725.00). The purchase agreement relating tothe Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to

46

make such purchase is subject to certain terms and conditions set forth in the purchase agreement, the approvalof certain legal matters by counsel and certain other conditions.

The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than theoffering price stated on the cover page thereof. The offering price may be changed from time to time by theUnderwriter.

FINANCIAL INTERESTS

The fees being paid to the Underwriter, Bond Counsel, the Fiscal Agent and Underwriter’s Counselare contingent upon the issuance and delivery of the Bonds. The fees being paid to the Appraiser and to theSpecial Tax Consultant are not contingent upon the issuance and delivery of the Bonds. From time to time,Disclosure Counsel represents the Underwriter on matters unrelated to the Bonds.

PENDING LEGISLATION

The District is not aware of any significant pending legislation which would have material adverseconsequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds whendue.

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ADDITIONAL INFORMATION

The purpose of this Official Statement is to supply information to prospective buyers of the Bonds.Quotations and summaries and explanations of the Bonds and documents contained in this Official Statementdo not purport to be complete, and reference is made to such documents for full and complete statements andtheir provisions. Any statements in this Official Statement involving matters of opinion, whether or notexpressly so stated, are intended as such and not as representations of fact.

The execution and delivery of this Official Statement by the Superintendent of the School District hasbeen duly authorized by the Board of Education of the Moreno Valley Unified School District acting in itscapacity as the legislative body of the District.

COMMUNITY FACILITIES DISTRICT NO. 2005-5 OFTHE MORENO VALLEY UNIFIED SCHOOLDISTRICT

By: /s/ Judy D. White, Ed.D.Superintendent of the

Moreno Valley Unified School District

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A-1

APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX

The following sets forth the Rate and Method of Apportionment for the levy and collection of SpecialTaxes of Community Facilities District No. 2005-5 of the Moreno Valley Unified School District (the“District”). An Annual Special Tax shall be levied on and collected in the District each Fiscal Year, in anamount determined through the application of the Rate and Method of Apportionment described below. All ofthe real property in the District, unless exempted by law or by the provisions hereof, shall be taxed for thepurposes, to the extent, and in the manner herein provided. Note that Resolution No. 2011-12-15 permanentlyreduced the special taxes to be levied within the District, as described in the Official Statement to which thisappendix is attached under the heading “SOURCES OF PAYMENT FOR THE BONDS – Special Taxes.”

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Moreno Valley Unified School District Final – June 6, 2006 Community Facilities District No. 2005-5 Page 1

RATE AND METHOD OF APPORTIONMENT FOR MORENO VALLEY UNIFIED SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2005-5

A Special Tax as hereinafter defined shall be levied on all Assessor's Parcels within Community Facilities District No. 2005-5 ("CFD No. 2005-5") of the Moreno Valley Unified School District (“School District”) and collected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount determined by the School District, through the application of this Rate and Method of Apportionment as described below. All of the real property within CFD No. 2005-5, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS

The terms hereinafter set forth have the following meanings: “Acre or Acreage” means the acreage of an Assessor's Parcel as shown on an Assessor's Parcel Map. If the acreage is not shown on an Assessor's Parcel Map, the acreage shown on the applicable Final Map, parcel map, condominium plan, or other recorded County map shall be used. If the acreage information supplied by these alternative sources is not available, or in conflict, the acreage used shall be determined by the Assistant Superintendent of Business Services or a designee. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California. “Administrative Expenses” means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2005-5: for the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the School District or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the School District, CFD No. 2005-5 or any designee thereof of complying with arbitrage rebate requirements; the costs to the School District, CFD No. 2005-5 or any designee thereof of complying with School District’s, CFD No. 2005-5’s or obligated persons’ disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the cost associated with the computation of the Backup Special Tax; the costs of the School District, CFD No. 2005-5 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the School District’s annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated or advanced by the School District or CFD No. 2005-5 for any other administrative purposes of CFD No. 2005-5, including attorney's fees and other costs

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related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's parcel number. "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. “Assistant Superintendent of Business Services” means the Assistant Superintendent of Business Services of the Moreno Valley Unified School District or his or her designee. “Assigned Special Tax” means the Special Tax for each Assessor's Parcel of Developed Property, as determined in accordance with Section C.1.b below. “Backup Special Tax” means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.1.c below. “Bonds” means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 2005-5, under the Act which are secured by the levy of Special Taxes of CFD No. 2005-5. "CFD No. 2005-5" means the Moreno Valley Unified School District Community Facilities District No. 2005-5. “City” means the City of Moreno Valley. “County” means the County of Riverside. “Developed Property” means, for each Fiscal Year, all Taxable Property for which a building permit for new construction was issued prior to May 1st of the prior Fiscal Year. “Final Map” means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.), an applicable local ordinance or recordation of a condominium plan pursuant to California Civil Code 1352 that creates individual lots for which building permits may be issued without further subdivision. “Fiscal Year” means the period starting July 1 and ending on the following June 30.

“Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time.

“Land Use Category” means any of the categories listed in Table 1.

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“Maximum Special Tax” means the Maximum Special Tax, determined in accordance with Section C, below, that shall be levied in any Fiscal Year on any Assessor's Parcel. “Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit was issued for any type of non-residential use. “Outstanding Bonds” means all Bonds which are deemed to be outstanding under the Indenture. “Property Owner Association Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 2005-5 that is owned by or irrevocably dedicated to a property owner association, including any master or sub-association as shown on the equalized roll of the County which is available on or about July 1st of the Fiscal Year. “Proportionately” means, for Developed Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor's Parcels of Developed Property whose Maximum Special Tax is derived by the application of the Backup Special Tax. For Undeveloped Property "Proportionately" means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor's Parcels of Undeveloped Property.

“Public Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 2005-5 that is (i) used for rights-of-way or any other purpose and is owned by or irrevocably offered for dedication to the federal government, the State of California, the County, the City or any other public agency as shown on the equalized roll of the County which is available on or about July 1st of the Fiscal Year or (ii) encumbered by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement as shown on the equalized roll of the County which is available on or about July 1st of the Fiscal Year, provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified in a Land Use Category in accordance with its zoning or use whichever is greater. “Residential 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 dwelling units. “School District” means the Moreno Valley Unified School District. “Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property in accordance with Section D. “Special Tax Requirement” means that amount required in any Fiscal Year for CFD No. 2005-5 to: (i) pay debt service on all Outstanding Bonds due in the calendar year that commences in such Fiscal Year; (ii) pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all

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Outstanding Bonds; (v) pay directly for acquisition or construction of school facilities to accommodate students from development in CFD No. 2005-5 eligible under the Act as reasonably determined by the District so long as the inclusion of such amount does not cause an increase in the Special Tax attributable to Undeveloped Property; (vi) pay for reasonably anticipated delinquent Special Taxes based on the delinquency rate of Special Taxes within CFD No. 2005-5, levied in the previous Fiscal Year, less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the Assistant Superintendent of Business Services pursuant to the Indenture. "State" means the State of California. “Taxable Property” means all of the Assessor's Parcels within the boundaries of CFD No. 2005-5 which have not been prepaid pursuant to Section J or, which are not exempt from the Special Tax pursuant to law or Section E below. “Trustee” means the trustee or fiscal agent under the Indenture. “Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property as shown on the equalized roll of the County which is available on or about July 1st of the Fiscal Year. “Zone” means the area(s) identified as a Zone of CFD No. 2005-5 as in Exhibit C to the Special Tax Report and as shown on the boundary map. “Zone A” means all property located within the area identified as Zone A of CFD No. 2005-5 and as shown on the boundary map of CFD No. 2005-5 “Zone B” means all property located within the area identified as Zone B of CFD No. 2005-5 and as shown on the boundary map of CFD No. 2005-5. “Zone C” means all property located within the area identified as Zone C of CFD No. 2005-5 and as shown on the boundary map of CFD No. 2005-5.

B. ASSIGNMENT TO LAND USE CATEGORIES

Each Fiscal Year, all Taxable Property within CFD No. 2005-5 shall be classified within each Zone as Developed Property or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D below. Assessor’s Parcels of Developed Property shall further be classified as Residential Property or Non-Residential Property.

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C. MAXIMUM SPECIAL TAX RATE 1. Developed Property

a. Maximum Special Tax

The Maximum Special Tax for each Assessor's Parcel of Residential Property that is classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. The Maximum Special Tax for each Assessor’s Parcel of Non-Residential Property shall be the Assigned Special Tax described in Table 1.

b. Assigned Special Tax

The Assigned Special Tax for each Assessor’s Parcel of Developed Property is shown in Table 1 below.

TABLE 1

Assigned Special Taxes for Developed Property Fiscal Year 2005/2006

Land Use Category Taxable Unit Assigned Special Tax Per Taxable Unit

Zone A – Tract 32834 1 - Residential Property D/U $1, 885.00 2 - Non - Residential Property Acre $11,978.46

Zone B – Tract 32836 1 - Residential Property D/U $1,508.00

2 - Non - Residential Property Acre $16,886.46

Zone C – Tract 32835

1 - Residential Property D/U $1,070.00

2 - Non - Residential Property Acre $38,075.32

c. Backup Special Tax

When a Final Map is recorded within CFD No. 2005-5 the Backup Special Tax for the Assessor’s Parcels of Residential Property within such Final Map area shall be determined. The owner of the property within the Final Map area shall provide the Assistant Superintendent of Business Services a copy of the recorded Final Map and a listing of the square footage of all lots within such Final Map prior to the first request for a certificate of compliance from the School District.

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The Backup Special Tax per Assessor’s Parcel of Residential Property within a Final Map shall be determined by multiplying $11,978.46 for Zone A, $16,886.46 for Zone B, and $38,075.32 for Zone C for Fiscal Year 2005/2006 by the total Acreage of Taxable Property, excluding the Acreage associated with Non-Residential Property, Public Property and Property Owner’s Association Property in such Final Map and dividing such amount by the number of Assessor’s Parcels that are or are expected to be Residential Property (i.e., the number of residential lots or dwelling units) within such Final Map. Table 2 below provides the projected Backup Special Tax for Fiscal Year 2005/2006 for Tract 32835 and the actual Backup Special Tax for Tracts 32834 and 32836. The actual Backup Special Tax for Tract 32835 will be calculated at the time the Final Map is recorded as described above.

TABLE 2

Backup Special Taxes Fiscal Year 2005/2006

Zone and Tract

Map Status

Projected Final Map Acreage of

Taxable Property

Actual Backup

Special Tax per Lot or Dwelling

Unit*

Projected Backup Special Tax per Lot or

Dwelling Unit*

Actual /

Projected Number

of Dwelling

Units Zone A –

Tract 32834 Final Map 35.84 $2,094.18 205

Zone B – Tract 32836

Final Map 12.80 $1,675.56 129

Zone C –Tract 32835

Tentative 8.56 $1,189.57 274

Total 608 * Note: The Backup Special Tax per lot or dwelling unit shown may be modified as described below. Notwithstanding the foregoing, if all or any portion of the Final Map(s) described in the preceding paragraph is subsequently changed or modified, then the Backup Special Tax for each Assessor’s Parcel of Residential Property in such Final Map area that is changed or modified shall be a rate per square foot of Acreage calculated as follows:

1. Determine the total Backup Special Taxes anticipated to apply to the

changed or modified Final Map area prior to the change or modification. 2. The result of paragraph 1 above shall be divided by the total Acreage of

Taxable Property excluding the Acreage associated with Non-Residential Property, Public Property and Property Owner Association Property which is ultimately expected to exist in such changed or modified Final Map area,

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as reasonably determined by the Assistant Superintendent of Business Services.

3. The result of paragraph 2 above shall be divided by 43,560. The result is

the Backup Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property classified as Residential Property in such changed or modified Final Map area for all remaining Fiscal Years in which the Special Tax may be levied.

d. Escalation

Commencing in January of 2006 to be effective for Fiscal Year 2006/2007, the Assigned Special Taxes and the Backup Special Tax shall escalate by two percent (2%) annually and annually thereafter.

2. Undeveloped Property

a. Maximum Special Tax

The Maximum Special Tax for Undeveloped Property within CFD 2005-5 shall be $11,978.46 per Acre for Zone A, $16,886.46 per Acre for Zone B and $38,075.32 per Acre for Zone C.

b. Escalation

Commencing in January of 2006 to be effective for Fiscal Year 2006/2007, the Maximum Special Tax for Undeveloped Property shall escalate by two percent (2%) annually and annually thereafter.

D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

Commencing with Fiscal Year 2006/2007 and for each following Fiscal Year, the School District shall levy the Special Tax as follows:

First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property at the applicable Assigned Special Tax; Second: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property including Public Property and Property Owner Association Property which is not then exempt at up to 100% of the Maximum Special Tax for Undeveloped Property;

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Third: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax as to each such Assessor's Parcel.

E. EXEMPTIONS

Tax exempt status will be irrevocably assigned by the Assistant Superintendent of Business Services in the chronological order in which property becomes Public Property or Property Owner Association Property provided however, that no such classification shall reduce the sum of all Taxable Property to less than 32.26 Acres in Zone A, 11.52 Acres in Zone B, and 7.70 Acres in Zone C. Property that is not exempt from Special Taxes under this section shall be required to prepay the Special Tax in full at the then applicable rate per Acre per Zone for Undeveloped Property pursuant to Section J.1. In the event the prepayment is not made pursuant to the preceding sentence, the Assessor’s Parcels will be subject to taxation as Undeveloped Property pursuant to the second step of Section D.

F. APPEAL

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Assistant Superintendent of Business Services not later than twelve months after having paid the first installment of the Special Tax that is disputed. The Assistant Superintendent of Business Services shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the Assistant Superintendent of Business Service’s decision requires that the Special Tax for an Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s).

G. MANNER OF COLLECTION

The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 2005-5 may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act.

H. EXCESS ASSIGNED ANNUAL SPECIAL TAX FROM DEVELOPED PROPERTY

In any Fiscal Year, when proceeds of Assigned Annual Special Tax for Developed Property are greater than principal, interest and Administrative Expenses such amount shall be

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available for the School District subject to any required reserve fund replenishment. The School District shall use proceeds for acquisition, construction or financing school facilities in accordance with the Act and other applicable law as determined by the School District.

I. PURPOSE OF THE SPECIAL TAXES

The proposed facilities to be financed include: A) elementary, middle, and high school buildings, as well as central administration and support facilities as needed and applicable, together with land and all necessary equipment of the School District; and B) Eastern Municipal Water District sewer and water facilities connection and facility capacity fees, as well as water and sewer facilities, together with an estimated useful life of five (5) years or longer to serve the properties within the District. The foregoing is only by way of explanation and is not a limitation or change to any of the provisions of this RMA.

J. PREPAYMENT OF SPECIAL TAX

The following definition applies to this Section J: “Outstanding Bonds” means all previously issued bonds issued and secured by the levy of Special Taxes, which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding bonds to be redeemed at a later date with the proceeds of prior prepayments of Maximum Special Taxes.

1. Prepayment in Full The Maximum Special Tax obligation may only be prepaid and permanently satisfied by an Assessor’s Parcel of Developed Property, Undeveloped Property for which a building permit has been issued, Public Property and/or Property Owner’s Association Property that is not Exempt Property pursuant to Section E. The Maximum Special Tax obligation applicable to such Assessor’s Parcel may be fully prepaid and the obligation of the Assessor’s Parcel to pay the Special Tax permanently satisfied as described herein; provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Maximum Special Tax obligation shall provide the Assistant Superintendent of Business Services with written notice of intent to prepay, and within five (5) days of receipt of such notice, the Assistant Superintendent of Business Services shall notify such owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by CFD No. 2005-5 in calculating the proper amount of a prepayment. Within fifteen (15) days of receipt of such non-refundable deposit, the Assistant Superintendent of Business Services shall notify such owner of the prepayment amount of such Assessor’s Parcel.

a) The prepayment amount for an Assessor’s Parcel will be equal to the present value of

the Assigned Special Tax of such Assessor’s Parcel and the amount determined pursuant to Section J.1.c., if applicable, using a discount rate equal to 6.0% prior to

Moreno Valley Unified School District Final – June 6, 2006 Community Facilities District No. 2005-5 Page 10

the Issuance of Bonds or the weighted average interest rate on the Outstanding Bonds and the remaining term for which the Special Tax may be levied pursuant to Section J.

b) A reasonable administrative fee (net of the non-refundable deposit) for determining

such prepayment and the call premium, if any, as provided in the Indenture shall be added to the amount determined in Section J.1.a. to determine the total prepayment amount due. The total prepayment amount shall be distributed in accordance with the Indenture.

c) If at the date of the prepayment calculation all or a portion of the Backup Special Tax

is being levied as a result of the total Residential Property units within CFD No. 2005-5 at buildout being less than the total estimated residential units that were assumed when the Bonds were issued as determined by the Assistant Superintendent of Business Services, that portion of the Backup Special Tax being levied in excess of the Assigned Special Tax for the Assessor’s Parcel which is seeking the prepayment shall be added to the Assigned Special Tax in Section J.1.a. for purposes of calculating the prepayment amount.

Upon cash payment of the prepayment amount due pursuant to Section J.1.b. and upon owner providing confirmation from the County to the Assistant Superintendent of Business Services that the current Fiscal Year’s Special Tax levy for such Assessor’s Parcel has been paid, the School District shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Taxes that may be levied on Taxable Property both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 2. Prepayment in Part The Maximum Special Tax on an Assessor’s Parcel of Developed Property or an Assessor’s Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid, provided an Assessor’s Parcel of Developed Property may only be partially prepaid prior to or concurrent with the close of escrow of a sale to the initial homebuyer. The amount of the prepayment shall be calculated as in Section J.1; except that a partial prepayment shall be calculated according to the following formula:

PP = (PE x F) + G

These terms have the following meaning:

PP = the partial prepayment amount

Moreno Valley Unified School District Final – June 6, 2006 Community Facilities District No. 2005-5 Page 11

PE = the prepayment amount calculated according to Section J.1.a., the call premium, if any, as determined by Section J.1.b. F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Maximum Special Tax. G = the administrative fee determined in Section J.1.b.

The owner of an Assessor’s Parcel who desires to partially prepay the Maximum Special Tax shall notify the Assistant Superintendent of Business Services of (i) such owner’s intent to partially prepay the Maximum Special Tax, and (ii) the percentage by which the Maximum Special Tax shall be prepaid, and within five (5) days of receipt of such notice, the Assistant Superintendent of Business Services shall notify such owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by CFD No. 2005-5 in calculating the proper amount of a partial prepayment. Within fifteen (15) days of receipt of such non-refundable deposit, the Assistant Superintendent of Business Services shall notify such owner of the partial prepayment amount of such Assessor’s Parcel. With respect to any Assessor’s Parcel that is partially prepaid, the Assistant Superintendent of Business Services shall (i) distribute the funds remitted to it according to the Indenture, and (ii) indicate in the records of CFD No. 2005-5 that there has been a partial prepayment of the Maximum Special Tax and that a portion of the Maximum Special Tax equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor’s Parcel pursuant to Section D.

K. TERM OF THE SPECIAL TAX

The Special Tax shall be levied annually on all Assessor’s Parcels of Taxable Property for a maximum of thirty-five (35) years as Developed Property not to exceed Fiscal Year 2045-2046.

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B-1

APPENDIX B

LIMITED APPRAISAL REPORT

(THIS PAGE INTENTIONALLY LEFT BLANK)

Harris Realty Appraisal5100 Birch Street, Suite 200

Newport Beach, California 92660949-851-1227 FAX 949-851-2055

www. harri s-ap praisal. corn

December 7, 2011

Ms. Mays KakishChief Business OfficialMORENO VALLEY UNIFIED SCHOOL DISTRICT25634 Alessandro BoulevardMoreno Valley, CA 92553

Re: Community Facilities District No. 2005-5Of the Moreno Valley Unified School DistrictSeries 2012 Special Tax Bonds

Dear Ms. Kakish:

In response to your authorization, we have provided Limited Appraisal Servicesthat are reported in this summary report. This report is intended to include sufficientinformation to accurately describe the scope of our assignment and purpose of theappraisal assignment relating to Community Facilities District No. 2005-5 ("CFD No. 2005-5"), which includes Zones A, B and C. The report will also include, in summary format, thedatabase upon which our value conclusions are, in part, predicated. Additional informationand analyses are retained in the appraiser's work files. The appraisal is limited to a massappraisal analysis for Zones A and B and a Static Residual Analysis for Zone C, whichresults in a Minimum Market Value for each Zone. Please review the definitions of LimitedAppraisal Assignment, Minimum Market Value, Mass Appraisal and Static ResidualAnalysis listed in the definitions section of this report.

In the case of this specific assignment, the Limited Appraisal prepared in asummary report are intended to evaluate whether the Assessed Values as provided by theMoreno Valley Unified School District's ("District") Special Tax Consultant for CFD No.2005-5 are supported by the conclusions of a mass appraisal for Zones A and B and aStatic Residual Analysis for Zone C. Our research and analyses provide value indicatorswhich conclude that the aggregate Fiscal Year 2011/2012 Assessed Value ("2011/2012Assessed Value") for Zones A and B are above the current Market Value, and a downwardadjustment from the aggregate Assessed Value has been made to estimate a MinimumMarket Value for Zones A and B, as of the date of value. The Assessed Value for thepartially graded undeveloped land within Zone C, entitled for 274 dwelling units, is testedbased on the current proposed use. Our research and analyses provide value indicatorswhich conclude that the aggregate Assessed Value for Zone C is below the current MarketValue, so no downward adjustment is indicated in estimating Minimum Market Value forZone C, as of the date of value.

LIMITED APPRAISAL

COMMUNITY FACILITIES DISTRICT NO. 2005-5 OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICT

SERIES 2012 SPECIAL TAX BONDS

Prepared for:

MORENO VALLEY UNIFIED SCHOOL DISTRICT 25634 Alessandro Boulevard

Moreno Valley, CA 92553

James B. Harris, MAI Berri Cannon Harris

Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA 92660

December 2011

Harris Realty Appraisal

Ms. Mays Kakish Chief Business Official MORENO VALLEY UNIFIED SCHOOL DISTRICT 25634 Alessandro Boulevard Moreno Valley, CA 92553

Re: Community Facilities District No. 2005-5 Of the Moreno Valley Unified School District Series 2012 Special Tax Bonds

Dear Ms. Kakish:

----5100 Birch Street, Suite 200

Newport Beach, California 92660 949-851- 1227 FAX 949-851-2055

www.harris-appraisal.com

December 7, 2011

In response to your authorization, we have provided Limited Appraisal Services that are reported in this summary report. This report is intended to include sufficient information to accurately describe the scope of our assignment and purpose of the appraisal assignment relating to Community Facilities District No. 2005-5 ("CFO No. 2005-5"), which includes Zones A, Band C. The report will also include, in summary format, the database upon which our value conclusions are, in part, predicated. Additional information and analyses are retained in the appraiser's work files. The appraisal is limited to a mass appraisal analysis for Zones A and B and a Static Residual Analysis for Zone C, which results in a Minimum Market Value for each Zone. Please review the definitions of Limited Appraisal Assignment, Minimum Market Value, Mass Appraisal and Static Residual Analysis listed in the definitions section of this report.

In the case of this specific assignment, the Limited Appraisal prepared in a summary report are intended to evaluate whether the Assessed Values as provided by the Moreno Valley Unified School District's ("District") Special Tax Consultant for CFO No. 2005-5 are supported by the conclusions of a mass appraisal for Zones A and B and a Static Residual Analysis for Zone C. Our research and analyses provide value indicators which conclude that the aggregate Fiscal Year 2011/2012 Assessed Value ("2011/2012 Assessed Value") for Zones A and B are above the current Market Value, and a downward adjustment from the aggregate Assessed Value has been made to estimate a Minimum Market Value for Zones A and B, as of the date of value. The Assessed Value for the partially graded undeveloped land within Zone C, entitled for 274 dwelling units, is tested based on the current proposed use. Our research and analyses provide value indicators which conclude that the aggregate Assessed Value for Zone C is below the current Market Value, so no downward adjustment is indicated in estimating Minimum Market Value for Zone C, as of the date of value.

Ms. Mays KakishDecember 7, 2011Page 2

In summary, Zone A has an Assessed Value of $52,427,455, but the LimitedAppraisal results in a Minimum Market Value of $43,740,000. Zone B has an AssessedValue of $25,654,815, but the Limited Appraisal results in a Minimum Market Value of$21,480,000. Zone C has an Assessed Value of $799,839, but the "as is" Market Valueindicates a value of $2,000,000, so the Limited Appraisal results in a Minimum MarketValue of $800,000.

The aggregate Assessed Values and/or Minimum Market Values stated in thisreport are for all of the parcels, subject to Special Tax, in each Zone. They are notintended to represent individual parcel values. The Client and the Finance Team haveagreed that this Limited Appraisal, prepared in a Summary Report, are sufficient.

This Limited Appraisal has been prepared in accordance with and is subject to therequirements of The Appraisal Standards for Land Secured Financing as published by theCalifornia Debt and Investment Advisory Commission; the Uniform Standards ofProfessional Appraisal Practice (USPAP) of the Appraisal Foundation; and the Code ofProfessional Ethics and the Standards of Professional Appraisal Practice of the AppraisalInstitute.

ClientThe client is the Moreno Valley Unified School District.

Purpose and Intended Use of the ReportThe purpose and intended use of this Limited Appraisal is solely to help in

establishing whether or not the aggregate Assessed Values for each Zone within CFD No.2005-5 are reasonable as of the date of value, December 1, 2011. Based on informationprovided by the Client's Special Tax Consultant, there are 334 single family dwellings inZone A and Zone B, and 29.08 gross acres of undeveloped land in Zone C. A review ofthe data for CFD No. 2005-5 indicates the dwellings were built between 2006 and 2009.According to the owner/developer of the land and the approved Tentative Tract Map(approved February 24, 2011), the site has Tentative Tract Map approval for 274 dwellingunits, but the owner/developer is not currently actively developing the property in Zone Cand a final map has not been recorded. The Tentative Tract Map does not expire untilFebruary 24, 2014.

The appraisers have relied on the information provided by the District's Special TaxConsultant. The appraisers have physically inspected the exterior of dwellings and theundeveloped land within Zone C of CFD No. 2005-5. It is a specific assumption of thisLimited Appraisal that the information provided for our analysis is accurate.

The subject properties are within CFD No. 2005-5 and are encumbered withSpecial Taxes. Within the City and the County it is common practice for properties builtwithin the last two decades to be within a community facilities district/assessment district.

Ms. Mays Kakish December 7, 2011 Page2

In summary, Zone A has an Assessed Value of $52,427,455, but the Limited Appraisal results in a Minimum Market Value of $43,740,000. Zone B has an Assessed Value of $25,654,815, but the Limited Appraisal results in a Minimum Market Value of $21,480,000. Zone C has an Assessed Value of $799,839, but the "as is" Market Value indicates a value of $2,000,000, so the Limited Appraisal results in a Minimum Market Value of $800,000.

The aggregate Assessed Values and/or Minimum Market Values stated in this report are for all of the parcels, subject to Special Tax, in each Zone. They are not intended to represent individual parcel values. The Client and the Finance Team have agreed that this Limited Appraisal, prepared in a Summary Report, are sufficient.

This Limited Appraisal has been prepared in accordance with and is subject to the requirements of The Appraisal Standards for Land Secured Financing as published by the California Debt and Investment Advisory Commission; the Unifonn Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

Client The client is the Moreno Valley Unified School District.

Purpose and Intended Use of the Report The purpose and intended use of this Limited Appraisal is solely to help in

establishing whether or not the aggregate Assessed Values for each Zone within CFO No. 2005-5 are reasonable as of the date of value, December 1, 2011. Based on information provided by the Client's Special Tax Consultant, there are 334 single family dwellings in Zone A and Zone B, and 29.08 gross acres of undeveloped land in Zone C. A review of the data for CFO No. 2005-5 indicates the dwellings were built between 2006 and 2009. According to the owner/developer of the land and the approved Tentative Tract Map (approved February 24, 2011), the site has Tentative Tract Map approval for 274 dwelling units, but the owner/developer is not currently actively developing the property in Zone C and a final map has not been recorded. The Tentative Tract Map does not expire until February 24, 2014.

The appraisers have relied on the information provided by the District's Special Tax Consultant. The appraisers have physically inspected the exterior of dwellings and the undeveloped land within Zone C of CFO No. 2005-5. It is a specific assumption of this Limited Appraisal that the information provided for our analysis is accurate.

The subject properties are within CFD No. 2005-5 and are encumbered with Special Taxes. Within the City and the County it is common practice for properties built within the last tvvo decades to be within a community facilities district/assessment district.

Ms. Mays KakishDecember 7, 2011Page 3

Intended Users of the Repo rtIt is our understanding that this Limited Appraisal will be used by our client,

Moreno Valley Unified School District, its underwriter, legal counsel, consultants, andpotential bond investors.

Scope of the AssignmentThe scope of this assignment encompasses the necessary research and analysis

required for the intended use. This is a Limited Appraisal assignment which providessufficient information to the District and the CFD's Finance Team to rely on the AssessedValues or the adjusted Minimum Market Values for CFD No. 2005-5, for use in the sale ofthe Community Facilities District No. 2005-5 of the Moreno Valley Unified School District,Series 2012 Special Tax Bonds.

The scope of this assignment is to gather sufficient recent home resales withinZones A and B to be able to analyze the Assessed Values and determine whether, basedon the data provided and the recent resales information acquired, the aggregate AssessedValues are reasonable. As summarized on the preceding page, the data indicates theAssessed Values for Zone A and Zone B are above the current Market Value, and anadjustment from the Assessed Values has been made in arriving at a Minimum MarketValue for Zones A and B.

Zone C includes undeveloped land that has been partially graded and entitled for274 dwelling units. Based on the data provided, an estimate of Minimum Market Valuewas derived at by the Static Residual Analysis, based on the current anticipated future useof the site. The Minimum Market Value was not below the Assessed Value, so noadjustment to the Assessed Value was made in arriving at the Minimum Market Value forZone C.

Date of the Limited Appraisal and Date of the ReportThe opinions of value expressed in this report are stated as of December 1,

2011. The date of the Limited Appraisal is December 7, 2011.

Property Rights AppraisedThe property rights appraised are those of the fee simple estate.

Property IdentificationThe appraisers have been provided with a boundary map for CFD No. 2005-5.

According to the map, CFD No. 2005-5 consists of three contiguous Zones: Zone A,improved with 205 dwelling units; Zone B, improved with 129 dwelling units; and Zone Centitled for 274 dwelling units, currently in a raw condition with the site partially gradedlocated in the City of Moreno Valley, Riverside County, California. CFD No. 2005-5 islocated south of State Highway 60 on the east side of Nason Street and north ofEucalyptus Avenue.

Ms. Mays Kakish December 7, 2011 Page 3

Intended Users of the Report It is our understanding that this Limited Appraisal will be used by our client,

Moreno Valley Unified School District, its underwriter, legal counsel, consultants, and potential bond investors.

Scope of the Assignment The scope of this assignment encompasses the necessary research and analysis

required for the intended use. This is a Limited Appraisal assignment which provides sufficient information to the District and the CFD's Finance Team to rely on the Assessed Values or the adjusted Minimum Market Values for CFD No. 2005-5, for use in the sale of the Community Facilities District No. 2005-5 of the Moreno Valley Unified School District, Series 2012 Special Tax Bonds.

The scope of this assignment is to gather sufficient recent home resales within Zones A and B to be able to analyze the Assessed Values and determine whether, based on the data provided and the recent resales information acquired, the aggregate Assessed Values are reasonable. As summarized on the preceding page, the data indicates the Assessed Values for Zone A and Zone B are above the current Market Value, and an adjustment from the Assessed Values has been made in arriving at a Minimum Market Value for Zones A and B.

Zone C includes undeveloped land that has been partially graded and entitled for 274 dwelling units. Based on the data provided, an estimate of Minimum Market Value was derived at by the Static Residual Analysis, based on the current anticipated future use of the site. The Minimum Market Value was not below the Assessed Value, so no adjustment to the Assessed Value was made in arriving at the Minimum Market Value for Zone C.

Date of the Limited Appraisal and Date of the Report The opinions of value expressed in this report are stated as of December 1,

2011. The date of the Limited Appraisal is December 7, 2011.

Property Rights Appraised The property rights appraised are those of the fee simple estate.

Property Identification The appraisers have been provided with a boundary map for CFD No. 2005-5.

According to the map, CFD No. 2005-5 consists of three contiguous Zones: Zone A, improved with 205 dwelling units; Zone B, improved with 129 dwelling units; and Zone C entitled for 274 dwelling units, currently in a raw condition with the site partially graded located in the City of Moreno Valley, Riverside County, California. CFD No. 2005-5 is located south of State Highway 60 on the east side of Nason Street and north of Eucalyptus Avenue.

Ms. Mays KakishDecember 7, 2011Page 4

Legal Description and OwnershipThe appraisers have been provided with a summary of each Assessor Parcel

within the District. The information provided includes an Assessor Parcel Number andownership for each parcel and generally also includes street address, year built, size ofdwelling and Assessed Values. The appraisers have also been provided with asummary of each home sale from the merchant builder to the original homeowner. A listof each parcel is included in the appraiser's work files.

Definitions Market Value'The most probable price in terms of money which a property should bring ina competitive and open market under all conditions requisite to a fair sale,the buyer and seller, each acting prudently, knowledgeably and assumingthe price is not affected by undue stimulus. Implicit in this definition is theconsummation of a sale as of a specified date and the passing of title fromseller to buyer under conditions whereby:

(a) Buyer and seller are typically motivated.

(b) Both parties are well informed or well advised, and each acting inwhat he considers his own best interest.

(c) A reasonable time is allowed for exposure in the open market.

(d) Payment is made in terms of cash in U.S. dollars or in terms offinancial arrangements comparable thereto.

(e) The price represents the normal consideration for the property soldunaffected by special or creative financing or sales concessionsgranted by anyone associated with the sale.

Minimum Market ValueIt may be appropriate for projects that have built-out and occupied product touse mass appraisal techniques. When conforming groups of property typeswithin the same CFD are built and have achieved a stabilized occupancy,appraisers may use a limited valuation analysis to value a sampling ofsimilar properties. In this Limited Appraisal, the overall average sales priceper square foot is compared to the overall average Assessed Value persquare foot for each Zone. A conservative estimate of value per squarefoot is used in testing the reasonableness of the aggregate AssessedValue or in estimating Minimum Market Value for the existing dwellingswithin CFD No. 2005-5.

1 Part 563, subsection 563.17-la (b) (2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations.

Ms. Mays Kakish December 7, 2011 Page4

Legal Description and Ownership The appraisers have been provided with a summary of each Assessor Parcel

within the District. The information provided includes an Assessor Parcel Number and ownership for each parcel and generally also includes street address, year built, size of dwelling and Assessed Values. The appraisers have also been provided with a summary of each home sale from the merchant builder to the original homeowner. A list of each parcel is included in the appraiser's work files.

Definitions Market Value 1

The most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(a) Buyer and seller are typically motivated.

{b) Both parties are well informed or well advised, and each acting in what he considers his own best interest.

(c) A reasonable time is allowed for exposure in the open market.

(d) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto.

(e) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Minimum Market Value It may be appropriate for projects that have built-out and occupied product to use mass appraisal techniques. When conforming groups of property types within the same CFO are built and have achieved a stabilized occupancy, appraisers may use a limited valuation analysis to value a sampling of similar properties. In this Limited Appraisal, the overall average sales price per square foot is compared to the overall average Assessed Value per square foot for each Zone. A conservative estimate of value per square foot is used in testing the reasonableness of the aggregate Assessed Value or in estimating Minimum Market Value for the existing dwellings within CFO No. 2005-5.

1 Part 563, subsection 563.17-1 a ( b) (2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations.

Ms. Mays KakishDecember 7, 2011Page 5

Mass AppraisalWhen a tract or project is built-out and absorbed, the appraiser may usean aggregate value estimate based upon conservative per dwelling unitestimates. It is implicit in mass appraisal that some individual valueconclusions will not meet standards of reasonableness, consistency andaccuracy. However, appraisers engaged in mass appraisal have aprofessional responsibility to ensure that, on an overall basis, the valueconclusions meet attainable standards of accuracy. The appraisers haveused an average conservative value, for the average size unit within ZoneA and Zone B. By utilizing average value estimates, individual homevalues could be higher or lower, depending on unit size. However, on anoverall basis, the value conclusions are reasonable and meet attainablestandards of accuracy.

Static Residual AnalysisThe Static Residual Analysis is used to estimate the merchant builderfinished lot value. From the estimated base retail home price, all costsassociated with the home construction including direct construction costs,indirect construction costs, financing and profit are deducted. Following thededuction of costs, the residual figure is an estimate of the merchant builderlot value.

Fee Simple Estate2Absolute ownership unencumbered by any other interest or estate subjectonly to the four powers of government.

Limited Appraisal AssignmentAn agreement between an appraiser and client to provide a valuationservice. A valuation service that is provided as a consequence of such anassignment. An appraisal assignment that complies with the UniformStandards of Professional Appraisal Practice rules governing thedevelopment of appraisal assignments.

Summary ReportA Summary Appraisal Report ("Summary Report") should contain asummary of all information significant to the solution of the appraisalproblem.

2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page140

Ms. Mays Kakish December 7, 2011 Page 5

Mass Appraisal When a tract or project is built-out and absorbed, the appraiser may use an aggregate value estimate based upon conservative per dwelling unit estimates. It is implicit in mass appraisal that some individual value conclusions will not meet standards of reasonableness, consistency and accuracy. However, appraisers engaged in mass appraisal have a professional responsibility to ensure that, on an overall basis, the value conclusions meet attainable standards of accuracy. The appraisers have used an average conservative value, for the average size unit within Zone A and Zone B. By utilizing average value estimates, individual home values could be higher or lower, depending on unit size. However, on an overall basis, the value conclusions are reasonable and meet attainable standards of accuracy.

Static Residual Analysis The Static Residual Analysis is used to estimate the merchant builder finished lot value. From the estimated base retail home price, all costs associated with the home construction including direct construction costs, indirect construction costs, financing and profit are deducted. Following the deduction of costs, the residual figure is an estimate of the merchant builder lot value.

Fee Simple Estate' Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government.

Limited Appraisal Assignment An agreement between an appraiser and client to provide a valuation service. A valuation service that is provided as a consequence of such an assignment. An appraisal assignment that complies with the Uniform Standards of Professional Appraisal Practice rules governing the development of appraisal assignments.

Summary Report A Summary Appraisal Report ("Summary Report") should contain a summary of all information significant to the solution of the appraisal problem.

2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 140

Ms. Mays KakishDecember 7, 2011Page 6

Assumptions and Limiting Conditions Standards Rule ("S.R.") 2-1c of the "Standards of Professional Appraisal

Practice" of the Appraisal Institute requires the appraiser to "clearly and accuratelydisclose any extraordinary assumption or limiting condition that directly affects anappraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1c and to assistthe reader in interpreting the report, the following assumptions and limiting conditionsare set forth as follows:

Specific Limiting ConditionsThis is a Limited Appraisal assignment that involves opinions of value, asdescribed in this report, to be used to test the reasonableness of theaggregate Assessed Values within CFD No. 2005-5, Zones A, B and C.This assignment is presented in a Summary Report.

The opinions of values expressed in this report do not apply to anyspecific dwelling unit.

The opinions of value rely on the information provided by the District'sSpecial Tax Consultant which we have assumed to accurately describethe properties within each Zone. It is a specific assumption of thisappraisal that the appraisers have been provided with a summary of all ofthe parcels subject to Special Tax within the CFD.

The costs to complete site construction for Zone C have been provided bythe builder/owner of the site in summary format. The Minimum Market Valueincluded in this report assumes the $10,000,000 in costs are all the costs tosatisfy the Conditions of Approval for PA10-0038 (TTMap 36340, approvedFebruary 24, 2011) and PA10-0039 (CUP). All conditions of approval expireon February 24, 2014 unless a building permit has been issued or theapplicant has filed for an extension. This report and estimated MinimumMarket Value assumes there are no additional costs of site developmentincluding development fees, for Zone C.

General Assumptions and Limiting ConditionsNo responsibility is assumed by your appraisers for matters that are legal innature. No opinion of title is rendered, and the opinions of value assume thetitle is marketable.

The date of value for which the opinions of Minimum Market Value areexpressed in this report is December 1, 2011. The dollar amount of thisvalue opinion is based on the purchasing power of the United States dollaron that date.

Ms. Mays Kakish December 7, 2011 Page6

Assumptions and Limiting Conditions Standards Rule ("S.R.") 2-1c of the "Standards of Professional Appraisal

Practice" of the Appraisal Institute requires the appraiser to "clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects an appraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1c and to assist the reader in interpreting the report, the following assumptions and limiting conditions are set forth as follows:

Specific Limiting Conditions This is a Limited Appraisal assignment that involves opinions of value, as described in this report, to be used to test the reasonableness of the aggregate Assessed Values within CFO No. 2005-5, Zones A, B and C. This assignment is presented in a Summary Report.

The opinions of values expressed in this report do not apply to any specific dwelling unit.

The opinions of value rely on the information provided by the District's Special Tax Consultant which we have assumed to accurately describe the properties within each Zone. It is a specific assumption of this appraisal that the appraisers have been provided with a summary of all of the parcels subject to Special Tax within the CFO.

The costs to complete site construction for Zone C have been provided by the builder/owner of the site in summary format. The Minimum Market Value included in this report assumes the $10,000,000 in costs are all the costs to satisfy the Conditions of Approval for PA10-0038 (TTMap 36340, approved February 24, 2011) and PA 10-0039 (CUP). All conditions of approval expire on February 24, 2014 unless a building pennit has been issued or the applicant has filed for an extension. This report and estimated Minimum Market Value assumes there are no additional costs of site development including development fees, for Zone C.

General Assumptions and Limiting Conditions No responsibility is assumed by your appraisers for matters that are legal in nature. No opinion of title is rendered, and the opinions of value assume the title is marketable.

The date of value for which the opinions of Minimum Market Value are expressed in this report is December 1, 2011. The dollar amount of this value opinion is based on the purchasing power of the United States dollar on that date.

Ms. Mays KakishDecember 7, 2011Page 7

Maps, plats, and exhibits included herein are for illustration only, as an aidfor the reader in visualizing matters discussed within the report. They shouldnot be considered as surveys or relied upon for any other purpose, norshould they be removed from, reproduced, or used apart from this report.

Oil, gas, mineral rights and subsurface rights were not considered in makingthis appraisal unless otherwise stated and are not a part of the appraisal, ifany exist.

A Remedial Grading Foundations and Updated Seismic DesignRecommendations Report prepared by Converse Consultants, datedFebruary 2, 2011, has been provided for the undeveloped land andproposed development of 274 dwelling units. Based on a review of theFebruary 2, 2011 report along with reference to a May 14, 2004 PreliminaryGeotechnical Investigation Report prepared by Converse Consulting, thesite is suitable for one and two story residential structures, slab-on-grade,assuming recommendations presented in the two reports are complied with.For purposes of this appraisal, the soil is assumed to be of adequate load-bearing capacity to support the proposed uses.

Because specific sold dwellings are not appraised, title reports have notbeen requested and are not provided. A preliminary title report preparedby Fidelity National Title Company, dated December 7, 2011 has beenprovided for the undeveloped land within Zone C referred to as Tract No.36340. For purposes of this appraisal, we assume there are noeasements, encroachments or restrictions that would adversely affect theestimates of value.

Information contained in this report has been gathered from sources whichare believed to be reliable, and, where feasible, has been verified. Noresponsibility is assumed for the accuracy of information supplied by others.

Since earthquakes are common in the area, no responsibility is assumed fortheir possible affect.

The appraisers assume no responsibility for economic or physical factorsthat may occur after the date of this appraisal. The appraisers, in renderingthese opinions, assume no responsibility for subsequent changes inmanagement, tax laws, environmental regulations, economic, or physicalfactors that may or may not affect said conclusions or opinions.

Unless otherwise stated in this report, the existence of hazardoussubstances, including without limitation asbestos, polychlorinated biphenyls,

Ms. Mays Kakish December 7, 2011 Page 7

Maps, plats, and exhibits included herein are for illustration only, as an aid for the reader in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

Oil, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, ff any exist.

A Remedial Grading Foundations and Updated Seismic Design Recommendations Report prepared by Converse Consultants, dated February 2, 2011, has been provided for the undeveloped land and proposed development of 274 dwelling units. Based on a review of the February 2, 2011 report along with reference to a May 14, 2004 Preliminary Geotechnical Investigation Report prepared by Converse Consulting, the site is suitable for one and two story residential structures, slab-on-grade, assuming recommendations presented in the two reports are complied with. For purposes of this appraisal, the soil is assumed to be of adequate toad­bearing capacity to support the proposed uses.

Because specific sold dwellings are not appraised, title reports have not been requested and are not provided. A preliminary title report prepared by Fidelity National Title Company, dated December 7, 2011 has been provided for the undeveloped land within Zone C referred to as Tract No. 36340. For purposes of this appraisal, we assume there are no easements, encroachments or restrictions that would adversely affect the estimates of value.

Information contained in this report has been gathered from sources which are believed to be reliable, and, where feasible, has been verified. No responsibility is assumed for the accuracy of information supplied by others.

Since earthquakes are common in the area, no responsibility is assumed for their possible affect.

The appraisers assume no responsibility for economic or physical factors that may occur after the date of this appraisal. The appraisers, in rendering these opinions, assume no responsibility for subsequent changes in management, tax laws, environmental regulations, economic, or physical factors that may or may not affect said conclusions or opinions.

Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls,

Ms. Mays KakishDecember 7, 2011Page 9

unless the client provides the appraisers with legal counsel who theninstructs them not to appear, instructs them not to produce certaindocuments, or instructs them not to answer certain questions. Theseinstructions will be overridden by a court order which the appraisers willfollow if legally required to do so. It shall be the responsibility of the client toobtain a protective order.

James B. Harris is a Member of the Appraisal Institute. The Bylaws andRegulations of the Institute require each Member to control the uses anddistribution of each appraisal report signed by such Member. Except ashereinafter provided, possession of this report, or a copy of it, does not carrywith it the right of publication. It may not be used for any purpose by anyperson other than the party to whom it is addressed without the writtenconsent of the appraisers and in any event only with properly writtenqualification and only in its entirety. The Moreno Valley Unified SchoolDistrict, its underwriter and legal counsel may publish this report in theOfficial Statement for the Series 2012 Special Tax Bonds for CFD No.2005-5.

Neither all nor any part of the contents of this report (especially anyconclusions as to value, the identity of the appraisers or the firm with whichthey are connected, or any reference to the Appraisal Institute or the MAIdesignation) shall be disseminated to the public through advertising media,public relations, news media or any other public means of communicationwithout the prior consent and approval of the undersigned.The acceptance of and/or use of this appraisal report by the client or anythird part constitutes acceptance of the following conditions:

The liability of Harris Realty Appraisal and the appraisersresponsible for this report is limited to the client only andto the fee actually received by the appraisers. Further,there is no accountability, obligation or liability to anythird party. If the appraisal report is placed in the hands ofanyone other than the client for whom this report wasprepared, the client shall make such party and/or partiesaware of all limiting conditions and assumptions of thisassignment and related discussions. Any party who usesor relies upon any information in this report, without thepreparer's written consent, does so at their own risk.

If the client or any third party brings legal action againstHarris Realty Appraisal or the signer of this report andthe appraisers prevail, the party initiating such legal

Ms. Mays Kakish December 7, 2011 Page 8

petroleum leakage, or agricultural chemicals, which may or may not be present on the lands, or other environmental conditions, were not called to the attention of the appraisers. Because specific parcels are not valued in this assignment, there were no specific on-site inspections of parcels.

The presence of such substances such as asbestos, urea formaldehyde, foam insulation, or other hazardous substances or environmental conditions may affect the value of property. The values estimated herein are predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in the field of environmental impacts upon real estate if so desired.

The cost and availability of financing help determine the demand for and supply of real estate and therefore affect real estate values and prices. The transaction price of one property may differ from that of an identical property because financing arrangements vary.

The forecasts of future events that influence the valuation process are predicated on the continuation of historic and current trends in the market.

The Ameticans with Disabilities Act (''.ADA') became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property.

We shall not be required, by reason of this appraisal, to give testimony or to be in attendance in court or any governmental or other hearing with reference to the assignment without prior arrangements having first been made with the appraisers relative to such additional employment.

In the event the appraisers are subpoenaed for a deposition, judicial, or administrative proceeding, and are ordered to produce their appraisal report and files, the appraisers will immediately notify the client.

The appraisers will appear at the deposition, judicial, or administrative hearing with their appraisal report and files and will answer all questions

Ms. Mays KakishDecember 7, 2011Page 8

petroleum leakage, or agricultural chemicals, which may or may not bepresent on the lands, or other environmental conditions, were not called tothe attention of the appraisers. Because specific parcels are not valued inthis assignment, there were no specific on-site inspections of parcels.

The presence of such substances such as asbestos, urea formaldehyde,foam insulation, or other hazardous substances or environmental conditionsmay affect the value of property. The values estimated herein are predicatedon the assumption that there is no such condition on or in the property or insuch proximity thereto that it would cause a loss in value. No responsibility isassumed for any such conditions or for any expertise or engineeringknowledge required to discover them. The client is urged to retain an expertin the field of environmental impacts upon real estate if so desired.

The cost and availability of financing help determine the demand for andsupply of real estate and therefore affect real estate values and prices. Thetransaction price of one property may differ from that of an identical propertybecause financing arrangements vary.

The forecasts of future events that influence the valuation process arepredicated on the continuation of historic and current trends in the market.

The Americans with Disabilities Act ("ADA') became effective January 26,1992. We have not made a specific compliance survey and analysis of thisproperty to determine whether or not it is in conformity with the variousdetailed requirements of the ADA. It is possible that a compliance survey ofthe property, together with a detailed analysis of the requirements of theADA, could reveal that the property is not in compliance with one or more ofthe requirements of the Act. If so, this fact could have a negative effect onthe value of the property. Since we have no direct evidence relating to thisissue, we did not consider possible non-compliance with the requirements ofthe ADA in estimating the value of the property.

We shall not be required, by reason of this appraisal, to give testimony or tobe in attendance in court or any governmental or other hearing withreference to the assignment without prior arrangements having first beenmade with the appraisers relative to such additional employment.

In the event the appraisers are subpoenaed for a deposition, judicial, oradministrative proceeding, and are ordered to produce their appraisal reportand files, the appraisers will immediately notify the client.

The appraisers will appear at the deposition, judicial, or administrativehearing with their appraisal report and files and will answer all questions

Ms. Mays Kakish December 7, 2011 Page9

unless the client provides the appraisers with legal counsel who then instructs them not to appear, instructs them not to produce certain documents, or instructs them not to answer certain questions. These instructions will be overridden by a court order which the appraisers will follow if legally required to do so. It shall be the responsibility of the client to obtain a protective order.

James B. Harris is a Member of the Appraisal Institute. The Bylaws and Regulations of the Institute require each Member to control the uses and distribution of each appraisal report signed by such Member. Except as hereinafter provided, possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraisers and in any event only with properly written qualification and only in its entirety. The Moreno Valley Unified School District, its underwriter and legal counsel may publish this report in the Official Statement for the Series 2012 Special Tax Bonds for CFO No. 2005-5.

Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers or the firm with which they are connected, or any reference to the Appraisal Institute or the MAI designation) shall be disseminated to the public through advertising media, public relations, news media or any other public means of communication without the prior consent and approval of the undersigned. The acceptance of and/or use of this appraisal report by the client or any third part constitutes acceptance of the following conditions:

The liability of Harris Realty Appraisal and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further, there is no accountability, obligation or liability to any third party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at their own risk.

If the client or any third party brings legal action against Harris Realty Appraisal or the signer of this report and the appraisers prevail, the party initiating such legal

Ms. Mays KakishDecember 7, 2011Page 10

action shall reimburse Harris Realty Appraisal and/orthe appraisers for any and all costs of any nature,including attorneys' fees, incurred in their defense.

Improvement and Site DescriptionThe subject CFD includes three Zones proposed for residential development.

Zones A and B are completely built out and all homes have closed escrow to individualhomeowners between 2006 and 2010. Zone A was improved with a product known asGoldenfields (Tract No. 32834). This product included five floor plans ranging from 1,858square feet to 3,239 square feet built on 6,000 square foot lots. Sales began in 2006 andthe last homes sold by the merchant builder occurred during 2010. Zone B was developedwith a product known as Cobblestone (Tract No. 32836). This product included three floorplans ranging from 1,823 square feet to 2,002 square feet. Cobblestone is a small lotdetached product which sold between 2006 and 2009 by the merchant builder. In totalZone A includes 205 single family detached homes and Zone B includes 129 single familydetached homes.

Zone C is undeveloped land that has been partially graded with an approvedTentative Tract Map entitled for 274 dwelling units. Beazer Homes Holding Corp., aDelaware corporation is the owner of this property. Reportedly Beazer Homes has heldtitle for approximately 3 years. The current plans are for Beazer Homes to develop the site.This site was originally planned for 274 attached condominium units. The first buildingcontaining 6 units was built and then the project was discontinued. The building has beendemolished and the site has been remapped as detached dwellings on small lots, alsoproposed for 274 units. The site has an approved Tentative Tract Map No. 36340containing 29.068 gross acres. According to the owner/builder, the site will be improvedonce market conditions improve. For purposes of this appraisal we have assumed thecurrent possible timeline is to begin site development in 2013, but actual development willdepend on various factors, including market conditions. According to the builder, the sitecosts are roughly estimated at $10,000,000 with $4,000,000 anticipated to be reimbursedfrom future CFD proceeds.

Highest and Best UseThe term highest and best use is an appraisal concept, which has been defined as

follows: The reasonably probable and legal use of vacant land or an improved property,which is physically possible, appropriately supported, financially feasible, and that resultsin the highest value.3

As discussed, this valuation analysis does not value specific parcels within Zones Aand B, but rather considers a probable overall value per particular group of dwellings.

3 The Appraisal of Real Estate, 10th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 275.

Ms. Mays Kakish December 7, 2011 Page 10

action shall reimburse Harris Realty Appraisal and/or the appraisers for any and all costs of any nature, including attorneys' fees, incurred in their defense.

Improvement and Site Description The subject CFO includes three Zones proposed for residential development.

Zones A and B are completely built out and all homes have closed escrow to individual homeowners between 2006 and 2010. Zone A was improved with a product known as Goldenfields (Tract No. 32834). This product included five floor plans ranging from 1,858 square feet to 3,239 square feet built on 6,000 square foot lots. Sales began in 2006 and the last homes sold by the merchant builder occurred during 2010. Zone B was developed with a product known as Cobblestone (Tract No. 32836). This product included three floor plans ranging from 1,823 square feet to 2,002 square feet. Cobblestone is a small lot detached product which sold between 2006 and 2009 by the merchant builder. In total Zone A includes 205 single family detached homes and Zone B includes 129 single family detached homes.

Zone C is undeveloped land that has been partially graded with an approved Tentative Tract Map entitled for 274 dwelling units. Beazer Homes Holding Corp., a Delaware corporation is the owner of this property. Reportedly Beazer Homes has held title for approximately 3 years. The current plans are for Beazer Homes to develop the site. This site was originally planned for 274 attached condominium units. The first building containing 6 units was built and then the project was discontinued. The building has been demolished and the site has been remapped as detached dwellings on small lots, also proposed for 274 units. The site has an approved Tentative Tract Map No. 36340 containing 29.068 gross acres. According to the owner/builder, the site will be improved once market conditions improve. For purposes of this appraisal we have assumed the current possible timeline is to begin site development in 2013, but actual development will depend on various factors, including market conditions. According to the builder, the site costs are roughly estimated at $10,000,000 with $4,000,000 anticipated to be reimbursed from future CFO proceeds.

Highest and Best Use The term highest and best use is an appraisal concept, which has been defined as

follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.3

As discussed, this valuation analysis does not value specific parcels within Zones A and B, but rather considers a probable overall value per particular group of dwellings.

3 The Appraisal of Real Estate, 10th Edition, Pub. by the Appraisal Institute, Chlcago, IL., p. 275.

Ms. Mays KakishDecember 7, 2011Page 11

Zone C consists of undeveloped land and the opinion of Minimum Market Value is specificto that parcel for the current envisioned development. The opinions of value included inthis report assume that the existing developments within Zones A and B are consistentwith its highest and best use as of the current date of value. Similarly, the opinion of valuefor Zone C assumes that the anticipated use for that parcel proposed by the existingowner is the highest and best use as of the current date of value.

Valuation The Direct Comparison Approach for residential dwellings is used in valuing the fee

simple interest, when sufficient recent comparable sales are available. The IncomeApproach is typically used when appraising income producing properties. This approach isnot applicable in the valuation of individual dwelling units, as they are not typically held togenerate monthly income. The Cost Approach is not an appropriate tool in the valuation ofdwelling units unless the particular dwelling is so unique that similar recent sales are notavailable.

This appraisal assignment is to test the reasonableness of the aggregateAssessed Values for CFD No. 2005-5 and to provide a Minimum Market Value for theCFD. Zones A and B will be valued by a mass appraisal. When implementing a massappraisal, conservative estimates are to be used in the valuation. A conservative priceper square foot for an average size dwelling for each Zone is estimated. Zone C will bevalued utilizing the Static Residual Analysis. This approach is particularly meaningfulwhen a specific product is known and the costs of development are available. In thecase of the subject, there is an approved Tentative Tract Map for 274 detached dwellingunits on small lots. The builder/owner has specific information for the proposed productwith cost of development available.

Special Tax Zones A & BCFD No. 2005-5 includes 334 dwelling units built between 2006 and 2009, with

the last merchant builder sales occurring in 2010. The data for this CFD included allnecessary information to analyze the 334 dwellings. There are 205 dwelling units builton 6,000 square foot lots in Zone A. The development was known as Goldenfields.Zone B includes 129 dwelling units built in a small lot configuration with smaller sizeunits than Zone A. The development was known as Cobblestone. Year built, unit sizeand Assessed Value was provided for each parcel. Due to the differences in size, eachZone was analyzed separately. The aggregate Assessed Value for the 205 dwelling inZone A is $52,427,455, which indicates an average Assessed Value per dwelling of$255,744 and an average Assessed Value per square foot of $95.89. Zone B has anaggregate Assessed Value for the 129 dwellings of $25,654,815, which indicates anaverage Assessed Value per dwelling of $198,875 and an average Assessed Value persquare foot of $103.90.

Ms. Mays Kakish December 7, 2011 Page 11

Zone C consists of undeveloped land and the opinion of Minimum Market Value is specific to that parcel for the current envisioned development. The opinions of value included in this report assume that the existing developments within Zones A and B are consistent with its highest and best use as of the current date of value. Similarly, the opinion of value for Zone C assumes that the anticipated use for that parcel proposed by the existing owner is the highest and best use as of the current date of value.

Valuation The Direct Comparison Approach for residential dwellings is used in valuing the fee

simple interest, when sufficient recent comparable sales are available. The Income Approach is typically used when appraising income producing properties. This approach is not applicable in the valuation of individual dwelling units, as they are not typically held to generate monthly income. The Cost Approach is not an appropriate tool in the valuation of dwelling units unless the particular dwelling is so unique that similar recent sales are not available.

This appraisal assignment is to test the reasonableness of the aggregate Assessed Values for CFO No. 2005-5 and to provide a Minimum Market Value for the CFD. Zones A and B will be valued by a mass appraisal. When implementing a mass appraisal, conservative estimates are to be used in the valuation. A conservative price per square foot for an average size dwelling for each Zone is estimated. Zone C will be valued utilizing the Static Residual Analysis. This approach is particularly meaningful when a specific product is known and the costs of development are available. In the case of the subject, there is an approved Tentative Tract Map for 274 detached dwelling units on small lots. The builder/owner has specific information for the proposed product with cost of development available.

Special Tax Zones A & B CFO No. 2005-5 includes 334 dwelling units built between 2006 and 2009, with

the last merchant builder sales occurring in 2010. The data for this CFO included all necessary information to analyze the 334 dwellings. There are 205 dwelling units built on 6,000 square foot lots in Zone A The development was known as Goldenfields. Zone B includes 129 dwelling units built in a small lot configuration with smaller size units than Zone A. The development was known as Cobblestone. Year built, unit size and Assessed Value was provided for each parcel. Due to the differences in size, each Zone was analyzed separately. The aggregate Assessed Value for the 205 dwelling in Zone A is $52,427,455, which indicates an average Assessed Value per dwelling of $255,744 and an average Assessed Value per square foot of $95.89. Zone B has an aggregate Assessed Value for the 129 dwellings of $25,654,815, which indicates an average Assessed Value per dwelling of $198,875 and an average Assessed Value per square foot of $103.90.

AV/Sale*

Bldr Sales

Year No. of Units Avg, Size

2006 4 1,930 SF

S & Assessed Values within Zone B CFD No. 2005-5

AAvg. /DU Avg. /SF

$387,550 $200.86

$372,953 $193.57

$284,118 $148.65

$244,044 $128.54

$194,556 $101.01

$174,878 $86.79

$198,875 $103.90

Bldr Sales 2007 49 1,927 SF

Bldr Sales 2008 39 1,911 SF

Bldr Sales 2009 37 1,899 SF

Resales 2010 9 1,925 SF

Resales 2011 9 2,015 SF

Total AV 2011/2012 129 1,914 SF

mary

Ms. Mays KakishDecember 7, 2011Page 12

To test the reasonableness of the Assessed Values the appraisers searched thepublic records for sales within the CFD between January 1, 2010, and December 1, 2011.The sales used to test the aggregate Assessed Value per square foot included dwellingunit size, sales price and date of sale. Forty-three sales were uncovered, of which 22 salesoccurred during 2010 and 21 sales within eleven months of 2011. The table belowsummarizes the sales from the merchant builder, resales and Assessed Value for Zones Aand B of CFD No. 2005-5. Please refer to the Addenda for a summary of each resale usedin the Limited Appraisal.

Summary of Sales & Assessed Values within Zone A CFD No. 2005-5

AV/Sale* Year No. of Units Avg. Size Avg. /DU Avg. /SF

Bldr Sales 2006 5 2,600 SF $466,440 $179.41

Bldr Sales 2007 56 2,635 SF $431,668 $163.80

Bldr Sales 2008 37 2,707 SF $331,285 $122.38

Bldr Sales 2009 61 2,609 SF $283,778 $108.76

Bldr Sales 2010 46 2,757 SF $296,613 $107.59

Resales 2010 13 2,505 SF $262,465 $107.31

Resales 2011 12 2,784SF $220,417 $79.17

Total AV 2011/2012 205 2,667 SF $255,744 $95.89

* Assessed Value, Original Builder Sale or Resale

* Assessed Value, Original Builder Sale or Resale

Ms. Mays Kakish December 7, 2011 Page 12

To test the reasonableness of the Assessed Values the appraisers searched the public records for sales within the CFO between January 1, 2010, and December 1, 2011. The sales used to test the aggregate Assessed Value per square foot included dwelling unit size, sales price and date of sale. Forty-three sales were uncovered, of which 22 sales occurred during 2010 and 21 sales within eleven months of 2011. The table below summarizes the sales from the merchant builder, resales and Assessed Value for Zones A and B of CFO No. 2005-5. Please refer to the Addenda for a summary of each resale used in the Limited Appraisal.

Summary of Sales & Assessed Values within Zone A CFD No. 2005-5

AV/Sale* Year No. of Units Avg. Size Avg. I/DU Avg. I/SF

Bldr Sales 2006 5 2,600 SF $466,440 $179.41

Bldr Sales 2007 56 2,635 SF $431,668 $163.80

Bldr Sales 2008 37 2,707 SF $331,285 $122.38

Bldr Sales 2009 61 2,609 SF $283,778 $108.76

Bldr Sales 2010 46 2,757 SF $296,613 $107.59

Resales 2010 13 2,505 SF $262,465 $107.31

Resales 2011 12 2,784 SF $220,417 $79.17

Tota/AV 2011/2012 205 2,667 SF $255,744 $95.89

* Assessed Value, Original Builder Sale or Resale

Summary of Sales & Assessed Values within Zone B CFD No. 2005..S

AV/Sale* Year No. of Units Avg. Size Avg. I/DU Avg. I/SF

Bldr Sales 2006 4 1,930 SF $387,550 $200.86

Bldr Sales 2007 49 1,927 SF $372,953 $193.57

Bldr Sales 2008 39 1,911 SF $284,118 $148.65

Bldr Sales 2009 37 1,899 SF $244,044 $128.54

Resales 2010 9 1,925 SF $194,556 $101.01

Resales 2011 9 2,015 SF $174,878 $86.79

Total AV 2011/2012 129 1,914 SF $198,875 $103.90

* Assessed Value, Original Builder Sale or Resale

Ms. Mays KakishDecember 7, 2011Page 13

The aggregate average Assessed Value per square foot is relatively supportedby the 2010 sales and resales within CFD No. 2005-5. However, the resales during2011 continued to decline in price and price per square foot. The actual resales withinthe subject CFD reflect the state of the residential market over the last 11 months. Thechange in price per square foot from the average aggregate Assessed Value per squarefoot to the 2011 average sales price per square foot is down approximately 17% in ZoneA and approximately 16% in Zone B. The gross price decline from sales in 2007 to theresales in 2011 is approximately 52% for Zone A and approximately 55% for Zone B.The overall price declines are relatively consistent with the residential market inRiverside County. The overall decline in home prices in Riverside County fromDecember 2006 to October 2011 is reported by DataQuick to be 57%. The overallfinished lot price decline in Moreno Valley from the peak of the market to mid-2011 isreported to be 50%, by the Hoffman Company.

Based on the data summarized above, a review of actively selling projects in thegeneral market area of CFD No. 2005-5, our knowledge of the current residentialmarket and current projections of the near-term residential market in Riverside County,we have estimated a conservative value of $80.00 per square foot for the 2,667 squarefoot average size dwelling within Zone A. Similarly, we have estimated a conservativevalue of $87.00 per square foot for the 1,914 square foot average size dwelling withinZone B. The estimated Minimum Market Value for Zones A and B are:

Zone A: $80.00/SF X 2,667 Square Feet X 205 DUs = $43,738,800Rounded to: $43,740,000

Zone B: $87.00/SF X 1,914 Square Feet X 129 DUs = $21,480,822Rounded to: $21,480,000

Special Tax Zone CThe merchant builder land is valued by the Static Residual Analysis. The purpose

of the Static Residual Analysis is to estimate a value for the land assuming no directconstruction has taken place. This method is particularly helpful when development for asubdivision represents the highest and best use and when competitive house sales areavailable. Reportedly, the Static Residual Analysis is by far the most commonly used bymerchant builders when determining price for land.

The Static Residual Analysis is useful for projects that will have a typical holdingperiod of one to two years which represents the typical holding period sought by merchantbuilders. The Static Residual Analysis best replicates the investor's analysis whendetermining what can be paid for the land based on proposed product. Purchase of theland is simply treated as one of the components necessary to build the houses to sell tothe homeowner. When all the components of the end-product can be identified andreasonable estimates of costs and profit can be allocated, the Static Residual Analysisbecomes the best indicator of value to a merchant builder for a specific product. Specific

Ms. Mays Kakish December 7, 2011 Page 13

The aggregate average Assessed Value per square foot is relatively supported by the 2010 sales and resales within CFD No. 2005-5. However, the resales during 2011 continued to decline in price and price per square foot. The actual resales within the subject CFD reflect the state of the residential market over the last 11 months. The change in price per square foot from the average aggregate Assessed Value per square foot to the 2011 average sales price per square foot is down approximately 17% in Zone A and approximately 16% in Zone B. The gross price decline from sales in 2007 to the resales in 2011 is approximately 52% for Zone A and approximately 55% for Zone B. The overall price declines are relatively consistent with the residential market in Riverside County. The overall decline in home prices in Riverside County from December 2006 to October 2011 is reported by DataQuick to be 57%. The overall finished lot price decline in Moreno Valley from the peak of the market to mid-2011 is reported to be 50%, by the Hoffman Company.

Based on the data summarized above, a review of actively selling projects in the general market area of CFD No. 2005-5, our knowledge of the current residential market and current projections of the near-term residential market in Riverside County, we have estimated a conservative value of $80.00 per square foot for the 2,667 square foot average size dwelling within Zone A Similarly, we have estimated a conservative value of $87.00 per square foot for the 1,914 square foot average size dwelling within Zone B. The estimated Minimum Market Value for Zones A and B are:

Zone A: $80.00/SF X 2,667 Square Feet X 205 DUs = $43,738,800 Rounded to: $43,740,000

Zone B: $87.00/SF X 1,914 Square Feet X 129 DUs = $21,480,822 Rounded to: $21,480,000

Special Tax Zone C The merchant builder land is valued by the Static Residual Analysis. The purpose

of the Static Residual Analysis is to estimate a value for the land assuming no direct construction has taken place. This method is particularly helpful when development for a subdivision represents the highest and best use and when competitive house sales are available. Reportedly, the Static Residual Analysis is by far the most commonly used by merchant builders when determining price for land.

The Static Residual Analysis is useful for projects that will have a typical holding period of one to two years which represents the typical holding period sought by merchant builders. The Static Residual Analysis best replicates the investor's analysis when determining what can be paid for the land based on proposed product. Purchase of the land is simply treated as one of the components necessary to build the houses to sell to the homeowner. When all the components of the end-product can be identified and reasonable estimates of costs and profit can be allocated, the Static Residual Analysis becomes the best indicator of value to a merchant builder for a specific product. Specific

Ms. Mays KakishDecember 7, 2011Page 14

product information is available, which makes the Static Residual Analysis particularlymeaningful.

The Static Residual Analysis uses an estimated average base sales price asestimated by the builder. The unit sizes and estimated sales prices of the proposedproduct appear to meet current market demands in the Riverside County and MorenoValley marketplace. The base prices are considered supported based on review ofsimilar product in the Riverside County area. The appraisers have included anestimated incentive of 5% which is considered supported in today's market. The StaticResidual Analysis uses the average base sales price, less incentives, for a specificproduct, then deducts the various costs including direct and indirect costs ofconstruction, marketing, taxes and overhead, as well as the required profit margin toattract an investor in light of the risks and uncertainties of the project and residentialmarket. The Static Residual Analysis is most helpful when significant lot and or viewpremiums are not present. When negotiating land price, builders typically will considerthe value of lot premiums when they are significant, but typically do not give thepremiums full consideration. When a downturn in the market occurs or a slight stall in asales program, premiums are typically the first to be negotiated away.

End-product Sales PricesThe Static Residual Analysis uses the average base sales price without lot

premiums. The current proposed product is smaller and less expensive than theproducts within Zones A and B, which better reflects current demand. A deduction of 5%has been estimated for incentives.

Direct and Indirect Development CostsThe builder has provided direct construction costs to build the product. We have

also interviewed local builders in the Riverside County market area for estimates of directconstruction costs for similar product. The builder has estimated direct construction costsof $47.00 per square foot for the proposed product. Based on the proposed quality ofconstruction, home size and functional utility, the builder's cost estimate appearsreasonable.

Indirect construction costs have been estimated at 4% of sales price, which is foundto be an industry standard for use in the Static Residual Analysis.

General and AdministrativeGeneral and administrative costs are estimated at 3% of retail value. This category

covers such expenses as administrative, professional fees, real estate taxes, HOA dues,and miscellaneous costs. This estimate is typical and consistent with the market.

Ms. Mays Kakish December 7, 2011 Page 14

product information is available, which makes the Static Residual Analysis particularly meaningful.

The Static Residual Analysis uses an estimated average base sales price as estimated by the builder. The unit sizes and estimated sales prices of the proposed product appear to meet current market demands in the Riverside County and Moreno Valley marketplace. The base prices are considered supported based on review of similar product in the Riverside County area. The appraisers have included an estimated incentive of 5% which is considered supported in today's market. The Static Residual Analysis uses the average base sales price, less incentives, for a specific product, then deducts the various costs including direct and indirect costs of construction, marketing, taxes and overhead, as well as the required profit margin to attract an investor in light of the risks and uncertainties of the project and residential market. The Static Residual Analysis is most helpful when significant lot and or view premiums are not present. When negotiating land price, builders typically will consider the value of lot premiums when they are significant, but typically do not give the premiums full consideration. When a downturn in the market occurs or a slight stall in a sales program, premiums are typically the first to be negotiated away.

End-product Sales Prices The Static Residual Analysis uses the average base sales price without lot

premiums. The current proposed product is smaller and less expensive than the products within Zones A and B, which better reflects current demand. A deduction of 5% has been estimated for incentives.

Direct and Indirect Development Costs The builder has provided direct construction costs to build the product. We have

also interviewed local builders in the Riverside County market area for estimates of direct construction costs for similar product. The builder has estimated direct construction costs of $47.00 per square foot for the proposed product. Based on the proposed quality of construction, home size and functional utility, the builder's cost estimate appears reasonable.

Indirect construction costs have been estimated at 4% of sales price, which is found to be an industry standard for use in the Static Residual Analysis.

General and Administrative General and administrative costs are estimated at 3% of retail value. This category

covers such expenses as administrative, professional fees, real estate taxes, HOA dues, and miscellaneous costs. This estimate is typical and consistent with the market.

Ms. Mays KakishDecember 7, 2011Page 15

Marketing and WarrantyMarketing and sales expenses plus warranty costs are estimated at 6% of retail

value. This category covers such expenses as advertising and sales commissions andhome warranties. This estimate is typical and consistent with the market.

Developer ProfitThe line item for profit reflects the required margin to attract an investor in light of

the risk and uncertainties of the specific project. The Static Residual Analysis assumesa finished lot and no on-site construction. Therefore, additional risk of development isunknown. Given the current residential market, and demand for the proposed projects,the risk of development is more than in a healthy residential market. There are 274dwellings proposed which would indicate a longer than typical holding time for amerchant builder.

Based on surveys of builders, current profit requirements are typically between8% and 12% of revenues, with occasional responses as high as 15%. These profitestimates are for projects that can be constructed and sold out in a two-year period.Higher profits can be required for longer construction/sellout periods and riskierprojects. Lower profits can be accepted in inexpensive land cost areas where homessell quickly. Zone C is proposed for detached dwellings on small lots in an area ofdecreased demand over the past 60± months. Based on a review of current absorptionfor similar subdivisions, a sales rate of 4+ units per month for the product appearsreasonable. This would indicate a 5 to 6 year sales period.

The line item for profit is based on a typical holding period sought by merchantbuilders; that of 1 to 2 years. Based on current market conditions and the outlook for thenext 24 to 36 months, an 8% line item for profit, would seem appropriate for a 2-yearsell-out time frame. Because Zone C is proposed for 274 dwellings, which based ontoday's market response will take 4 to 5 years to absorb, a 15% line item for profitappears appropriate.

Interest During Holding PeriodA typical allowance for financing during the holding period has been between 5%

and 7%. Based on recent interviews with builders in the subject market area, we havechosen a 5% deduction for financing during the holding period.

Site CostsBecause this analysis residuals to a finished lot condition, deductions for costs to

bring to a finished lot condition are not required.

Please refer to the next page for a copy of the Static Residual Analysis to finishedlot value for Zone C. The table on page 17 illustrates the estimated "as is" MinimumMarket Value for the 29± gross acre site, under the ownership of Beazer Homes Holding

Ms. Mays Kakish December 7, 2011 Page 15

Marketing and Wananty Marketing and sales expenses plus warranty costs are estimated at 6% of retail

value. This category covers such expenses as advertising and sales commissions and home warranties. This estimate is typical and consistent with the market.

Developer Profit The line item for profit reflects the required margin to attract an investor in light of

the risk and uncertainties of the specific project. The Static Residual Analysis assumes a finished lot and no on-site construction. Therefore, additional risk of development is unknown. Given the current residential market, and demand for the proposed projects, the risk of development is more than in a healthy residential market. There are 274 dwellings proposed which would indicate a longer than typical holding time for a merchant builder.

Based on surveys of builders, current profit requirements are typically between 8% and 12% of revenues, with occasional responses as high as 15%. These profit estimates are for projects that can be constructed and sold out in a two-year period. Higher profits can be required for longer construction/sellout periods and riskier projects. Lower profits can be accepted in inexpensive land cost areas where homes sell quickly. Zone C is proposed for detached dwellings on small lots in an area of decreased demand over the past 60± months. Based on a review of current absorption for similar subdivisions, a sales rate of 4:+: units per month for the product appears reasonable. This would indicate a 5 to 6 year sales period.

The line item for profit is based on a typical holding period sought by merchant builders; that of 1 to 2 years. Based on current market conditions and the outlook for the next 24 to 36 months, an 8% line item for profit, would seem appropriate for a 2-year sell-out time frame. Because Zone C is proposed for 27 4 dwellings, which based on today's market response will take 4 to 5 years to absorb, a 15% line item for profit appears appropriate.

Interest During Holding Period A typical allowance for financing during the holding period has been between 5%

and 7%. Based on recent interviews with builders in the subject market area, we have chosen a 5% deduction for financing during the holding period.

Site Costs Because this analysis residuals to a finished lot condition, deductions for costs to

bring to a finished lot condition are not required.

Please refer to the next page for a copy of the Static Residual Analysis to finished lot value for Zone C. The table on page 17 illustrates the estimated "as is" Minimum Market Value for the 29± gross acre site, under the ownership of Beazer Homes Holding

Ms. Mays KakishDecember 7, 2011Page 16

BEAZER HOMESRockcliffe

Zone CFinished Lot Value

Floor Plan Size Base Price1 1,377 $174,9902 1,664 $194,9903 1,815 $200,9904 1,987 $209,990

Average 1,711 $195,240

Incentives at 5%: $9,762

LandRatio

274 Finished LotsDetached Small Lot Condos

Average Retail Value of Improvements $185,478 $108.42(Per sq. ft.)

Average Dwelling Size (Sq. Feet) 1,711Direct Building Cost Per Sq. Ft. $47.00 $80,405Indirect Construction Costs 4.00% $7,419General & Administrative Costs 3.00% $5,564Marketing and Warranty Costs 6.00% $11,129Builder's Profit 15.00% $27,822Interest During Holding Period 5.00% $9,274Costs to bring to Finished Lot None

Finished Lot Estimate of Value $43,86544.000

Finished Lot 0.24

Ms. Mays Kakish December 7, 2011 Page 16

274 Finished Lots Detached Small Lot Condos

BEAZER HOMES Rockcliffe

ZoneC Finished Lot Value

Floor Plan 1 2 3 4

Average

Incentives at 5%:

Size 1,377 1,664 1,815 1,987

1,711

Average Retail Value of Improvements $185,478

Average Dwelling Size (Sq. Feet) 1,711 Direct Building Cost Per Sq. Ft. $47.00 $80,405 Indirect Construction Costs 4.00% $7,419 General & Administrative Costs 3.00% $5,564 Marketing and Warranty Costs 6.00% $11,129 Builder's Profit 15.00% $27,822 Interest During Holding Period 5.00% $9,274 Costs to bring to Finished Lot None

Finished Lot Estimate of Value $43,865 i44,QOD

Base Price $174,990 $194,990 $200,990 $209,990

$195,240

$9,762

Land Ratio

$108.42 (Per sq. ft.)

Finished Lot 0.24

Ms. Mays KakishDecember 7, 2011Page 17

Corp. Due to the lack of recent comparable land sales and the dramatic changes in theresidential market over the past several years, the Static Residual Analysis is used inestimating the Market Value for the partially graded undeveloped land, entitled for 274dwelling units.

274 Finished Lots X $44,000/Lot = $12,056,000Rounded To: $12,000,000

Less Costs To Complete ($10,000,000)

"As Is" Land Value Zone C $ 2,000,000

Zone C is partially graded land, entitled for 274 dwelling units on small lots, with anapproved Tentative Tract Map No. 36340 (February 24, 2011).

According to information provided by the Special Tax Consultant, the Fiscal Year2011/2012 Assessed Value for the 72 assessor parcels, subject to Special Tax, withinZone C, is $799,839. The Assessed Value is supported.

Valuation ConclusionsBased on the investigation and analyses undertaken, our experience as real

estate appraisers, and subject to all the premises, assumptions and limiting conditionsset forth in this Summary Report, we have estimated the following Minimum MarketValues for CFD No. 2005-5:

CFD No. 2005-5: $66,020,000 (rounded)Zone A - 205 Dwelling Units: $43,740,000Zone B - 129 Dwelling Units: $21,480,000

Zone C - 29± Gross Acres: $800,000

Certification We hereby certify that during the completion of this assignment, we have personally

inspected the property that is the subject of this appraisal and that, except as specificallynoted:

We have no present or contemplated future interest in the real estate orpersonal interest or bias with respect to the subject matter or the partiesinvolved in this appraisal.

We have not provided appraisal services regarding the subject propertywithin the last three years to our client, the Moreno Valley Unified SchoolDistrict.

To the best of our knowledge and belief, the statements of fact contained inthis appraisal report, upon which the analyses, opinions, and conclusionsexpressed herein are based, are true and correct.

Ms. Mays Kakish December 7, 2011 Page 17

Corp. Due to the lack of recent comparable land sales and the dramatic changes in the residential market over the past several years, the Static Residual Analysis is used in estimating the Market Value for the partially graded undeveloped land, entitled for 274 dwelling units.

274 Finished Lots X $44,000/Lot:::: Rounded To:

$12,056,000 $12,000,000

Less Costs To Complete

"As Is" Land Value Zone C

($10,000,000)

$ 2,000,000

Zone C is partially graded land, entitled for 274 dwelling units on small lots, with an approved Tentative Tract Map No. 36340 (February 24, 2011 ).

According to information provided by the Special Tax Consultant, the Fiscal Year 2011/2012 Assessed Value for the 72 assessor parcels, subject to Special Tax, within Zone C, is $799,839. The Assessed Value is supported.

Valuation Conclusions Based on the investigation and analyses undertaken, our experience as real

estate appraisers, and subject to all the premises, assumptions and limiting conditions set forlh in this Summary Report, we have estimated the following Minimum Market Values for CFO No. 2005-5:

Certification

CFD No. 2005-5: $66,020,000 (rounded) Zone A - 205 Dwelling Units: $43,740,000

Zone B -129 Dwelling Units: $21,480,000

Zone C - 29± Gross Acres: $800,000

We hereby certify that during the completion of this assignment, we have personally inspected the property that is the subject of this appraisal and that, except as specifically noted:

We have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subject matter or the parties involved in this appraisal.

We have not provided appraisal services regarding the subject property within the last three years to our client, the Moreno Valley Unified School District.

To the best of our knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct.

Ms. Mays Kakish December 7, 2011 Page 18

Our engagement in this assignment was not contingent upon developing or reporting predetermined results. The compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.

The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

As of the date of this report, James B. Harris has completed the requirements of the continuing education program of the Appraisal Institute.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions.

No one provided significant real property appraisal assistance to the persons signing this certificate.

Disclosure of the contents of this appraisal is governed by the Bylaws and Regulations of the Appraisal Institute. In furtherance of the aims of the Institute to develop higher standards of professional performance by its Members, we may be required to submit to authorized committees of said Institute copies of this appraisal and any subsequent changes or modifications thereof.

Respectfully submitted,

18.LtM: ~ ,~ Berri Cannon Harris Vice President AG009147

B~ ames 8. Harris, MAI resident

AG001846

ADDENDAADDENDA

HARRIS REALTY APPRAISAL5100 Birch Street, Suite 200Newport Beach, CA 92660

(949) 851-1227

HARRIS REAL TY APPRAISAL 5100 Birch Street, Suite 200 Newport Beach, CA 92660

(949) 851-1227

QUALIFICATIONSOF

JAMES B. HARRIS, MAI

PROFESSIONAL BACKGROUND

Actively engaged as a real estate analyst and consulting appraiser since 1971. President andPrincipal of Harris Realty Appraisal, with offices at:

5100 Birch Street, Suite 200Newport Beach, California 92660

Before forming Harris Realty Appraisal, in 1982, was employed with Real Estate Analysts of Newport,Inc. (REAN) as a Principal and Vice President. Prior to employment with REAN was employed with theBank of America as the Assistant Urban Appraisal Supervisor. Previously, was employed by the VerneCox Company as a real estate appraiser.

PROFESSIONAL ORGANIZATIONS

Member of the Appraisal Institute, with MAI designation No. 6508Director, Southern California Chapter — 1998, 1999Chair, Orange County Branch, Southern California Chapter -1997Vice-Chair, Orange County Branch, Southern California Chapter - 1996Member, Region VII Regional Governing Committee - 1991 to 1995, 1997, 1998Member, Southern California Chapter Executive Committee - 1990, 1997 to 1999Chairman, Southern California Chapter Seminar Committee - 1991Chairman, Southern California Chapter Workshop Committee - 1990Member, Southern California Chapter Admissions Committee - 1983 to 1989Member, Regional Standards of Professional Practice Committee -1985 - 1997

Member of the International Right-of-Way Association, Orange County Chapter 67.

California State Certified Appraiser, Number AG001846

EDUCATIONAL ACTIVITIES

B.S., California State Polytechnic University, Pomona, 1972.

Successfully completed the following courses sponsored by the Appraisal Institute and the Right-of-Way Association:

Course I-ACourse I-BCourse IICourse IVCourse VICourse VIIICourse SPPCourse 401

Principles of Real Estate AppraisalCapitalization TheoryUrban PropertiesLitigation ValuationInvestment AnalysisSingle-Family Residential AppraisalStandards of Professional PracticeAppraisal of Partial Acquisitions

Has attended numerous seminars sponsored by the Appraisal Institute and the International Right-of-Way Association.

QUALIFICATIONS OF

JAMES B. HARRIS, MAI

PROFESSIONAL BACKGROUND

Actively engaged as a real estate analyst and consulting appraiser since 1971. President and Principal of Harris Realty Appraisal, with offices at:

5100 Birch Street, Suite 200 Newport Beach, California 92660

Before forming Harris Realty Appraisal, in 1982, was employed with Rea! Estate Analysts of Newport, Inc. (REAN) as a Principal and Vice President. Prior to emp!oyment with REAN was employed with the Bank of America as the Assistant Urban Appraisal Supervisor. Previously, was employed by the Verne Cox Company as a real estate appraiser.

PROFESSIONAL ORGANIZATIONS

Member of the Appraisal Institute, with MAI designation No. 6508 Director, Southern California Chapter-1998, 1999 Chair, Orange County Branch, Southern California Chapter -1997 Vice-Chair, Orange County Branch, Southern California Chapter- 1996 Member, Region VII Regional Governing Committee-1991 to 1995, 1997, 1998 Member, Southern California Chapter Executive Committee-1990, 1997 to 1999 Chairman, Southern California Chapter Seminar Committee - 1991 Chairman, Southern California Chapter Workshop Committee - 1990 Member, Southern California Chapter Admissions Committee - 1983 to 1989 Member, Regional Standards of Professional Practice Committee -1985 - 1997

Member of the International Right-of-Way Association, Orange County Chapter 67.

California State Certified Appraiser, Number AG001846

EDUCATIONAL ACTIVITIES

B.S., California State Polytechnic University, Pomona. 1972.

Successfully completed the following courses sponsored by the Appraisal Institute and the Right-of­Way Association:

Course I-A Course I-B Course!! Course IV Course VI Course VIII Course SPP Course 401

Principles of Real Estate Appraisal Capitalization Theory Urban Properties Litigation Valuation Investment Analysis Single-Family Residential Appraisal Standards of Professional Practice Appraisal of Partial Acquisitions

Has attended numerous seminars sponsored by the Appraisal Institute and the International Right­of-Way Association.

TEACHING AND LECTURING ACTIVITIES

Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine, UCLA,California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation ofMunicipal Analysts.

MISCELLANEOUS

Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regardingAppraisal Standards for Land Secured Financing (March 2003 through June 2004)

LEGAL EXPERIENCE

Testified as an expert witness in the Superior Court of the County of Los Angeles and the County of SanBernardino and in the Federal Bankruptcy Courts five times concerning the issues of Eminent Domain,Bankruptcy, and Specific Performance. He has been deposed numerous times concerning these andother issues. This legal experience has been for both Plaintiff and Respondent clients. He has preparednumerous appraisals for submission to the IRS, without having values overturned. He has worked closelywith numerous Bond Counsel in the completion of 175 Land Secured Municipal Bond Financingappraisals over the last five years.

SCOPE OF EXPERIENCE

Feasibility and Consultive Studies

Feasibility and market analyses, including the use of computer-based economic models for both landdevelopments and investment properties such as shopping centers, industrial parks, mobile home parks,condominium projects, hotels, and residential projects.

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also hascompleted out-of-state appraisal assignments in Arizona, Florida, Georgia, Hawaii, Nevada, New Jersey,Oklahoma, Oregon, and Washington.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile home parks,apartment houses, and single-family residences.

Commercial

Office buildings, hotels, motels, retail store buildings, restaurants, power shopping centers,neighborhood shopping centers, and convenience shopping centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research and developmentfacilities.

Vacant Land

Community Facilities Districts, Assessment Districts, master planned communities, residential,commercial and industrial sites; full and partial takings for public acquisitions.

TEACHING AND LECTURING ACTIVITIES

Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine, UCLA, California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation of Municipal Analysts.

MISCELLANEOUS

Member of the Advisory Pane! to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004)

LEGAL EXPERIENCE

T estlfied as an expert witness in the Superlor Court of the County of Los Angeles and the County of San Bernardino and in the Federal Bankruptcy Courts five times concerning the issues of Eminent Domain, Bankruptcy, and Specific Performance. He has been deposed numerous times concerning these and other issues. This legal experience has been for both Plaintiff and Respondent clients_ He has prepared numerous appraisals for submission to the IRS, without having values overturned. He has worked closely with numerous Bond Counsel in the completion of 175 Land Secured Municipal Bond Financing appraisals over the last five years.

SCOPE OF EXPERIENCE

Feasibility and Consultive Studies

Feasibility and market analyses, including the use of computer-based economic models for both land developments and investment properties such as shopping centers, industrial parks, mobile home parks, condominium projects, hotels, and residential projects.

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assignments in Arizona, Florida, Georgia, Hawaii, Nevada, New Jersey, Oklahoma, Oregon, and Washington.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences.

Commercial

Office buildings, hotels, motels, retail store buildings, restaurants, power shopping centers, neighborhood shopping centers, and convenience shopping centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities.

Vacant Land

Community Facilities Districts, Assessment Districts, master planned communities, residential. commercial and industrial sites; full and partial takings for public acquisitions.

QUALIFICATIONSOF

BERRI CANNON HARRIS

PROFESSIONAL BACKGROUND

Actively engaged as a real estate appraiser since 1982. Vice President of Harris RealtyAppraisal, with offices at:

5100 Birch Street, Suite 200Newport Beach, California 92660

Before joining Harris Realty Appraisal was employed with Interstate Appraisal Corporation asAssistant Vice President. Prior to employment with Interstate Appraisal was employed withReal Estate Analysts of Newport Beach as a Research Assistant.

PROFESSIONAL ORGANIZATIONS

Candidate of the Appraisal Institute for the MAI designation.Co-Chair, Southern California Chapter Hospitality Committee - 1994 - 1998Chair, Southern California Chapter Research Committee - 1992, 1993

Women in Commercial Real Estate, Member Orange County Chapter.Chair, Special Events — 1998, 1999, 2000, 2001, 2002, 2003Second Vice-President - 1996, 1997Treasurer - 1993, 1994, 1995Chair, Network Luncheon Committee - 1991, 1992

California State Certified Appraiser, Number AG009147

EDUCATIONAL ACTIVITIES

B.S., University of Redlands, Redlands, California

Successfully completed the following courses sponsored by the Appraisal Institute:

Principles of Real Estate AppraisalBasic Valuation ProceduresCapitalization Theory and Techniques - ACapitalization Theory and Techniques - BReport Writing and Valuation AnalysesStandards of Professional PracticeCase Studies in Real Estate Valuation

Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended realestate related courses through University of California-Irvine.

QUALIFICATIONS OF

BERRI CANNON HARRIS

PROFESSIONAL BACKGROUND

Actively engaged as a real estate appraiser since 1982. Vice President of Harris Realty Appraisal, wlth offices at:

5100 Birch Street, Suite 200 Newport Beach, California 92660

Before joining Harris Realty Appraisal was employed with Interstate Appraisal Corporation as Assistant Vice President. Prior to employment with Interstate Appraisal was employed with Real Estate Analysts of Newport Beach as a Research Assistant.

PROFESSIONAL ORGANIZATIONS

Candidate of the Appraisal Institute for the MAI designation. Co-Chair, Southern California Chapter Hospitality Commlttee-1994 -1998 Chair, Southern California Chapter Research Committee -1992, 1993

Women in Commercial Real Estate, Member Orange County Chapter. Chair, Special Events - 1998, 1999, 2000, 2001, 2002, 2003 Second Vice-President - 1996, 1997 Treasurer- 1993, 1994, 1995 Chair, Network Luncheon Committee - 1991, 1992

California State Certified Appraiser, Number AG009147

EDUCATIONAL ACTIVITIES

B.S., University of Redlands, Redlands, California

Successfully completed the following courses sponsored by the Appraisal Institute:

Principles of Real Estate Appraisal Basic Valuation Procedures Capitalization Theory and Techniques - A Capitalization Theory and Techniques - B Report Writing and Valuation Analyses Standards of Professional Practice Case Studies in Real Estate Valuation

Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended real estate related courses through University of California-Irvine.

LECTURING ACTIVITIES

Seminars and lectures presented to UCLA, California Debt and Investment AdvisoryCommission, and Stone & Youngberg.

MISCELLANEOUS

Member of the Advisory Panel to the California Debt and Investment Advisory Commission,regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004)

SCOPE OF EXPERIENCE

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California.Also has completed out-of-state appraisal assignments in Arizona and Hawaii.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile homeparks, apartment houses, and single-family residences.

Commercial

Office buildings, retail store buildings, restaurants, neighborhood-shopping centers, stripretail centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research anddevelopment facilities.

Vacant Land

Residential sites, commercial sites, industrial sites, large multi-unit housing, masterplanned unit developments, and agricultural acreage. Specializing in CommunityFacilities District and Assessment District appraisal assignments.

LECTURING ACTIVITIES

Seminars and lectures presented to UCLA, California Debt and Investment Advisory Commission, and Stone & Youngberg.

MISCELLANEOUS

Member of the Advisory Panel to the Californla Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004)

SCOPE OF EXPERIENCE

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assignments in Arizona and Hawaii.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences.

Commercial

Office buildings, retail store buildings, restaurants, neighborhood-shopping centers, strip retail centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilitles.

Vacant Land

Residential sites, commercial sites, industrial sites, large multi-unit housing, master planned unit developments, and agricultural acreage. Specializing in Community Facilities District and Assessment Dlstrict appraisal assignments.

BOUNDARY MAP

Bank of America Bank One Commerce Bank Downey S&L Assoc. Fremont Investment and Loan Institutional Housing Partners

Army Corps of Engineers California State University Caltrans City of Adelanto City of Aliso Viejo City of Beaumont City of Camarillo City of Corona City of Costa Mesa Clty of Encinitas City of Fontana City of Fullerton City of Hesperia City of Honolulu City of Huntington Beach City of Indian Wells City of Indio City of Irvine City of Lake Elsinore City of Loma Linda City of Los Angeles City of Moreno Valley City of Newport Beach City of Oceanside City of Ontario

Arter & Hadden Bronson, Bronson & McKinnon

PARTIAL LIST OF CLIENTS

Lending Institutions

NationsBank Preferred Bank Santa Monica Bank Tokai Bank Union Bank Wells Fargo Bank

Public Agencies

City of Palm Springs City of Perris City of Rialto City of Riverside City of San Marcos City of Tustin City of Victorville City of Yucaipa County of Hawaii County of Orange County of Riverside County of San Bernardino Eastern Municipal Water District Orange County Sheriff's Department Ramona Municipal Water District Rancho Santa Fe Comm. Services District Capistrano Unified School District Hemet Unified School District Hesperia Unified School District Romoland School District Saddleback Valley Unified School District Santa Ana Unified School District Sulphur Springs School District Val Verde Unified School District Yucaipa-Calimesa Unified School District

Law Firms

McC!intock, Weston, Benshoof, Rochefort & MacCuish

Bryan, Cave, McPheeters & McRoberts Richard Clements

Palmlri, Tyler, Wiener, Wilhelm, & Waldron Sonnenschein Nath & Rosenthal

Cox, Castle, Nicholson Gibson, Dunn & Crutcher Hill, Farrer & Burrill

Strauss & Troy Wyman, Bautzer, Rothman, Kuchel &

Silbert

PARTIAL LIST OF CLIENTS

Lending Institutions

Bank of America NationsBankBank One Preferred BankCommerce Bank Santa Monica BankDowney S&L Assoc. Tokai BankFremont Investment and Loan Union BankInstitutional Housing Partners Wells Fargo Bank

Public Agencies

Army Corps of EngineersCalifornia State UniversityCaltransCity of AdelantoCity of Aliso ViejoCity of BeaumontCity of CamarilloCity of CoronaCity of Costa MesaCity of EncinitasCity of FontanaCity of FullertonCity of HesperiaCity of HonoluluCity of Huntington BeachCity of Indian WellsCity of IndioCity of IrvineCity of Lake ElsinoreCity of Loma LindaCity of Los AngelesCity of Moreno ValleyCity of Newport BeachCity of OceansideCity of Ontario

City of Palm SpringsCity of PerrisCity of RialtoCity of RiversideCity of San MarcosCity of TustinCity of VictorvilleCity of YucaipaCounty of HawaiiCounty of OrangeCounty of RiversideCounty of San BernardinoEastern Municipal Water DistrictOrange County Sheriff's DepartmentRamona Municipal Water DistrictRancho Santa Fe Comm. Services DistrictCapistrano Unified School DistrictHemet Unified School DistrictHesperia Unified School DistrictRomoland School DistrictSaddleback Valley Unified School DistrictSanta Ana Unified School DistrictSulphur Springs School DistrictVal Verde Unified School DistrictYucaipa-Calimesa Unified School District

Law Firms

Arter & HaddenBronson, Bronson & McKinnonBryan, Cave, McPheeters & McRobertsRichard ClementsCox, Castle, NicholsonGibson, Dunn & CrutcherHill, Farrer & Burrill

McClintock, Weston, Benshoof,Rochefort & MacCuish

Palmiri, Tyler, Wiener, Wilhelm, & WaldronSonnenschein Nath & RosenthalStrauss & TroyWyman, Bautzer, Rothman, Kuchel &

Silbert

BOUNDARY MAP

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RESALES DURING 2010 - ZONES A & B

Recording APN Tract Lot Address Street Owner Name Bldg.SF Sale Price $/SF Date Doc.No. Yr. BuHt

488-121-022 32834 21 13065 Creekside Way Javed Khan 2,961 $250,000 $84.43 1/15/2010 19491 2007 488-131-018 32834 44 27058 Dracaea Ave Christopher E & Julia M Santiago 2,961 $255,000 $86.12 2/18/2010 73505 2007 488-121-014 32834 13 13052 Creekside Way Cristita Delacruz 2,961 $235,000 $79.37 3/12/2010 114698 2007 488-120-034 32834 193 27221 Golden field Ct Jeffrey B & Angela Andress 2,818 $325,000 $115.33 3/29/2010 140965 2006 488-120-035 32834 194 27231 Golden Field Ct Milagros L Cunamay 2,961 $345,000 $116.51 4/12/2010 165582 2006 488-120-033 32834 192 27211 Golden field Ct Enrlque Bravo 2,145 $310,000 $144.12 4/21/2010 183186 2006 488-120-003 32834 191 27201 Golden Field Ct Wllliam J Betts 1,858 $286,000 $153.93 4/27/2010 191009 2006 488-120-036 32834 195 27232 Golden Field Ct Sabrina L Donahue 3,218 $357,545 $111.11 4/28/2010 193817 2006 488-132-001 32834 48 27250 Dracaea Ave Octave M AleJ1:is 2,145 $205,000 $95.30 7/2/2010 311694 2007 488-131-007 32834 33 27029 Quail Creek Dr Phillip Chi 2,961 $225,000 $75.99 7/28/2010 352125 2007 488-132-023 32834 70 27160 Quail Creek Dr Cintia C & Herman J Rivas 1,858 $213,500 $114.91 9/3/2010 426004 2007 488-132-028 32834 75 27100 Quail Creek Dr Janis Tyler 1,858 $200,000 $107.64 9/22/2010 453331 2007 488-130-004 32834 26 13125 Creekside Way Stanley R Minor 1,858 $205,000 $110.33 10/20/2010 501522 2007

13 Resales during 2010 for Zone A Averages: 2,505 $262,465 $107.31

488-122-022 32836 33 12911 Dolomite ln Miguel Guerrero 2,047 $200,00D $97.70 3/11/2010 112615 2007 488-122-012 32836 23 12991 Dolomite Ln Laurence A Slicer 2,047 $220,000 $107.47 4/21/2010 181921 2007 488-122-015 32836 26 12967 Dolomite Ln Gina R & Joann T Strawn 1,874 $176,000 $93.92 6/14/2010 271519 2007 488-110-D03 32836 36 12887 Dolomite Ln Noel Madrigal 1,932 $199,000 $103.00 6/3D/2010 306739 2007 488-122-032 32836 107 12928 Dolomite ln Mee Jung Yoon 1,874 $210,000 $112.06 7/29/2010 355357 2007 488-110-072 32836 118 12843 Serpentine Way Tianlei Han 1,932 $198,000 $102.48 9/29/2010 464559 2007 488-110--0 65 32836 111 12880 Dolomite Ln Christopher Rush 1,874 $190,000 $101.39 11/19/2010 560000 2007 488-110-008 32836 41 12847 Dolomite Ln Carissa Balinghasay 1,874 $182,500 $97.39 ll/24/2010 567611 2007 488-122-018 32836 29 12943 Dolomite ln Joseph A & Holly N Alejandre 1,874 $175,500 $93.65 12/9/2010 588925 2007

9 Resales during 2010 for Zone B Averases: 1,925 $194,556 $101.01

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Recording APN Tract Lot Address Street Owner Name Bldg. SF Sale Price $/SF Date Doc. No. Yr. Built

488-132-005 32834 52 27186 DracaeaAve Mark & Patricia Garcia 2,961 $230,000 $77.68 3/28/2011 135028 2007 488-130-003 32834 25 13115 Creekside Way Michael & Chekesha M Mccollum 2,961 $240,000 $81.05 3/29/2011 137995 2007 488-131-001 32834 27 13149 Creekside Way Frank G Gonzalez 1,858 $190,000 $102.26 3/31/2011 142069 2007 488-132-027 32834 74 27112 Quail Creek Dr Cynthia Olivas 2,818 $230,000 $81.62 4/18/2011 171212 2006 488-140-025 32834 113 13060 Wild Sage Ln Raul C & Isabel S flerez 1,858 $165,000 $88.81 5/20/2011 225249 2009 488-121-019 32834 18 13029 Creekside Way Luis A Munoz 2,961 $226,000 $76.33 6/22/2011 274097 2007 488-131-003 32834 29 13173 Creekside Way Robert L Miller 2,961 $245,000 $82.74 7/22/2011 322208 2007 488-140-024 32834 112 13072 Wild Sage Ln Shui YChen 3,218 $275,000 $85.46 7/26/2011 325614 2009 488-131-00S 32834 31 13197 Creekside Way Swati S Desai 2,961 $160,000 $54.04 7/29/2011 332130 2007 488-132-004 32834 51 27202 Oracaea Ave Laureano C Corpuz 2,818 $219,000 $77.71 8/23/2011 373383 2007 488-131-004 32834 30 13185 Creekside Way Larry R & Connie Rice 2,818 $240,000 $85.17 10/18/2011 458300 2007 488-133-022 32834 140 13148 Creekside Way Juan C & Griselda Mendoza 3,218 $225,000 $69.92 11/2/2011 486513 2007

12 Resales during 2011 for Zone A Averages: 2,784 $220,417 $79.17

488-122-036 32836 126 27069 Copper Run Jalal Ahmadpour 1,874 $147,000 $78.44 1/6/2011 7577 2007 488-122-029 32836 104 12952 Dolomite Ln Allison S Roberts 2,047 $205,000 $100.15 1/13/2011 18041 2007 488-122-033 32836 108 12920 Dolomite Ln Rhonda Kirkwood 2,047 $199,000 $97.22 1/28/2011 45929 2007 488-380-024 32836 76 27041 Dolostone Wav Cameron Wade 2,047 $179,000 $87.45 4/26/2011 182639 2008 488-122-019 32836 30 12935 Dolomite Ln Zhou FamilvTrust 1,932 $164,900 $85.35 6/10/2011 256759 2007 488-380-010 32836 62 27114 Dolostone Way Zaiwei Li 2,047 $170,000 $83.05 7/29/2011 333689 2008 488-122-020 32836 31 12927 Dolomite Ln F!abrano Ramirez 2,047 $170,000 $83.05 9/15/2011 409038 2007 488-110-010 32836 43 12831 Dolomite Ln Allan D Advintula 2,047 $183,000 $89.40 11/9/2011 501905 2007 488-110-076 32836 122 1287S Serpentine Way David Wong 2,047 $156,000 $76.21 11/16/2011 509697 2007

9 Resales during 2011 for Zone B Averages: 2,015 $174,878 $86.79

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APPENDIX C

FORM OF OPINION OF BOND COUNSEL

Upon delivery of the Bonds, Bowie, Arneson, Wiles & Giannone, Newport Beach, California, BondCounsel to the Moreno Valley Unified School District, expects to render their final approving opinion withrespect to the Bonds in substantially the following form:

Board of EducationMoreno Valley Unified School District25634 Alessandro Blvd.Moreno Valley, California 92553

Re: $9,115,000.00 Community Facilities District No. 2005-5 of theMoreno Valley Unified School District Series 2012 Special Tax BondsFinal Opinion of Bond Counsel

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by Community FacilitiesDistrict No. 2005-5 of the Moreno Valley Unified School District (“District”) of $9,115,000.00 aggregateprincipal amount of bonds designated “Community Facilities District No. 2005-5 of the Moreno ValleyUnified School District Series 2012 Special Tax Bonds” (“Bonds”). The Bonds are issued pursuant to theMello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 ofTitle 5 of the Government Code of the State of California), Resolution No. 2011-12-13 adopted by the Boardof Education of the Moreno Valley Unified School District (“School District”) acting in its capacity as theLegislative Body of the District on January 17, 2012, and the Fiscal Agent Agreement executed in connectiontherewith dated as of February 1, 2012, by and between the District and U.S. Bank National Association(“Fiscal Agent Agreement”). Capitalized terms used herein and not otherwise defined shall have the meaningsgiven such terms in the Fiscal Agent Agreement.

As Bond Counsel, we have examined copies certified to us as being true and complete copies of theproceedings in connection with the formation of the District and the issuance of the Bonds (“DistrictProceedings”). We have also examined certificates and representations of fact made by public officials andofficers of the District and the School District, the Underwriter and others as we have deemed necessary torender this opinion.

Attention is called to the fact that we have not been requested to examine and have not examined anydocuments or information relating to the District or the School District other than the record of the DistrictProceedings hereinabove referred to, and no opinion is expressed as to any financial or other information, orthe adequacy thereof which has been or may be supplied to any purchaser of the Bonds. We have assumed thegenuineness of all documents and signatures presented to us (whether as originals or as copies) and the due andlegal execution and delivery thereof by, and validity against, any parties other than the District.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and courtdecisions and cover certain matters not directly addressed by such authorities. Such opinions may be affectedby actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, orto inform any person, whether any such actions are taken or omitted or events do occur or any matters thatcome to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is notintended to, and may not, be relied upon in connection with any such actions, events or matters. Our

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engagement with respect to the Bonds has concluded with the issuance thereof and we disclaim any obligationto update this letter.

As to questions of fact material to our opinion, we have relied upon the representations of fact andcertifications referred to above, and we have not undertaken by independent investigation to verify theauthenticity or the accuracy of the factual matters represented, warranted or certified therein. Furthermore, wehave assumed compliance with all covenants contained in the Fiscal Agent Agreement, the Tax Certificate andother documents related to the District Proceedings, including, without limitation, covenants compliance withwhich is necessary to assure that future actions or events will not cause the interest on the Bonds to be includedin gross income for federal income tax purposes. Failure to comply with certain of such covenants may causeinterest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date oforiginal issuance of the Bonds.

In addition, we call attention to the fact that the rights and obligations under the Bonds, the FiscalAgent Agreement and the Tax Certificate and other documents related to the District Proceedings are subjectto bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other lawsrelating to creditors' rights and remedies, to the application of equitable principles, to the exercise of judicialdiscretion in appropriate cases and to limitations on legal remedies against school districts in the State ofCalifornia (“State”). We express no opinion with respect to any indemnification, contribution, penalty,choice of law, choice of forum, choice of venue, waiver or severability provisions contained in theforegoing documents. Finally, we undertake no responsibility for the accuracy, completeness or fairnessof the Official Statement or other offering material relating to the Bonds and express no opinion withrespect thereto.

The Fiscal Agent Agreement, the Tax Certificate and other documents related to the DistrictProceedings refer to certain requirements and procedures which may be changed and certain actions whichmay be taken or omitted under the circumstances and subject to terms and conditions set forth in suchdocuments. No opinion is expressed herein as to the effect on any Bond or the interest thereon if any suchchange is made, or action is taken or omitted, upon the advice or approval of counsel other than ourselves.

Based on and subject to the foregoing, and in reliance thereon, and our consideration of such questionsof 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, payable in accordance withtheir terms. The Bonds are limited obligations of the District payable solely from and secured by a pledge ofthe Net Taxes, and from other funds and accounts pursuant to the Fiscal Agent Agreement, and are notobligations of the School District, the State or any public agency thereof (other than the District). The Districthas the full right, 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 and deliveredby, and constitutes a valid and binding obligation of, the District.

3. Interest on the Bonds (including any original issue discount properly allocable to the ownerthereof) is excluded from gross income for federal income tax purposes under Section 103 of the InternalRevenue Code of 1986, as amended, and is exempt from State personal income taxes. Interest on the Bonds isnot a specific preference item for purposes of the federal alternative minimum taxes imposed on individualsand corporations, although it should be noted that, with respect to corporations, such interest will be includedas an adjustment in the calculation of alternative minimum taxable income which may affect the alternativeminimum tax liability of such corporations. We express no opinion regarding other tax consequences related tothe Bonds or to the accrual or receipt of the interest on the Bonds.

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We express no opinion as to any matter other than as expressly set forth above.

Very truly yours,

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APPENDIX D

GENERAL INFORMATION CONCERNING THE REGION

The following information concerning the City of Moreno Valley (the “City”), the County of Riverside(the “County”) and the State of California (the “State”) are presented as general background information.The Bonds are not an obligation of the City, the County or the State; and the taxing the power of none of theCity, the County or the State is pledged to the payment of the Bonds.

General

The School District encompasses approximately 752 square miles of the southern part of RiversideCounty (the “County”). Population centers include the cities of Indio, La Quinta, Indian Wells, Palm Desert,Rancho Mirage and the community of Bermuda Dunes.

The County is the fourth largest county in the State of California (the “State”), encompassingapproximately 7,243 square miles. It is located in the southern portion of the State and is bordered by SanBernardino County on the north, Los Angeles and Orange Counties on the west, the State of Arizona and theColorado River on the east, and San Diego and Imperial Counties on the south. The County, incorporated in1893, is a general law city with its County seat located in the city of Riverside.

Population

According to the State Department of Finance, Demographic Research Unit, the County’s populationwas estimated at 2,217,778 as of January 1, 2011, representing a 43.7% increase since the 2000 Census or asimple annual average increase of 3.8%. The following table presents population figures for the City ofMoreno Valley, the County of Riverside and the State of California for the years 2000 through 2011.

POPULATIONCity of Moreno Valley, County of Riverside and State of California

(2000-2011)

Calendar Year(1)City of

Moreno ValleyCounty ofRiverside

State ofCalifornia

2000(2) 142,379 1,545,387 33,873,0862001 144,312 1,589,708 34,256,8792002 147,533 1,655,291 34,725,5162003 152,355 1,730,219 35,163,6092004 158,634 1,814,485 35,570,8472005 167,262 1,895,695 35,869,1732006 176,830 1,975,913 36,116,2022007 182,330 2,049,902 36,399,6762008 185,513 2,102,741 36,704,3752009 189,690 2,140,626 36,966,7132010 192,599 2,179,692 37,223,9002011 193,365 2,189,641 37,510,766

(1) As of January 1.(2) As of April 1.Source: California Department of Finance, Demographic Research Unit.

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Employers

Employment and unemployment figures for the School District are unavailable. For the past fiveyears the unemployment rate in the County of Riverside has been above the unemployment rate of the State ofCalifornia and that of the United States. For a summary of the labor force, employment and unemploymentfigures over the past five years for the County of Riverside, the State of California and the United States as awhole see “Annual Average Industry Employment.”

The following table sets forth the major employers located in the County as of 2010:

CERTAIN MAJOR EMPLOYERS(1)

County of Riverside(2010)

Company Name Product/ServiceNo. of LocalEmployees(2)

County of Riverside County Government 17,467March Air Reserve Base Government/Military 8,600University of California, Riverside Educational Institution 7,321Stater Bros. Markets Supermarket Retailer 6,900Wal-Mart Retail Store 6,550Riverside Unified School District School District 5,099Abbott Vascular Medical & Biotech Manufacturer 4,500Pechanga Resort & Casino Casino/Resort 4,000Kaiser Permanente Riverside Medical Center Healthcare 3,600Temecula Valley Unified School District School District 2,752

(1) Certain major employers in the County may have been excluded because of the data collection methodology used by TheBusiness Press.

(2) Includes employees within the County; includes, under certain circumstances, temporary, seasonal and per diem employees.Source: The Business Press 2010 Book of Lists.

Industry and Employment

The County is a part of the Riverside-San Bernardino Primary Metropolitan Statistical Area(“PMSA”), which includes all of Riverside and San Bernardino Counties. In addition to varied manufacturingemployment, the PMSA has large and growing commercial and service sector employment, as reflected in thefollowing table.

The following table represents the Annual Average Labor Force for the City, the County and the State.

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CIVILIAN LABOR FORCE, EMPLOYMENT, UNEMPLOYMENTAND UNEMPLOYMENT RATE

City of Moreno Valley, County of Riverside and State of California(2006-2010)

Year (1) Area Labor Force Employment UnemploymentUnemployment

Rate

2006 City of Moreno Valley 83,700 78,700 4,900 5.9%Riverside County 883,400 839,000 44,400 5.0State of California 17,686,700 16,121,300 865,400 4.9

2007 City of Moreno Valley 85,800 79,700 6,000 7.0%Riverside County 903,800 849,400 54,300 6.0State of California 17,928,700 16,970,200 958,500 5.3

2008 City of Moreno Valley 86,900 78,300 8,600 9.9%Riverside County 912,100 834,700 77,400 8.5State of California 18,191,000 16,883,400 1,307,600 7.2

2009 City of Moreno Valley 88,100 74,500 13,700 15.5%Riverside County 916,600 793,600 123,000 13.4California 18,204,200 16,141,500 2,062,700 11.3

2010 City of Moreno Valley 88,100 73,200 14,900 16.9%Riverside County 913,800 779,500 134,300 14.7State of California 18,176,200 15,916,300 2,259,900 12.4

(1) March 2010 Benchmark, data not seasonally adjusted. Annual average.Source: State of California Employment Development Department.

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Building Activity

The two tables below are a five-year summary of building permit valuations and new dwelling unitsauthorized in the City of Moreno Valley since 2006.

BUILDING PERMIT VALUATIONSCity of Moreno Valley

(in thousands)(2006-2010)

2006 2007 2008 2009 2010RESIDENTIAL

New Single-Family $196,830 $98,759 $26,641 $30,174 $27,663New Multi-Family 119,390 33,789 9,052 0 6,812Alterations and Adjustments 5,748 4,781 3,739 1,457 1,713Total Residential $321,969 $137,329 $39,433 $31,652 $36,189

NON-RESIDENTIALNew Commercial $41,243 $66,287 $56,290 $1,244 $63,044New Industry 72,951 8,283 1,300 0 0New Other(1) 13,950 7,133 3,465 3,471 2,900Alterations & Adjustments 35,114 11,287 19,882 8,706 7,955Total Nonresidential $163,260 $92,991 $80,937 $13,421 $73,900

TOTAL ALL BUILDING $485,229 $230,321 $120,371 $45,053 $110,089

(1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings,residential garages, public works and utilities buildings and no-residential alterations and additions.

Note: Totals may not add up due to rounding.Source: Construction Industry Research Board.

NUMBER OF NEW DWELLING UNITSCity of Moreno Valley

(2006-2010)

2006 2007 2008 2009 2010

Single Family 849 356 116 114 91Multi-Family 1,262 450 84 0 70

TOTAL 2,111 806 200 114 161

Source: Construction Industry Research Board.

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The two tables below are a five-year summary of building permit valuations and new dwelling unitsauthorized in the County (in both incorporated and unincorporated areas) since 2006.

BUILDING PERMIT VALUATIONSCounty of Riverside

(in thousands)(2006-2010)

2006 2007 2008 2009 2010RESIDENTIAL

New Single-Family $4,412,257 $2,207,320 $1,214,752 $892,790 $ 914,057New Multi-Family 431,579 238,316 243,741 75,756 71,152Alterations and Adjustments 158,098 141,996 118,490 85,148 94,428Total Residential $5,001,934 $2,587,832 $1,576,983 $1,053,694 $1,079,637

NON-RESIDENTIALNew Commercial $648,068 $682,331 $539,944 $94,651 $191,324New Industry 288,353 184,506 70,411 12,278 6,686New Other(1) 290,010 240,765 138,766 107,332 243,266Alterations & Adjustments 303,407 350,539 292,694 162,558 274,339Total Nonresidential $1,529,838 $1,458,141 $1,041,815 $376,819 $539,379

TOTAL ALL BUILDING $ 6,531,772 $4,045,973 $2,618,798 $1,430,513 $1,619,016

(1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings,residential garages, public works and utilities buildings and no-residential alterations and additions.

Note: Totals may not add up due to rounding.Source: Construction Industry Research Board.

NUMBER OF NEW DWELLING UNITSCounty of Riverside

(2006-2010)

2006 2007 2008 2009 2010

Single Family 20,692 9,763 3,815 3,431 4,031Multi-Family 4,519 2,690 2,104 759 526

TOTAL 25,211 12,453 5,919 4,190 4,557

Source: Construction Industry Research Board.

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Retail Trade

The following table shows a five-year history of taxable sales for the City of Moreno Valley.

TAXABLE SALES TRANSACTIONSCity of Moreno Valley

(in thousands)(2005-2009)

YearRetail

Permits

Retail StoresTaxable

Transactions Total Permits

Total OutletsTaxable

Transactions

2005 1,395 $1,110,612 2,287 $1,189,4372006 1,502 1,218,440 2,316 1,307,9612007 1,398 1,170,236 2,312 1,267,0452008 1,402 1,064,374 2,342 1,154,6502009 1,546 947,927 2,040 1,018,353

Note: In 2009, retail permits expanded to include permits for food services.Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

The following table shows a five-year history of taxable sales for the County.

TAXABLE SALES TRANSACTIONSCounty of Riverside

(in thousands)(2005-2009)

YearRetail

Permits

Retail StoresTaxable

Transactions Total Permits

Total OutletsTaxable

Transactions

2005 22,691 $20,839,212 44,222 $28,256,4912006 23,322 21,842,345 43,672 29,816,2372007 22,918 21,242,516 45,279 29,023,6092008 23,604 18,689,249 46,272 26,003,5952009 29,829 16,057,488 42,765 22,227,877

Note: In 2009, retail permits expanded to include permits for food services.Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

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Annual Average Industry Employment

The following table represents the Annual Average Labor Force and Industry Employment for the pastfive years in Riverside County which is part of the Riverside-San Bernardino-Ontario Metropolitan StatisticalArea (“MSA”).

ANNUAL AVERAGE INDUSTRY EMPLOYMENTRiverside-San Bernardino-Ontario

Metropolitan Statistical Area(2006-2010)

2006 2007 2008 2009 2010

Agriculture 17,300 16,400 15,900 14,900 14,800Natural Resources & Mining 1,400 1,300 1,200 1,100 1,000Construction 127,500 112,500 90,70 67,900 59,500Manufacturing 123,400 118,500 106,900 88,800 84,600Wholesale Trade 54,200 56,800 54,100 48,900 48,800Retail Trade 173,200 175,600 168,600 156,200 154,600Transportation, Warehousing & Utilities 63,800 69,500 70,200 66,800 66,500Information 15,300 15,400 14,900 15,100 15,900Financial Activities 51,500 49,800 46,100 42,500 41,100Professional & Business Services 142,400 145,200 137,700 124,300 121,500Education & Health Services 122,100 127,200 131,800 133,600 133,800Leisure & Hospitality 128,100 132,600 131,000 123,800 122,100Other Services 42,500 41,200 40,800 37,300 37,500Government 222,500 225,300 229,900 228,400 224,300Total All Industries 1,285,000 1,287,300 1,239,700 1,149,700 1,126,000

Notes: The unemployment rates are calculated using unrounded data. Data may not add up due to rounding. Data does notinclude proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involvedin labor/management trade disputes. Employment reported by place of work.Source: State Employment Development Department, Labor Market Information Division (March 2010 Benchmark).

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Effective Buying Income

“Effective Buying Income” is defined as personal income less personal tax and nontax payments, anumber often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages andsalaries, other than labor-related income (such as employer contributions to private pension funds), proprietor’sincome, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings),dividends paid by corporations, interest income from all sources and transfer payments (such as pensions andwelfare assistance). Deducted from this total are personal taxes (federal, state and local, nontax paymentsfines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. governmentdefinitions, the resultant figure is commonly known as “disposable personal income.”

TOTAL EFFECTIVE BUYING INCOMECounty of Riverside and State of California

(2006-2010)

Year and Area

TotalEffective Buying

Income(2)

Median HouseholdEffective Buying

IncomePercent of Households with

Income over $50,000

2006Riverside County $35,656,620 $43,490 41.8%California $764,120,082 $46,275 45.6%

2007Riverside County $38,631,365 $45,310 44.3%California $814,894,437 $48,203 47.9%

2008Riverside County $40,935,407 $46,958 46.2%California $832,531,445 $48,952 48.8%

2009Riverside County $40,935,686 $46,852 46.2%California $832,528,809 $48,915 48.7%

2010Riverside County $41,337,856 $47,080 46.6%California $844,822,042 $49,736 49.7%

______________(1) Estimated.(2) Dollars in thousands.Source: Demographics USA, Trade Dimensions for 2006, “Survey of Buying Power,” Sales & Marketing ManagementMagazine, 2007 and 2008, and Nielson Solution Center for 2009 and 2010.

Personal Income

Personal Income is the income that is received by all persons from all sources. It is calculated as thesum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventoryvaluation and capital consumption adjustments, rental income of persons with capital consumption adjustment,personal dividend income, personal interest income, and personal current transfer receipts, less contributionsfor government social insurance.

The personal income of an area is the income that is received by, or on behalf of, all the individualswho live in the area; therefore, the estimates of personal income are presented by the place of residence of theincome recipients.

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Total personal income in Riverside County increased by 91% between 1998 and 2009. The followingtable summarizes personal income for Riverside County for 1998 through 2009.

PERSONAL INCOMECounty of Riverside

(1998-2009)(in thousands)

Year Riverside CountyAnnual

Percent Change

1998 $33,155,565 ---1999 35,237,015 6.3%2000 38,238,713 8.52001 41,362,723 8.22002 43,619,440 5.52003 46,998,865 7.82004 50,899,043 8.32005 55,177,252 8.42006 60,450,090 9.62007 63,749,464 5.52008 64,496,632 1.22009 63,228,086 (2.0)

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

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APPENDIX E

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

COMMUNITY FACILITIES DISTRICT NO. 2005-5OF THE MORENO VALLEY UNIFIED SCHOOL DISTRICT

SERIES 2012 SPECIAL TAX BONDS

The following is a brief summary of certain provisions of the Fiscal Agent Agreement relative to theabove-referenced 2012 Special Tax Bonds. This summary is not intended to be definitive and is qualified in itsentirety by reference to such Fiscal Agent Agreement for the complete terms of the Fiscal Agent Agreement.Copies of the Fiscal Agent Agreement are available upon request from the Moreno Valley Unified SchoolDistrict.

DEFINITIONS

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

“2012 Bonds” means the Community Facilities District No. 2005-5 of the Moreno Valley UnifiedSchool District Series 2012 Special Tax Bonds.

“2012 Term Bond(s)” means the 2012 Bonds maturing on September 1, 2029, September 1, 2034,and September 1, 2041.

“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311, etseq., of the Government Code of the State and any successor provisions thereto.

“Additional Bonds” means all bonds, notes or similar evidences of indebtedness hereafter issued,payable out of the Net Taxes and which, as provided for in the Fiscal Agent Agreement, rank on a parity withthe 2012 Bonds, except for bonds issued to refund the 2012 Bonds or refund any other bonds, notes, orindebtedness of the District.

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

“Administrative Expenses” means the administrative costs with respect to the calculation andcollection of the Special Taxes and any other costs related to the Bonds, including the fees and expenses of theFiscal Agent and any persons, parties, consultants or attorneys employed pursuant to the Fiscal AgentAgreement, costs and legal expenses of foreclosure actions undertaken pursuant to the Fiscal Agent Agreementto the extent not recovered pursuant to statutory authorization, costs otherwise incurred by the District in orderto carry out the authorized purposes of the Bonds, including statutory disclosure and reporting requirements forthe District, overseeing the Developer’s continuing disclosure obligations and reporting requirements, if any,rebate compliance and "Administrative Expenses" as defined in the Rate and Method.

“Administrative Expense Requirement” means the amount of $33,784.87 as further set forth in, andsubject to the provisions and limitations of, the Fiscal Agent Agreement.

“Amended Notice of Special Tax Lien” means that certain “Amended Notice of Special Tax Lienfor Community Facilities District No. 2005-5 of the Moreno Valley Unified School District,” approved by the

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Board on January 17, 2012, by adoption of Resolution No. 2011-12-15 and as thereafter recorded as DocumentNo. 2012-0043721 of the County Recorder of the County of Riverside on January 31, 2012.

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

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

(a) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those forwhich the faith and credit of the United States are pledged for the payment of principal and interest, and whichhave a maximum term to maturity not to exceed three years.

(b) Obligations of any of the following federal agencies which obligations represent thefull faith 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 notfully guaranteed 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’s issued by the Federal National Mortgage Association (FNMA) orFederal Home Loan Mortgage Corporation (FHLMC)

‒‒ Obligations of the Resolution Funding Corporation (REFCORP)

‒‒ Senior debt obligations of the Federal Home Loan Bank System.

(d) Registered state warrants or treasury notes or bonds of the State, including bondspayable solely out of the revenues from a revenue-producing property owned, controlled, or operated by theState or by a department, board, agency, or authority of the State, which are rated in one of the two highestshort-term or long-term rating categories by Moody’s or Standard & Poor’s.

E - 3

(e) Registered bonds, notes, warrants or other evidences of indebtedness of any localagency of the State, including bonds payable solely out of revenues from a revenue-producing property owned,controlled, or operated by the local agency, where the interest on such local agency obligation is exempt fromfederal and State income taxes and which are rated in one of the two highest short-term or long-term ratingcategories by Moody’s or Standard & Poor’s.

(f) Deposit accounts, time certificates of deposit or negotiable certificates of depositissued by 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 shall beone or more of the following:

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

(2) Continuously and fully secured by securities described in clause (a) or (b)above which shall have a market value, as determined on a marked-to-market basis calculated at least weekly, and exclusive of accrued interest, ornot less than 102% of the principal amount of the certificates of deposit.

(g) Commercial paper of “prime” quality of the highest ranking or of the highest letterand numerical 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 have totalassets in excess of $500,000,000 and that have an “A” or higher rating for the issuer’s debentures, other thancommercial paper, by Moody’s and Standard & Poor’s, provided that purchases of eligible commercial papermay not exceed 180 days’ maturity nor represent more than 10% of the outstanding commercial paper of anissuing corporation. Purchases of commercial paper may not exceed 20% of the invested proceeds of theBonds.

(h) A repurchase agreement with a state or nationally chartered bank or trust company ora national 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 “AA”by Standard & Poor’s or “Aa2” by Moody’s, provided that all of the following conditions are satisfied:

(1) (A) the agreement is secured by any one or more of the securitiesdescribed in clause (a) above of this definition of AuthorizedInvestments (“Underlying Securities”);

(B) the Underlying Securities are required by the repurchase agreementto be held by a bank, trust company, or primary dealer having acombined capital and surplus of at least $100,000,000 and which isindependent of the issuer of the repurchase agreement (“Holder ofCollateral”) and the Underlying Securities have been transferred tothe Holder of Collateral in accordance with applicable state andfederal laws (other than by means of entries on the transferor’sbooks); and

(C) the Underlying Securities are maintained at a market value, asdetermined on a marked-to-market basis calculated at least weekly,of not less than 103% of the amount so invested and at such levelsand additional conditions not otherwise in conflict with the termsabove as would be acceptable to Standard & Poor’s or Moody’s soas to maintain, respectively, an “AA” or “Aa2” rating in an “AA” or“Aa2” rated structured financing (with a market value approach).

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(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 “AA-” by Standard & Poor’s or “Aa3” by Moody’s, as appropriate,the provider must within 10 days of such rating withdrawal, suspension orreduction, repurchase all collateral and terminate the agreement, with nopenalty or premium to the District or Fiscal Agent.

(i) Any investment agreement or guaranteed investment contract with, or guaranteed by,a financial institution, the long-term unsecured obligations of which are rated “AA” or “Aa2” or better byStandard & Poor’s or Moody’s, respectively, at the time of initial investment (“Provider”). The investmentagreement shall be subject to a downgrade provision with at least the following requirements:

(1) Within five Business Days after the Provider’s long-term unsecured creditrating has been reduced below “AA-” by Standard & Poor’s or below “Aa3”by Moody’s (these events are called “Rating Downgrades”), the Providershall give notice to the Fiscal Agent and the District and, within the five-dayperiod, and for as long as the Rating Downgrade is in effect, shall deliver ortransfer in the name of the District to the Fiscal Agent or a third partyacceptable to the District acting solely as agent therefore (Holder ofCollateral) (other than by means of entries on the Provider’s books) federalsecurities allowed as investments under clause (a) above with aggregatecurrent market value equal to at least 105% of the principal amount of theinvestment agreement invested with the Provider at that time, and shalldeliver additional such federal securities as needed to maintain an aggregatecurrent market value equal to at least 105% of the principal amount of theinvestment agreement within three days after each evaluation date, whichshall 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 orStandard & Poor's from the practice of rating that debt, or reduced below“Aa3” by Moody's or below “AA-” by Standard & Poor's, the Provider shallgive notice of the downgrade to the District and the Fiscal Agent, theProvider shall within five Business Days of such withdrawal, suspension orreduction, repay the investment agreement, with accrued but unpaid interestthereon to the date of such payment, and terminate such agreement.

(j) A taxable or tax exempt government money market portfolio mutual fund restrictedto obligations 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 faith andcredit of the United States of America or rated in one of the three highest categories by Moody’s or Standard &Poor’s. Such money market funds may include funds for which the Fiscal Agent, its affiliates or subsidiariesprovide investment advisory or other management services.

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

“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 Business Official, and such other persons as shall be designated in writing bythe Superintendent or the Chief Business Official.

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“Board” means the Board of Education of the Moreno Valley Unified School District.

“Bond Counsel” means a firm of nationally recognized bond attorneys, initially Bowie, Arneson,Wiles & Giannone.

“Bond Fund” means the fund of that name established under, and held by the Fiscal Agent pursuantto, the Fiscal Agent Agreement.

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

“Bond Year” means each twelve month period extending from September 2 in one calendar year toSeptember 1 of the succeeding calendar year, except in the case of the initial Bond Year which shall be theperiod from the Delivery Date to September 1, 2012, both dates inclusive.

“Bondowner(s)” or “Owner(s)” means the person or persons in whose name or names any Bond isregistered.

“Bonds” means the 2012 Bonds and any Additional Bonds.

“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 provisions thereto.

“Completion Date” means the date on which the Project is completed and all Project Costs have beenpaid as evidenced by a certificate to that effect delivered to the Fiscal Agent by the District.

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

“Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by theDistrict or School District and related to the authorization, sale and issuance of the Bonds, which items ofexpense shall include, but not be limited to, printing costs, cost of reproducing and binding documents, closingcosts, appraisal costs, filing and recording fees, fees and expenses of counsel to the District or School District,initial fees and expenses of the Fiscal Agent, including its first annual administration fee and fees of itscounsel, expenses incurred by the District and the School District in connection with the issuance of the Bondsand the establishment of the District, Underwriter's discount, legal fees and charges, including Bond Counsel,special tax consultant's fees, appraiser's fees, market absorption consultant's fees, financial consultants' fees,charges for execution, transportation and safekeeping of the Bonds and other costs, charges and fees inconnection with the foregoing, including any funds advanced by the Developer for the foregoing items ofexpense.

“Costs of Issuance Account” means the account of that name within the Construction Fundestablished under, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

“Dated Date” or “Delivery Date” means February 13, 2012, with respect to the 2012 Bonds, andwith respect to Additional Bonds, the date such Additional Bonds are delivered.

"Developer" means Beazer Homes Holdings Corp. and its successors and assigns pursuant to theMitigation Agreement.

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

“District” means Community Facilities District No. 2005-5 of the Moreno Valley Unified SchoolDistrict.

“District Continuing Disclosure Agreement” shall mean that certain Community Facilities DistrictContinuing Disclosure Agreement provided by the School District on behalf of the District, dated February 1,2012, as originally executed and as it may be amended from time to time in accordance with the terms thereof,with respect to the 2012 Bonds and any Additional Bonds.

“DTC” means The Depository Trust Company, 55 Water Street, 25th Floor, New York, New York,10041-0099, Attn: Call Notification Department, Fax (212) 855-5004.

“EMWD” means Eastern Municipal Water District.

“EMWD Account” means the account of that name within the Construction Fund, established under,and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

“EMWD Agreement” means that Joint Community Facilities Agreement dated as of August 15,2006, among the School District, the Developer and EMWD, as it may be amended from time to time.

“EMWD Fee Facilities” means water and sewer public facilities to be owned by EMWD, exclusiveof previously tax exempt financed facilities, as such public facilities are described in the EMWD Agreement.EMWD Fee Facilities include, but are not limited to water and sewer transmission pipelines, sewer treatmentplants, disposal ponds, pumping plants, lift stations, and water reservoirs, including all costs of site acquisition,planning, design, engineering, legal services, materials testing, coordination, surveying, construction stakingconstruction, inspection and any and all appurtenant facilities and appurtenant work relating to the foregoing.

“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 amounts attributable to an excessdescribed 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 this subparagraph (i)) had beenequal to the Yield on the Bonds,

plus

(ii) any income attributable to the excess described in subparagraph (i).

In determining the amount of Excess Investment Earnings, there shall be excluded any amount earnedon any fund or account which is used primarily to achieve a proper matching of revenues and annual debtservice on the Bonds during each Bond Year and which is depleted at least once a year except for a reasonablecarryover amount not in excess of the greater of one year’s earnings on such fund or account or one-twelfth(1/12) of Annual Debt Service on the Bonds, as well as amounts earned on said earnings. The District intendsthat the Bond Fund, including the Principal Account and the Interest Account established therein, the SpecialTax Fund and the Redemption Fund will be the type of funds described in the preceding sentence. The Fiscal

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Agent shall have no responsibility to determine Excess Investment Earnings and may rely on the calculationsprovided by the District or any arbitrage consultant retained by the District.

“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 for funds held by the Fiscal Agent:

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

(ii) any of the following obligations of the following agencies of the United States ofAmerica: (a) direct obligations of the Export-Import Bank, (b) certificates of beneficial ownershipissued by the Farmers Home Administration, (c) participation certificates issued by the GeneralServices Administration, (d) mortgage-backed bonds or pass-through obligations issued andguaranteed by the Government National Mortgage Association, (e) project notes issued by the UnitedStates Department of Housing and Urban Development, and (f) public housing notes and bondsguaranteed by the United States of America.

“Fiscal Agent” means U.S. Bank National Association, a national banking association, and itssuccessors and assigns or any and other fiscal agent which may be appointed pursuant to the Fiscal AgentAgreement.

“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.

“Gross Proceeds” means any proceeds of the Bonds and any funds (other than proceeds of theBonds) that are part of a reserve or replacement fund for the Bonds within the meaning of Section 1.148-1(b)of the Regulations.

“Gross Taxes” means the amount of all Special Taxes collected the District and proceeds from thesale of property collected pursuant to the foreclosure provisions of the Fiscal Agent Agreement for thedelinquency 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 facilities districts,or the financial consulting field, appointed and paid by the District or the School District and who, or each ofwhom:

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

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

(3) is not an officer or employee of the District or the School District, or an owner,officer or employee of any of the property owners within the District, but who may be regularlyretained to make annual or other reports to the District or the School District.

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

“Interest Payment Date” means March 1 and September 1 of each year during which Bonds areOutstanding, commencing September 1, 2012.

“Legislative Body” means the Board of Trustees, acting as the Legislative Body of the District.“Mandatory Redemption Account” means the account of that name within the Redemption Fund

established under, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

“Mandatory Sinking Payments” means the amounts to be applied to the redemption of the 2012Term Bonds in accordance with the schedule set forth in the Fiscal Agent Agreement and any subsequentschedule set forth in any Supplement.

“Maximum Annual Debt Service” means the maximum sum obtained for any remaining Bond Yearprior to the final maturity on the Bonds by totaling the following for each Bond Year:

(1) the principal amount of all Outstanding Bonds payable in such Bond Year whether atmaturity or by redemption together with a premium thereon, if any premium is payable; and

(2) the interest payable on the aggregate principal amount of Bonds Outstanding in suchBond Year, assuming the Bonds are retired as scheduled.

“Mitigation Agreement” means the First Amended and Restated School Facilities Funding andMitigation Agreement by and among the School District, the District, and the Developer, dated as of January17, 2012, as it may be amended from time to time.

“Moody’s” means Moody’s Investors Services and its successors.

“Net Taxes” means the amount of all Gross Taxes minus an amount equal to the AdministrativeExpense Requirement, as further set forth in the Fiscal Agent Agreement.

“Nominee” means the nominee of DTC, which may be Cede & Co., as determined from time to timepursuant to 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 148 of theCode in which Gross Proceeds are invested (other than tax-exempt securities which are described in Section103(a) of the Code) and which is not acquired to carry out the governmental purpose of the Bonds.

“Optional Redemption Account” means the account of that name within the Redemption Fundestablished under, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

“Ordinance” means Ordinance No. 2006-07-15 adopted by the Board on September 12, 2006.

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

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

(2) Bonds for the transfer or exchange of or in lieu of or in substitution for which otherBonds shall have been authenticated and delivered by the Fiscal Agent pursuant to the terms hereof;and

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

“Participating Underwriter” shall have the meaning ascribed thereto in the District ContinuingDisclosure Agreement.

“Prepaid Special Taxes” means all Special Taxes prepaid to the District pursuant to the Rate andMethod during the term of the Fiscal Agent Agreement, less related Administrative Expenses.

“Prepayment Account” means the account of that name within the Special Tax Fund establishedunder, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

“Principal Account” means the account of that name within the Bond Fund established under, andheld by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

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

“Project” means the "CFD Facilities," or any portion thereof, as defined in the Formation Resolutionand referred to in the Community Facilities District Report for the District dated August 15, 2006.

“Project Costs” means the costs of design, acquisition, construction and installation of the Project,School Facilities, and EMWD Fee Facilities, and all costs related thereto. Project Costs may include thepayment, or prepayment, of lease payments or installment payments necessary for the acquisition of all or partof the Project.

“Purchase Price” for the purpose of computation of the Yield of the Bonds, has the same meaning asthe term "issue price" in Sections 1273 (b) and 1274 of the Code, and, in general, means the initial offeringprice to the public (not including bond houses and brokers, or similar persons or organizations acting in thecapacity of underwriters or wholesalers) at which price a substantial amount of the Bonds are sold or, if theBonds are privately placed, the price paid by the original purchaser or the acquisition cost of the originalpurchaser. The term "Purchase Price," for the purpose of computation of the Yield of NonpurposeInvestments, means the “fair market value” of the Nonpurpose Investments on the date of use of GrossProceeds for acquisition thereof, or, if later, on the date that Investment Property (as defined in Section148(b)(2) and (3) of the Code) constituting a Nonpurpose Investment becomes a Nonpurpose Investment of theBonds, as the case may be.

“Rate and Method” means the Rate and Method of Apportionment for Community Facilities DistrictNo. 2005-5 of Moreno Valley Unified School District, as set forth in the Ordinance, as approved pursuant tothe Act and as such may be amended or interpreted from time to time.

“Rating Agencies” means S&P and Moody’s.

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

“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 Fiscal Agent Agreement.

“Regulations” means any temporary, proposed or final regulations of the United States Departmentof Treasury with respect to obligations issued pursuant to Section 103 and Sections 141 to 150 of the Code.

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

“Reserve Requirement” means with respect to the Bonds, an amount, as of any date of calculation,equal to the least of (i) 10% of the original principal amount of the Bonds, (ii) Maximum Annual Debt Service,or (iii) 125% of average Annual Debt Service on the Bonds.

“Resolution of Issuance” means Resolution No. 2011-12-13 of the School District, dated January 17,2012, authorizing the issuance of the 2012 Bonds and approving 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 AuthorizedRepresentative of the Fiscal Agent at its Principal Corporate Trust Office.

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

“School Facilities” means the facilities of the School District authorized to be constructed, acquiredand financed under the Formation Resolution and Bond Authorization Resolution.

“School Facilities Account” means the account of that name within the Construction Fundestablished under, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

“Securities Depository(ies)” means initially DTC and, in accordance with then-current guidelines ofthe Securities and Exchange Commission, such other securities depositories as the District may designate in acertificate delivered to the Fiscal Agent.

“Sinking Fund Redemption Account” means the account of that name within the Redemption Fundestablished under, and held by the Fiscal Agent pursuant to, the Fiscal Agent Agreement.

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

“Special Taxes” means the special taxes as defined in the Rate and Method and levied by theLegislative Body within the District pursuant to the Act, the Formation Resolution, the Election and theOrdinance and as permanently reduced in accordance with the Amended Notice of Special Tax Lien.

“Standard & Poor’s” or “S&P” means Standard & Poor’s Ratings Group and its successors.

“State” means the State of California.

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

“Surplus School Facilities Fund” means the fund of that name established under, and held by theFiscal Agent pursuant to, the Fiscal Agent Agreement.

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

“Taxable Property” has the meaning set forth in the Rate and Method.

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“Underwriter” means means Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, aDivision of Stifel Nicolaus.

“Undeveloped Property” has the meaning set forth in the Rate and Method.

“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 payments in aform not characterized as principal and interest) on a Nonpurpose Investment or on the Bonds produces anamount equal to the Purchase Price of such Nonpurpose Investment or the Bonds, as the case may be, allcomputed as prescribed in the applicable Regulations.

ISSUANCE OF THE 2011 SPECIAL TAX BONDS

The 2012 Bonds are issued pursuant to the Act, the Resolution of Issuance and the Fiscal AgentAgreement in the amounts and maturities set forth in the Fiscal Agent Agreement (See “INTRODUCTION”).

Limited Obligation

The Bonds shall be and are limited obligations of the District and shall be payable as to the principalthereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes andamounts in certain funds and accounts created pursuant to the Fiscal Agent Agreement as specified therein.The Net Taxes are pledged for the payment of the Bonds pursuant to the terms of the Fiscal Agent Agreement.

The Bonds and interest thereon are not payable from the general fund of the District or the SchoolDistrict. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or theSchool District is pledged for the payment of the Bonds or interest thereon, and no Owner of the Bonds maycompel the exercise of the taxing power by the District or the School District or the forfeiture of any of theirproperty. The principal of and interest on the Bonds and premiums upon the redemption of any thereof are nota debt of the District (except to the limited extent set forth in the Fiscal Agent Agreement) or the SchoolDistrict, the State nor any of its political subdivisions within the meaning of any constitutional or statutorylimitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon anyproperty or income, receipts or revenues of the District or the School District, except the Net Taxes which are,under the terms of the Fiscal Agent Agreement, pledged for the payment of the Bonds and interest thereon.Neither the members of the Legislative Body nor the Board nor any persons executing the Bonds are liablepersonally for the Bonds by reason of their issuance.

Pursuant to the Act and the Fiscal Agent Agreement, the Bonds shall be equally payable from the NetTaxes without priority for number, date of the Bonds, date of sale, date of execution or date of delivery, andthe payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof shallbe exclusively paid from the Net Taxes and amounts held in certain funds and accounts created under theFiscal Agent Agreement as specified in the Fiscal Agent Agreement. All of the Net Taxes are pledged for thepayment of the Bonds, and such Net Taxes and any interest earned on the Net Taxes shall constitute a trustfund for the payment of the principal of and interest on the Bonds, and so long as any of the Bonds or interestthereon are unpaid the Net Taxes and interest thereon shall not be used for any other purpose, except aspermitted by the Fiscal Agent Agreement or any Supplement, and shall be held in trust for the benefit of theBondowners and shall be applied pursuant to the Fiscal Agent Agreement, or any Supplement pursuant toprovisions in the Fiscal Agent Agreement. Notwithstanding any provision contained in the Fiscal AgentAgreement to the contrary, Net Taxes deposited in the Administrative Expense Fund, the Surplus SchoolsFacilities Fund and the Rebate Fund shall no longer be considered to be pledged to the Bonds and theAdministrative Expense Fund, the Surplus Schools Facilities Fund, the Construction Fund (and all accountstherein), and the Rebate Fund shall not be construed as trust funds held for the benefit of the Bondowners.

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In the event that the Fiscal Agent lacks sufficient amounts to make timely payment of principal of andinterest and premium upon redemption, if any, on the Bonds when due, such principal of and interest andpremium on the Bonds shall be paid from available amounts held by the Fiscal Agent in the Special Tax Fund(and its accounts), Bond Fund (and its accounts), the Reserve Fund, or Redemption Fund under the terms ofthe Fiscal Agent Agreement (not including those amounts deposited in the Construction Fund, Surplus SchoolsFacilities Fund, Administrative Expense Fund and the Rebate Fund), including the default and remediesprovisions of the Fiscal Agent Agreement, as may be applicable, in accordance with such terms withoutpreference or priority of interest over principal or principal over interest, or of any installment of principal orinterest over any other installment of principal or interest, ratably to the aggregate amount of such principaland interest.

Nothing in the Fiscal Agent Agreement or any Supplement shall preclude the redemption of anyBonds subject to call and redemption prior to maturity, and payment of the Bonds from proceeds of refundingbonds issued under the Act as the same now exists or is hereafter amended, or under any other law of the State(See “SOURCES AND PAYMENTS FOR THE BONDS - Limited Obligation”).

Funds and Accounts

The Fiscal Agent Agreement specifies funds and accounts to be maintained by the Fiscal Agent, asfollows:

Special Tax Fund - The Special Taxes and other amounts constituting Gross Taxes collected by theDistrict at any time (exclusive of Prepaid Special Taxes received which shall be deposited into the PrepaymentAccount of the Special Tax Fund), shall be transferred no later than 10 days after receipt thereof to the FiscalAgent and shall be held in trust in the Special Tax Fund (exclusive of the Administrative ExpenseRequirement) for the benefit of the Bondowners and shall, exclusive of the Prepaid Special Taxes held in thePrepayment Account, be transferred or applied to the funds and accounts in the priority set forth below and atthe times and in the amounts and in accordance with the following and the terms of the Fiscal AgentAgreement: (a) to pay up to the Administrative Expense Requirement of $33,784.87 for Fiscal Year 2011-12(which shall increase 2% per Fiscal Year commencing 2012-13) (paid through the Administrative ExpenseFund), (b) interest on the Bonds (paid through the Interest Account of the Bond Fund), (c) principal paymentsdue on the Bonds during the current Bond Year (payable from the Principal Account of the Bond Fund), (d)Mandatory Sinking Payments due on the Bonds during the current Bond Year (paid through the Sinking FundRedemption Account of the Redemption Fund), and (e) if, necessary, provide funds to replenish the ReserveFund to the Reserve Requirement. Provided all the amounts due in the current Bond Year are funded asdescribed in (b)-(e) above, to the extent there are additional Administrative Expenses, to the AdministrativeExpense Fund in the amount specified in writing by the District required to bring the balance therein to theamount needed to pay such expenses. Any remaining Special Taxes and other amounts constituting GrossTaxes shall remain in the Special Tax Fund until the end of the Bond Year. Provided there are no SpecialTaxes levied on Undeveloped Property in the current Fiscal Year or projected to be levied on UndevelopedProperty in the next Fiscal Year, as verified in writing by an Authorized Representative to the Fiscal Agent,

any remaining funds in the Special Tax Fund, which are not required to cure a delinquency in the payment ofprincipal and interest on the Bonds (including payment of Mandatory Sinking Payments due during the currentBond Year), to restore the Reserve Fund to the Reserve Requirement, or to pay current or pendingAdministrative Expenses as provided for in the Fiscal Agent Agreement, shall be deposited by the FiscalAgent in the Surplus School Facilities Fund, free and clear of any lien or pledge thereon, to be used inaccordance with the Fiscal Agent Agreement. Any funds required to cure any delinquency shall be retained inthe Special Tax Fund and expended or transferred at the earliest possible date. (See “SOURCES ANDPAYMENT FOR THE BONDS - Special Tax Fund”).

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

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Special Tax Fund. The Prepaid Special Taxes shall be held in the Prepayment Account for the benefit of theBondowners and shall be transferred by the Fiscal Agent to the Mandatory Redemption Account of theRedemption Fund to call Bonds on the next date for which notice can be given in accordance with the specialmandatory redemption provisions as set forth in the Fiscal Agent Agreement (See “SOURCES ANDPAYMENT FOR THE BONDS - Special Tax Fund”).

Administrative Expense Fund - Upon receipt of Gross Taxes and the written direction of the District,the Fiscal Agent shall transfer from the Special Tax Fund to the Administrative Expense Fund the amount thatthe District has determined, and of which the District has notified the Fiscal Agent in writing prior to suchtransfer date, will be necessary to bring the balance in the Administrative Expense Fund to equal the amountspecified by the District as necessary to meet Administrative Expenses until the collection of Special Taxes inthe next Fiscal Year, subject to the maximum limit of the Administrative Expense Requirement as set forth inthe Fiscal Agent Agreement.

Bond Fund - The Bond Fund (in which there is established an Interest Account and a PrincipalAccount) is used to disperse payments of principal and interest to the Bondowners on each respective InterestPayment Date. Monies in the Interest Account are allocated to the payment of interest due on each InterestPayment Date and monies in the Principal Account are allocated to the repayment of principal on the Bonds onthe corresponding Interest Payment Date (See “SOURCES OF PAYMENT FOR THE BONDS - Bond Fund”).

Reserve Fund - There shall be maintained in the Reserve Fund an amount equal to the ReserveRequirement. Notwithstanding the foregoing, in the event of a redemption or partial defeasance of the Bonds,the Reserve Requirement shall in connection therewith be re-determined by the District and communicated tothe Fiscal Agent in writing and any funds in excess of such re-determined Reserve Requirement shall beutilized as set forth in the Fiscal Agent Agreement. If Special Taxes are prepaid and Bonds are to be redeemedwith the proceeds of such prepayment, a proportionate amount in the Reserve Fund (determined on the basis ofthe principal of Bonds to be redeemed and the original principal of the Bonds, but not in excess of the amountof funds available as a result of the re-determination of the Reserve Requirement) will be applied to theredemption of the Bonds as provided in the Fiscal Agent Agreement.

Monies in the Reserve Fund shall be used solely for the purpose of (i) making transfers to the BondFund or Redemption Fund to pay the principal of, including Mandatory Sinking Payments, and interest onBonds when due to the extent that monies in the Interest Account and the Principal Account of the Bond Fundor monies in the Sinking Fund Redemption Account are insufficient therefor; (ii) making any required transferto the Rebate Fund pursuant to the Fiscal Agent Agreement upon written direction from the District, (iii)making any transfers to the Bond Fund or Redemption Fund in connection with prepayments of the SpecialTaxes; (iv) paying the principal and interest due on Bonds in the final Bond Year, and (v) application to thedefeasance of Bonds in accordance with the Fiscal Agent Agreement. If the amounts in the Interest Account orthe Principal Account of the Bond Fund and the Sinking Fund Redemption Account of the Redemption Fundare insufficient to pay the principal of, including Mandatory Sinking Payments, or interest on the Bonds whendue, the Fiscal Agent shall, one Business Day prior to an Interest Payment Date, withdraw from the ReserveFund for deposit in the Interest Account and the Principal Account of the Bond Fund, or the Sinking FundRedemption Account of the Redemption Fund, monies necessary for such purpose. Following any transfer tothe Interest Account or the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account ofthe Redemption Fund, the Fiscal Agent shall notify the District of the amount needed to replenish the ReserveFund to the Reserve Requirement and the District shall include such amount as is required at that time tocorrect such deficiency in the next Special Tax levy to the extent of the permitted maximum Special Tax rates.

Monies in the Reserve Fund in excess of the Reserve Requirement (exclusive of Excess InvestmentEarnings) shall be withdrawn on each March 1 and transferred to the Interest Account of the Bond Fund, andany remaining excess shall be transferred to the Principal Account of the Bond Fund, or to the Sinking FundRedemption Account of the Redemption Fund to the extent required to make any principal payment orMandatory Sinking Payments on the next following September 1. The Fiscal Agent shall transfer Excess

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Investment Earnings from Reserve Fund earnings upon written direction of the District pursuant to the FiscalAgent Agreement. Monies in the Reserve Fund shall be invested in accordance with the Fiscal AgentAgreement. (See “SOURCES OF PAYMENT FOR THE BONDS - Reserve Fund”).

Redemption Fund - The Redemption Fund includes an Optional Redemption Account, Sinking FundRedemption Account and Mandatory Redemption Account. Each of the redemption accounts is used for thetemporary retention of monies allocated to the redemption of Bonds corresponding to that account. Monies ineach such account shall be applied solely for such redemption purpose (See “THE BONDS - Redemption”).

Construction Fund - The Fiscal Agent Agreement establishes the Construction Fund, in which there isa School Facilities Account, an EMWD Account, and a Costs of Issuance Account.

A portion of the proceeds of the Bonds shall be deposited in the School Facilities Account, theEMWD Account, and the Costs of Issuance Account. Monies deposited in the School Facilities Account shallbe expended to pay Project Costs for School Facilities, except as otherwise provided in the Fiscal AgentAgreement. Monies deposited into the EMWD Account shall be expended to pay Project Costs for EMWDFee Facilities, except as otherwise provided in the Fiscal Agent Agreement. Monies deposited into the Costsof Issuance Account shall be disbursed from time to time to pay or reimburse Costs of Issuance.

Rebate Fund - The Rebate Fund is established by the Fiscal Agent Agreement for the receipt andpayment of arbitrage earnings to the United States government as required under the terms of the Fiscal AgentAgreement and the Tax Certificate.

Surplus School Facilities Fund - Pursuant to the Fiscal Agent Agreement, moneys on deposit in theSurplus School Facilities Fund are not pledged for the payment of the principal of, or interest or premium on,the Bonds, and are not subject to any Bondholder’s lien. Moneys on deposit in the Surplus School FacilitiesFund may be used by the District, at its option, for acquisition and/or construction of the School Facilities; tomake deposits to the Rebate Fund; for the optional redemption of any of the Bonds pursuant to the FiscalAgent Agreement; or for payment of principal of or interest on the Bonds.

Investments - The Fiscal Agent shall maintain separate books and records regarding the investment ofmonies in any of the funds, accounts or subaccounts established pursuant to the Fiscal Agent Agreement.Authorized Investments shall be deemed at all times to be a part of such funds, accounts or subaccounts. Anyloss resulting from such Authorized Investments shall be charged to such funds, accounts or subaccount.Subject to limitations set forth as to each of the funds or accounts set forth in the Fiscal Agent Agreement, thelimitations as to maturities set forth in the Fiscal Agent Agreement and any additional limitations orrequirements established by the District and consistent with the foregoing, the Fiscal Agent shall invest theamounts on deposit in all funds, accounts or subaccount in Authorized Investments as directed in writing bythe District, subject to the restrictions set forth in the Fiscal Agent Agreement (See “SOURCES OFPAYMENT FOR THE BONDS - Investment of Moneys in Funds”).

Redemption of 2012 Bonds

The 2012 Bonds are subject to optional redemption, mandatory sinking fund redemption, and specialmandatory redemption from Prepaid Special Taxes in accordance with the terms of the Fiscal AgentAgreement (See “THE BONDS - Redemption”).

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 theFiscal Agent Agreement and any Supplement (to be performed by the District or its proper officers, agents oremployees), which covenants are necessary, convenient and desirable to secure the Bonds; provided, however,that said covenants do not require the District to expend any funds or monies other than the Net Taxes or any

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monies deposited in the funds and accounts created under the Fiscal Agent Agreement and legally availabletherefor.

Covenant 1. Punctual Payment. The District will duly and punctually pay, or cause to bepaid, the principal of and interest on every Bond issued under the Fiscal Agent Agreement, together with thepremium thereon, if any be payable, on the date, at the place and in the manner mentioned in the Bonds and inaccordance with the Fiscal Agent Agreement and any Supplement to the extent Net Taxes are availabletherefor, and that the payments into the Bond Fund and the Reserve Fund will be made, all in strict conformitywith the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfully observe and perform allof the conditions, covenants and requirements of the Fiscal Agent Agreement and any Supplement and of theBonds issued thereunder, and that time of such payment and performance is of the essence of the District’scontract 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, 2012, the Fiscal Agent shall provide a writtennotice to the District stating the amounts then on deposit in the various funds and accounts established by theFiscal Agent Agreement as well as Fiscal Agent fees coming due during the next Fiscal Year. The receipt ofsuch notice by the District shall in no way affect the obligations of the District under the following paragraphs.Upon receipt of a copy of such notice, the District shall communicate with the Riverside County Treasurer-Tax Collector or other appropriate official of the County of Riverside (“County”) to ascertain the relevantparcels on which the Special Taxes are to be levied, taking into account any parcel splits during the precedingand then current year.

The District has retained an Independent Financial Consultant to assist in the levy of theSpecial Taxes for each Fiscal Year, in accordance with the Ordinance, such that the computation of the levy iscomplete before the final date on which the Riverside Treasurer-Tax Collector will accept the transmission ofthe Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. The nextsuch levy shall occur in Fiscal Year 2012. Upon the completion of the computation of the amounts of the levy,and approval by the Legislative Body, the District shall prepare or cause to be prepared, and shall transmit tothe Riverside County Treasurer-Tax Collector, such data as the Riverside County Treasurer-Tax Collectorrequires to include the levy of the Special Taxes on the next secured tax roll.

The District shall fix and levy at least the amount of Special Taxes within the Districtrequired for the payment of principal of and interest on Outstanding Bonds becoming due and payable duringthe ensuing year including any necessary replenishment or expenditure of the Reserve Fund for the Bonds, anamount equal 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 timeand in the same installment as the general taxes on real property are payable, and have the same priority,become delinquent at the same times and in the same proportionate amounts and bear the same proportionatepenalties and interest after delinquency as do the general taxes on real property; provided that, the LegislativeBody may provide for direct collection of the Special Taxes in certain circumstances.

In order to determine if there are delinquencies with respect to the payment of the SpecialTaxes, no later than March 1 and July 1 in every year (“reconciliation date”) commencing March 1, 2012, theDistrict shall reconcile or cause to be reconciled the amount of Special Taxes levied to the amount of SpecialTaxes theretofore reported by the County as paid and received. No later than forty-five (45) days after thereconciliation date, commencing on the first reconciliation date in 2012, the District shall send or cause to be

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sent a notice of delinquency to all property owners reported to be delinquent in the payment of the SpecialTaxes as of the reconciliation date.

The fees and expenses of the Independent Financial Consultant retained by the District toassist in computing the levy of the Special Taxes under the Fiscal Agent Agreement and any reconciliation ofamounts levied to amounts received, as well as the costs and expenses of the District (including a charge forDistrict staff time) in conducting its duties under the Fiscal Agent Agreement, shall be an AdministrativeExpense hereunder.

Covenant 3. Commence Foreclosure Proceedings.

Not later than August 1 of each Fiscal Year, the District will compare the amount of Special Taxestheretofore levied in the District in the prior Fiscal Year to the amount of Special Taxes theretofore reported bythe County as paid and received, and:

(A) Individual Delinquencies. If the District determines that (i) any single parcelis subject to a Special Tax delinquency in the aggregate amount of $7,000 or more or (ii) anyowner owns one or more parcels subject to a Special Tax delinquency in an aggregate amountof $7,000 or more, then the District shall send or cause to be sent a notice of delinquency (anda demand for immediate payment thereof) to the property owner within 45 days of suchdetermination, and (if the delinquency remains uncured) the Board shall provide for thecommencement of foreclosure proceedings by Board action within 120 days following theDistrict’s delinquency determination referred to herein to the extent permissible underapplicable law.

(B) Aggregate Delinquencies If the District determines that the totalamount of delinquent Special Taxes for the prior Fiscal Year for the District (including thetotal of delinquencies under paragraph (A) above) exceeds 5% of the total Special Taxes dueand payable for the prior Fiscal Year, the District shall notify or cause to be notified propertyowners who are then delinquent in the payment of Special Taxes (and demand immediatepayment of the delinquency) within 45 days of such determination, and the Board shallprovide for the commencement of foreclosure proceedings by Board action against eachparcel of land within the District with a Special Tax delinquency within 120 days followingthe District’s delinquency determination referred to in the Fiscal Agent Agreement to theextent permissible under applicable law.

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 Bonds superior to, or on a paritywith, the pledge and lien herein created for the benefit of the Bonds, except as permitted by the Fiscal AgentAgreement and as to bonds issued to refund the Bonds.

Covenant 5. Modification of Maximum Authorized Special Tax. The District covenantsthat no modification of the maximum authorized Special Taxes in the District shall be approved by the Districtunless it is confirmed in writing, by an Independent Financial Consultant, that, immediately subsequent to suchmodifications the amount of the maximum Special Taxes on Developed Property (as defined in the Rate andMethod), pursuant to the Act and the applicable resolutions and ordinances of the District is at least 1.10 timesMaximum Annual Debt Service plus Administrative Expenses on all Outstanding Bonds and any AdditionalBonds expected to be issued.

The District further covenants that in the event an ordinance is adopted by initiative pursuantto Section 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, commence and

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pursue legal action seeking to preserve its ability to comply with its covenant contained in the precedingparagraph.

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 rights againstall claims and demands of all persons. From and after the delivery of any of the Bonds by the District, theBonds shall be incontestable by the District.

Covenant 7. Compliance with Law, Completion of Project. The District will complywith all applicable provisions of the Act and law in completing the acquisition and construction of the Project;provided that the District shall have no obligation to advance any funds to complete the Project in excess of theamounts available therefore in the accounts of the Construction Fund.

Covenant 8. Books and Accounts. The District will keep, or cause to be kept, properbooks of records and accounts, separate from all other records and accounts of the Bonds, in which completeand correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and thedeposits to the Special Tax Fund including the Prepayment Account. Such books of record and accounts shallat all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of not lessthan ten percent of the principal amount of the Bonds then Outstanding or their representatives authorized inwriting.

Covenant 9. Tax Covenant. The District covenants and represents that until the lastBonds 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 Bonds will remain excludedfrom gross income for federal income tax purposes.

Covenant 10. Additional Tax Covenants. The District covenants, without limiting thegenerality of Covenant 9, that:

(a) the District will make no use of the proceeds of the Bonds which at any time willcause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and applicableRegulations;

(b) the District will ensure that the payment of principal and interest on the Bonds shallnot be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency orinstrumentality thereof) and no portion of the monies contained in any of the funds or accounts created hereinshall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof);(ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit InsuranceCorporation, National Credit Union Administration or any other similar federally chartered corporation; or (iii)otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (orany agency or instrumentality thereof); except (a) investments during the initial temporary period followingissuance of the Bonds until the Completion Date; (b) investment of amounts held in the Reserve Fund, or otherreserve funds satisfying Section 148(d) of the Code; (c) investment of amounts held in the Special Tax Fund,Bond Fund and other bona fide debt service funds; (d) for investments in obligations issued by the UnitedStates Treasury; (e) for investments in obligations guaranteed by the Federal National Mortgage Association,Government National Mortgage Association or Federal Home Loan Mortgage Corporation; or, (f) investmentspermitted under Regulations issued pursuant to Section 149(b)(3)(B) of the Code;

(c) the District will ensure that no portion of the monies contained in any of the funds oraccounts created under the Fiscal Agent Agreement shall be used so as to cause any of the Bonds to meet the“private activity bond” tests of Section 141 of the Code and any Regulations issued thereunder;

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(d) the District agrees that there shall be paid from time to time all amounts required tobe rebated to the United States pursuant to Section 148(f) of the Code and the applicable Regulations and theFiscal Agent Agreement (including, but not limited to, the Fiscal Agent Agreement) and any furtherdocuments executed in connection with the Bonds. This covenant shall survive payment in full or defeasanceof the Bonds. The District specifically covenants to pay or cause to be paid to the United States at the timesand in the amounts determined above the amounts required to be so paid by the Fiscal Agent Agreement andfurther documents executed in connection with the Bonds, the Code and the Regulations;

(e) the District (i) shall neither invest Gross Proceeds nor cause Gross Proceeds to beinvested in Nonpurpose Investments if the Yield on such Nonpurpose Investments would be less than the Yieldthat would have resulted in an arm’s length transaction; (ii) shall not sell or otherwise dispose of or cause to besold or otherwise disposed of Nonpurpose Investments if such sale or disposition would result in a smallerprofit or larger loss than would have resulted from a sale at fair market value arrived at in an arm’s lengthtransaction; and (iii) shall keep a detailed accounting of all transactions contemplated under the Fiscal AgentAgreement or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds fora period of six years after the later of the date of payment of all Excess Investment Earnings to the UnitedStates or the date the District disburses the last of the Gross Proceeds of the Bonds; and

(f) notwithstanding any provision of the Fiscal Agent Agreement, if the District shallprovide to the Fiscal Agent an opinion of Bond Counsel that any specified action required under the FiscalAgent Agreement is no longer required or that some further or different action is required to maintain theexclusion from gross income for federal income tax purposes of interest on the Bonds, the Fiscal Agent mayconclusively rely on such opinion in complying with the requirements of the Fiscal Agent Agreement, and thecovenants hereunder shall be deemed to be modified to that extent notwithstanding the provisions of the FiscalAgent Agreement.

Covenant 11. Further Assurances. The District will adopt, make, execute and deliver anyand all 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 benefits provided inthe Fiscal Agent Agreement and in any Supplement.

Covenant 12. Additional Opinion(s). The District will not make any change inrequirements or procedures or take any action, as to which change or action in the Fiscal Agent Agreement orrelated documents require an opinion of Bond Counsel, unless it obtains an opinion of Bond Counsel to theeffect that (a) interest on the Bonds was excluded from gross income for federal income tax purposes fromtheir date of issuance until the date of such change, assuming compliance with the covenants in the FiscalAgent Agreement as they were in effect prior to the change (except that such opinion need not be given as toany interest for which a similar opinion has previously been given and remains in effect subsequent to suchchange), and (b) assuming continued compliance by the District with the covenants as changed, interest on theBonds is excluded from gross income for purposes of federal income taxation.

Covenant 13. Tender of Bonds. The District will not, in collecting the Special Taxes or inprocessing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections53340, 53344.1, 53344.2, 53356.1 and 53356.5 of the California Government Code in any manner whichwould be inconsistent with the interests of the Owners and, in particular, will not permit the tender of Bonds infull or partial payment of Special Taxes except upon receipt of a certificate of an Independent FinancialConsultant that to accept such tender will not result in the District having insufficient Net Taxes to pay theprincipal of and interest on the Bonds remaining Outstanding following such tender.

Conditions for the Issuance of Additional Bonds. The District may, at any time after the issuance anddelivery of the 2012 Bonds, issue Additional Bonds payable from the Net Taxes and amounts deposited in the

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Reserve Fund, or accounts thereof, and secured by a lien and charge upon such amounts equal to the lien andcharge securing the Outstanding 2012 Bonds hereunder as hereinafter provided.

Additional Bonds may be issued subject to the following additional specific conditions, which arehereby made conditions precedent to the issuance of any Additional Bonds:

(a) Maximum Total Parity Bond Issuance. The aggregate original principal amount ofthe 2012 Bonds and all Additional Bonds issued may not exceed $25,000,000; provided, however,that, notwithstanding the foregoing, Additional Bonds may be issued at any time to refund theOutstanding Bonds without satisfying the requirements under clauses (d), (e) and (f) below, andwithout limitation on the foregoing $25,000,000 principal amount limitation.

(b) Compliance with Covenants. The District shall be in compliance with all covenantsset forth in the Fiscal Agent Agreement and any Supplement then in effect and a certificate of theDistrict to that effect shall have been filed with the Fiscal Agent; provided, however, that AdditionalBonds may be issued notwithstanding that the District is not in compliance with all such covenants solong as immediately following the issuance of such Additional Bonds, the District will be incompliance with all such covenants.

(c) Supplemental Fiscal Agent Agreement. The issuance of Additional Bonds shall havebeen duly authorized pursuant to the Act and all applicable laws, and the issuance of Additional Bondsshall have been provided for by a Supplement duly adopted by the District which shall specify thefollowing:

(1) the purpose for which the Additional Bonds are to be issued and the fund orfunds into which the proceeds thereof are to be deposited including payment of all costsincidental to or connected therewith;

(2) the authorized principal amount of the Additional Bonds;

(3) the date and the maturity date or dates of the Additional Bonds; providedthat

(i) each maturity date shall fall on September 1 and shall pay interest on theInterest Payment Dates,

(ii) all such Additional Bonds of like maturity shall be identical in allrespects, except as to number, and

(iii) fixed serial maturities or Mandatory Sinking Payments, or anycombination thereof, shall be established if necessary to provide for the retirement ofall Additional Bonds on or before their respective maturity dates;

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

(5) the denominations and method of numbering of such Additional Bonds;

(6) the amount and due date of each Mandatory Sinking Payment, if any, for theAdditional Bonds;

(7) the amount, if any, to be deposited from the proceeds of the AdditionalBonds in the Reserve Fund to increase the amounts therein to the Reserve Requirement;

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(8) the form of the Additional Bonds;

(9) the terms of redemption for the Additional Bonds, which shall be consistentwith the terms (other than dates for redemption, premium rates and amounts) specified in theFiscal Agent Agreement; and

(10) such other provisions as are necessary or appropriate and not inconsistentwith the Fiscal Agent Agreement.

(d) Minimum Debt Service Coverage. The District must receive one or more certificatesfrom one or more Independent Financial Consultants which, when taken together, certify that theamount of the maximum Special Taxes that may be levied in each remaining Bond Year on all parcelsof Taxable Property that are not known by the District to be delinquent in the payment of any SpecialTaxes, assessments or ad valorem property taxes then due and owing is at least the sum of (i) theAdministrative Expense Requirement, plus (ii) 1.10 times the Annual Debt Service for eachcorresponding Bond Year on all Outstanding 2012 Bonds and the Additional Bonds proposed to beissued. For purposes of making this certification, the Independent Financial Consultants may rely onany reports or certificates as may be acceptable to the District and the underwriter of the proposedAdditional Bonds.

(e) Minimum Value-to-Lien Ratio. The “Improvement Area Value” (as defined below)shall be at least five times the sum of:

(i) the principal amount of all Outstanding Bonds, plus

(ii) the principal amount of the Additional Bonds proposed to be issued, plus

(iii) the principal amount of any fixed assessment liens on Taxable Property inthe District, plus

(iv) a Proportionate Share of the outstanding principal amount of all other specialtax bonds payable at least partially from special taxes to be levied on the Taxable Property inthe District (“Overlapping Bonds”), determined by multiplying the outstanding principalamount of the Overlapping Bonds by the following fraction: the amount of special taxessecuring the Overlapping Bonds levied on the Taxable Property in the District, divided by thetotal amount of special taxes securing the Overlapping Bonds (in each case to be determinedbased upon the maximum special taxes that could be levied in the year in which estimatedannual debt service on the Overlapping Bonds occurs).

The term “District Value” for purposes of this subparagraph means the value (including both land andimprovements) of all parcels of Taxable Property in the District that are not known by the District to bedelinquent in the payment of any Special Taxes, assessments or ad valorem property taxes then due and owing.District Value will be determined by reference to either or some combination of (i) an appraisal prepared by anMAI appraiser selected by the District, with a date of value no earlier than 90 days before the date theproposed Additional Bonds would be issued, or (ii) the assessed values shown on the last equalized Countyassessor’s property tax rolls.

Neither the School District nor the District shall be liable to the Owners or any other person or entitywith respect to any appraisal provided for purposes of meeting this requirement or by reason of any exercise ofdiscretion made by any appraiser in connection with this requirement.

(f) Minimum Value-to-Lien Ratio for Undeveloped Property. The “UndevelopedProperty Value” (as defined below) for Undeveloped Property shall be at least three times the sum of:

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(i) the Proportionate Share of the principal amount of all Outstanding Bonds,plus

(ii) the Proportionate Share of the principal amount of the Additional Bondsproposed to be issued that are attributable to Undeveloped Property, plus

(iii) the principal amount of any fixed assessment liens on UndevelopedProperty, plus

(iv) the Proportionate Share of the outstanding principal amount of all otherspecial tax bonds payable at least partially from special taxes to be levied on UndevelopedProperty.

For this purpose, “Proportionate Share” is determined by multiplying the outstanding principal amountof the bonds in question by the following fraction: the amount of special taxes securing those bonds leviedonly on Undeveloped Property in the District, divided by the total amount of special taxes securing thosebonds (in each case to be determined based upon the estimated special taxes to be levied in the year in whichmaximum annual debt service on the bonds occurs) levied on all property within the respective communityfacilities district.

The term “Undeveloped Property Value” for purposes of this subparagraph means the value (includingboth land and improvements) of all parcels of Undeveloped Property that are not known by the District to bedelinquent in the payment of any Special Taxes, assessments or ad valorem property taxes then due and owing.Undeveloped Property Value shall be determined by reference to either or some combination of (i) an appraisalprepared by an MAI appraiser selected by the District, with a date of value no earlier than 90 days before thedate the proposed Additional Bonds would be issued, or (ii) the assessed values shown on the last equalizedCounty assessor’s property tax rolls.

Neither the School District nor the District shall be liable to the Owners or any other person or entitywith respect to any appraisal provided for purposes of meeting this requirement or by reason of any exercise ofdiscretion made by any appraiser in connection with this requirement.

(g) Deposit to Reserve Fund. The Supplement may provide for the establishment ofseparate funds and accounts, and shall provide for a deposit in the Reserve Fund so that the balance inthe Reserve Fund, including the account established for the Additional Bonds, shall be equal to theReserve Requirement on the Delivery Date for the Additional Bonds.

(h) District Certification. The District shall file with the Fiscal Agent a certificate of aDistrict Representative certifying that the conditions precedent to the issuance of the Additional Bondsset forth in the Fiscal Agent Agreement have been satisfied. The District Representative executingthis certificate may conclusively rely upon such certificates of the Fiscal Agent, the IndependentFinancial Consultant, appraisers, owners of property within Improvement Area No. 1, and othersselected with due care, without the need for independent inquiry or certification.

(i) As a condition precedent to the issuance of Additional Bonds, the District shall havereceived an opinion of Bond Counsel and/or general counsel to the District to the effect that (1) theDistrict has the right and power under the Act to adopt the Fiscal Agent Agreement and theSupplements relating to such Additional Bonds, and the Fiscal Agent Agreement and all suchSupplements have been duly and lawfully adopted by the District, are in full force and effect and arevalid and binding upon the District and enforceable in accordance with their terms (except asenforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relatingto the enforcement of creditors’ rights); (2) the Fiscal Agent Agreement creates the valid pledge which

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it purports to create of the Net Taxes and other amounts as provided in the Fiscal Agent Agreement,subject to the application thereof to the purposes and on the conditions permitted by the Fiscal AgentAgreement; and (3) such Additional Bonds are valid and binding limited obligations of the District,enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy,insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) andthe terms of the Fiscal Agent Agreement and all Supplements thereto and entitled to the benefits of theFiscal Agent Agreement and all such Supplements, and such Additional Bonds have been duly andvalidly authorized and issued in accordance with the Act (or other applicable laws) and the FiscalAgent Agreement and all such Supplements; and a further opinion of Bond Counsel to the effect that,assuming compliance by the District with certain tax covenants, the issuance of the Additional Bondswill not adversely affect the exclusion from gross income for federal income tax purposes of intereston the 2012 Bonds and any Additional Bonds theretofore issued on a tax exempt basis, or theexemption from State of California personal income taxation of interest on any Outstanding Bondsand Additional Bonds theretofore issued.

Continuing Disclosure Covenant. The District covenants and agrees that it will comply with and carryout all of its obligations under the District Continuing Disclosure Agreement. Notwithstanding any otherprovision of the Fiscal Agent Agreement, failure of the District to comply with its obligations under theDistrict Continuing Disclosure Agreement shall not be considered an event of default under the Fiscal AgentAgreement, and the sole remedy, in the event of any failure of the District to comply with the DistrictContinuing Disclosure Agreement, shall be an action to compel performance thereof. The Fiscal Agent, at therequest of any Participating Underwriter or the Owners of at least 25% aggregate principal amount ofOutstanding Bonds and upon being provided with indemnity reasonably satisfactory to the Fiscal Agent, shall,or any Bondowner or Beneficial Owner may, take such actions as may be necessary and appropriate, includingseeking mandate or specific performance by court order, to cause the District to comply with its obligationsunder this covenant. For purposes of this covenant, “Beneficial Owner” means any person which (a) has thepower, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds(including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated asthe Owner of any Bonds for federal income tax purposes.

Amendment to Fiscal Agent Agreement

The District may from time to time, and at any time, without notice to or consent of any of theOwners, adopt Supplements for any of the following purposes:

(a) to cure any ambiguity, to correct or supplement any provision of the Fiscal AgentAgreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, or to make anyother provision with respect to matters or questions arising under the Fiscal Agent Agreement, or in anySupplement, provided that such action shall not have a material adverse effect on the interests of theBondowners;

(b) to add to the covenants and agreements of and the limitations and the restrictionsupon the District contained in the Fiscal Agent Agreement which are not contrary to or inconsistent with theFiscal Agent Agreement as theretofore in effect;

(c) to modify, alter, amend or supplement the Fiscal Agent Agreement in any otherrespect which is not materially adverse to the Bondowners including, but not limited to, providing for therating or insuring of the Bonds; or

(d) to provide for the issuance of Additional Bonds pursuant to the terms of the FiscalAgent Agreement.

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Exclusive of amendments supplemental to the Fiscal Agent Agreement described above, the Ownersof not less than 60% in aggregate principal amount of the Bonds then Outstanding shall have the right toconsent to and approve the adoption by the District of such amendments or orders supplemental to the FiscalAgent Agreement as shall be deemed necessary or desirable by the District for the purpose of waiving,modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisionscontained in the Fiscal Agent Agreement; provided, however, that nothing in the Fiscal Agent Agreement shallpermit, or be construed as permitting, (a) an extension of the maturity date of the principal of, or the paymentdate of interest on, any Bonds, (b) a reduction in the principal amount of, or redemption premium on, anyBonds or the rate of interest thereon, (c) a preference or priority of any Bonds over any other Bonds, or (d) areduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to suchSupplement, without, in the case of (a) or (b), the consent of the affected Owner, or, in the case of (c) or (d),the consent of the Owners of all Bonds then Outstanding.

Fiscal Agent

The Fiscal Agent is appointed and takes authorized actions under the terms of the Fiscal AgentAgreement. The initial Fiscal Agent may be removed or replaced by the District upon 30 days’ prior writtennotice (except during the continuance of an event of default, as further discussed below) or may, upon 60 days’prior written notice, resign in favor of a successor Fiscal Agent. The Fiscal Agent Agreement provides forcertain minimum qualifications of the Fiscal Agent and provides for notice and procedures in the event asuccessor Fiscal Agent is required or appointed.

The duties of the Fiscal Agent are specified within the Fiscal Agent Agreement and include mailinginterest payments to the Owners, selecting Bonds for redemption pursuant to the terms of the Fiscal AgentAgreement, giving notice of redemption and meetings of the Owners, maintaining the Bond Register andmaintaining and administering the funds and accounts established pursuant to the Fiscal Agent Agreement.The Fiscal Agent also performs all other acts authorized or directed of the Fiscal Agent pursuant to the termsof 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 same andmakes no representations as to the validity or sufficiency of the Fiscal Agent Agreement or the Bonds. TheFiscal Agent Agreement provides for certain protections from liability of the Fiscal Agent except for its ownnegligence or willful misconduct, as further specified in the Fiscal Agent Agreement.

Events of Default, Remedies

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

(a) default in the due and punctual payment of the principal of or redemption premium,if any, on any Bond when and as the same shall become due and payable, whether at maturity as thereinexpressed or from mandatory redemption;

(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 in the Fiscal Agent Agreement or in the Bonds contained, and the continuation of suchdefault for a period of 30 days after the District shall have been given notice in writing of such default by theFiscal Agent, provided that if within 30 days the District has commenced curing of the default and diligentlypursues elimination thereof, such period shall be extended to permit such default to be eliminated; providedthat, any noncompliance with the terms of the Continuing Disclosure Covenant under the Fiscal Agent

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Agreement (and set forth above) shall not be an event of default under the terms of the Fiscal AgentAgreement.

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

(a) by mandamus or other suit or proceeding at law or in equity to enforce his or herrights against 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 Act andtheir 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 therights of the Owners; or

(c) upon the happening of an event of default (as defined in the Fiscal AgentAgreement), by a suit in equity to require the District and its members, officers and employees to account asthe trustee of an express trust.

Nothing in the Fiscal Agent Agreement, or in the Bonds, shall affect or impair the obligation of theDistrict, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respectiveOwners of the Bonds at the respective dates of maturity, as provided in the Fiscal Agent Agreement, out of theNet Taxes pledged for such payment, or affect or impair the right of action, which is also absolute andunconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied inthe Bonds and in the Fiscal Agent Agreement.

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

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

No remedy in the Fiscal Agent Agreement conferred upon or reserved to the Owners is intended to beexclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every otherremedy given pursuant to the Fiscal Agent Agreement or now or hereafter existing, at law or in equity or bystatute or otherwise, and may be exercised without exhausting and without regard to any other remedyconferred by the Act or any other law.

Defeasance

Any Outstanding Bond(s) shall be deemed to have been paid within the meaning expressed in theFiscal Agent Agreement if such Bond is paid in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest and any premium due onsuch Bond, as and when the same become due and payable;

(b) by depositing with the Fiscal Agent, or a designated bank or trust company as escrowholder, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund,the Bond Fund, the Redemption Fund and the Reserve Fund and available for such purpose, is fully sufficient

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to pay the principal of and interest and any premium on such Bond as and when the same shall become due andpayable; or

(c) by depositing with the Fiscal Agent, or a designated bank or trust company as escrowholder, noncallable direct obligations of, or obligations guaranteed by, the United States of America, in whichthe District may lawfully invest its money, in such amount as certified by a nationally recognized certifiedpublic accountant which will, together with the interest to accrue thereon and monies then on deposit in theSpecial Tax Fund, the Bond Fund, the Redemption Fund and the Reserve Fund available for such purpose,together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of and interestand any premium on such Bond as and when the same shall become due and payable;

then, notwithstanding that any such Bond shall not have been surrendered for payment, all obligations of theDistrict under the Fiscal Agent Agreement, and any Supplement, with respect to such Bond shall cease andterminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of any suchBonds not so surrendered and paid, all sums due thereon and except for the covenants of the District containedand identified in the Fiscal Agent Agreement.

(THIS PAGE INTENTIONALLY LEFT BLANK)

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APPENDIX F

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of February 1, 2012, isexecuted and delivered by Community Facilities District No. 2005-5 of the Moreno Valley Unified SchoolDistrict (the “District”) and Special District Financing & Administration LLC, as dissemination agent, inconnection with the issuance and delivery by the District of the Series 2012 Special Tax Bonds (the “Bonds”).The Bonds are being issued pursuant to Resolution No. 2011-12-13 and that certain Fiscal Agent Agreement,dated as of February 1, 2012 (the “Fiscal Agent Agreement”). The District covenants as follows:

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

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

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

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

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

“Dissemination Agent” shall mean, initially, Special District Financing & Administration LLC, or anysuccessor Dissemination Agent designated in writing by the District which has filed with the then currentDissemination Agent a written acceptance of such designation.

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

“Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated dba Stone &Youngberg, a Division of Stifel Nicolaus.

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

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

“Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal incometax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includabledirectly or indirectly for purposes of calculating any other tax liability, including any alternative minimum taxor environmental tax.

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SECTION 3. Provision of Annual Reports.

(a) Not later than March 1 immediately following the end of the District’s fiscal year,commencing March 1, 2012, the District shall, provide or shall cause the Dissemination Agent to provide, tothe Repository and the Participating Underwriter an Annual Report which is consistent with the requirementsof Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or asseparate documents 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 the District may besubmitted separately from and later than the balance of the Annual Report if they are not available by the daterequired above for the filing of the Annual Report.

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

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

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

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

SECTION 4. Content of Annual Reports. The initial Annual Report filed by March 1, 2012 shallconsist of the Official Statement and the audited financial statements of the School District. Thereafter, theDistrict’s Annual Report shall contain or include by reference:

(a) Financial Statements. The audited financial statements of the School District for the mostrecent fiscal year of the District then ended. If the audited financial statements are not available by the timethe Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statementsof the District in a format similar to the audited financial statements, and the audited financial statements shallbe filed in the same manner as the Annual Report when they become available. Audited financial statementsof the School District shall be audited by such auditor as shall then be required or permitted by State law or theFiscal Agent Agreement. Audited financial statements shall be prepared in accordance with generally acceptedaccounting principles as prescribed for governmental units by the Governmental Accounting Standards Board;provided, however, that the District may from time to time, if required by federal or state legal requirements,modify the basis upon which its financial statements are prepared. In the event that the School District shallmodify the basis upon which its financial statements are prepared, the District shall provide a notice of such

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modification to the Repository, including a reference to the specific federal or state law or regulationspecifically describing the legal requirements for the change in accounting basis.

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

(i) the principal amount of Bonds and any Additional Bonds outstanding as ofSeptember 2 of each year;

(ii) the balance in each fund under the Fiscal Agent Agreement as of the December 1preceding the filing of the Annual Report, including the Reserve Fund and a statement of the ReserveRequirement;

(iii) a summary of the Special Taxes levied on Undeveloped Property and DevelopedProperty (as defined in the Rate and Method of Apportionment of Special Tax) levied within the District, andan update of Table 4 based on the assessed value of such land, as shown on the assessment roll of the RiversideCounty Assessor last equalized prior to the September 30 next preceding the Annual Report date;

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

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

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

(vii) the delinquency rate for the Special Taxes for the preceding fiscal year and theidentity of any property owner whose delinquent Special Taxes represent more than 5% of the amount leviedand the assessed value-to-lien ratios of such delinquent properties; and

(viii) any information not already included under (i) through (vii) above that the District isrequired to file in its annual report to the California Debt and Investment Advisory Commission pursuant tothe provisions of the Mello-Roos Community Facilities Act of 1982, as amended.

In addition to any of the information expressly required to be provide under paragraphs (a) or (b) ofthis Section, the District shall provide such further information, if any, as may be necessary to make thespecifically required statements set forth in clauses (i) to (viii), in the light of the circumstances under whichthey were made, not misleading for purposes of applicable federal securities laws.

(c) Any or all of the items listed in (a) or (b) above may be included by specific reference toother documents, including official statements of debt issues of the District or related public entities, whichhave been submitted to the Repository or the Securities and Exchange Commission. If the document includedby reference is a final official statement, it must be available from the Repository. The District shall clearlyidentify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) The District shall notify the Dissemination Agent not more than eight (8) Business Days afterthe following events, and the Dissemination Agent shall file a notice with the Repository not more than ten(10) Business Days after the following events:

1. principal and interest payment delinquencies;

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2. unscheduled draws on debt service reserves reflecting financial difficulties;

3. unscheduled draws on credit enhancements reflecting financial difficulties;

4. substitution of credit or liquidity providers, or their failure to perform;

5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed orfinal determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other materialnotices or determinations with respect to the tax status of the Bonds;

6. defeasances;

7. tender offers;

8. ratings changes; and

9. bankruptcy, insolvency, receivership or similar proceedings. For the purposes of theevent identified in this Section 5(a)(9), the event is considered to occur when any of the followingoccur: the appointment of a receiver, fiscal agent or similar officer for the District or the SchoolDistrict in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state orfederal law in which a court or governmental authority has assumed jurisdiction over substantially allof the assets or business of the District or the School District, or if such jurisdiction has been assumedby leaving the existing governmental body and officials or officers in possession but subject to thesupervision and orders of a court or governmental authority, or the entry of an order confirming a planof reorganization, arrangement or liquidation by a court or governmental authority having supervisionor jurisdiction over substantially all of the assets or business of the District or the School District.

(b) Additionally, the District shall provide the Dissemination Agent, and the DisseminationAgent shall promptly file with the Repository, notice of the occurrence of any of the following events withrespect to the Bonds, if material:

1. The consummation of a merger, consolidation or acquisition involving an obligatedperson or sale of all or substantially all of the assets of the obligated persons or their person, other thanin the ordinary course of business, the entry into a definitive agreement to undertake such an action orthe termination; of a definitive agreement relating to any such actions, other than pursuant to its term;

2. appointment of a successor or additional fiscal agent or the change of the name of afiscal agent;

3. non payment related defaults;

4. modifications to the rights of Bondholders;

5. Bond calls;

6. release, substitution or sale of property securing repayment of the Bonds; and

7. other material notices or determinations with respect to the tax status of the Bonds, orother material events affecting the tax status of the Bonds.

(c) The District hereby agrees that the undertaking set forth in this Disclosure Agreement is theresponsibility of the District and the Dissemination Agent shall not be responsible for determining whether the

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District’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of theRule.

SECTION 6. Termination of Reporting Obligation. The obligations of the District and theDissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, priorredemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of theBonds, the District shall give notice of such termination in the same manner as for a Listed Event underSection 5.

SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage aDissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and maydischarge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Theinitial Dissemination Agent shall be Special District Financing & Administration LLC. The DisseminationAgent may resign by providing (i) thirty days written notice to the District, and (ii) upon appointment of a newDissemination Agent hereunder.

SECTION 8. Amendment.

(a) This Disclosure Amendment may be amended, by written agreement of the parties, withoutthe consent of the Owners, if all of the following conditions are satisfied: (1) such amendment is made inconnection with a change in circumstances that arises from a change in legal (including regulatory)requirements, a change in law, or a change in the identity, nature or status of the District or the type of businessconducted thereby, (2) this Disclosure Agreement as so amended would have complied with the requirementsof the Rule as of the date of this Disclosure Agreement, after taking into account any amendments orinterpretations of the Rule, as well as any change in circumstances, (3) the District shall have delivered to theDissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securitieslaws, addressed to the District and the Participating Underwriter, to the same effect as set forth in clause (2)above, (4) the District shall have delivered to the Dissemination Agent an opinion of nationally recognizedbond counsel or counsel expert in federal securities laws, addressed to the District, to the effect that theamendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendmentshall have been approved by the Owners in the same manner as an amendment to the Fiscal Agent Agreement,and (5) the District shall have delivered copies of such opinion and amendment to the Repository and theParticipating Underwriter.

(b) This Disclosure Agreement also may be amended by written agreement of the parties uponobtaining consent of Owners in the same manner as provided in the Fiscal Agent Agreement for amendmentsto the Fiscal Agent Agreement with the consent of the Owners of the Bonds; provided that the conditions setforth in Section 8(a)(1), (2) and (3) have been satisfied.

(c) To the extent any amendment to this Disclosure Agreement results in a change in the type offinancial information or operating data provided pursuant to this Disclosure Agreement, the first AnnualReport provided thereafter shall include a narrative explanation of the reasons for the amendment and theimpact of the change in the type of operating data or financial information being provided.

(d) If an amendment is made to the basis on which financial statements are prepared, the AnnualReport for the year in which the change is made shall present a comparison between the financial statements orinformation prepared on the basis of the new accounting principles and those prepared on the basis of theformer accounting principles. Such comparison shall include a quantitative and, to the extent reasonablyfeasible, qualitative discussion of the differences in the accounting principles and the impact of the change inthe accounting principles on the presentation of the financial information.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed toprevent the District from disseminating any other information, using the means of dissemination set forth in

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this Disclosure Agreement or any other means of communication, or including any other information in anyAnnual Report or notice of occurrence of a Listed Event, in addition to that which is required by thisDisclosure Agreement. If the District chooses to include any information in any Annual Report or notice ofoccurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement,the District shall have no obligation under this Agreement to update such information or include it in anyfuture Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent tocomply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds maytake such actions as may be necessary and appropriate, including seeking mandate or specific performance bycourt order, to cause the District and/or the Dissemination Agent to comply with their respective obligationsunder this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event ofDefault under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the eventof any failure of the District or the Dissemination Agent to comply with this Disclosure Agreement shall be anaction to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The DisseminationAgent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Districtagrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents,harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise orperformance of their powers and duties hereunder, including the costs and expenses (including attorneys fees)of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’snegligence or willful misconduct. Any Dissemination Agent other than the District shall be paid(i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to bemutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agentin the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation toreview any information provided to it by the District pursuant to this Disclosure Agreement. The obligationsof the District under this Section shall survive resignation or removal of the Dissemination Agent and paymentof the Bonds. No person shall have any right to commence any action against the Dissemination Agentseeking any remedy other than to compel specific performance of this Disclosure Agreement. TheDissemination Agent shall not be liable under any circumstances for monetary damages to any person for anybreach under this Disclosure Agreement.

The Dissemination Agent may file reports, notices and other information as required by thisagreement electronically to the Repository. If the District is equipped to receive such informationelectronically, the Dissemination Agent will include the District in any simultaneous electronic disseminationof materials.

SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of theDistrict, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from timeto time of the Bonds, and shall create no rights in any other person or entity.

SECTION 13. Counterparts. This Disclosure Agreement may be executed in several counterparts,each of which shall be an original and all of which shall constitute but one and the same instrument.

SECTION 14. Governing Law. This Disclosure Agreement shall be construed and governed inaccordance with the laws of the State of California.

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SECTION 15. Notices. Notices shall be provided, as required hereunder, to the applicableaddressees below:

District: Moreno Valley Unified School District25634 Alessandro BoulevardMoreno Valley, California 92553Telephone: (951) 571-7500Facsimile: (951) 571-7659Attention: Chief Business Official

Dissemination Agent: Special District Financing & Administration LLC437 West Grand AvenueEscondido, California 92025Telephone: (760) 233-2630Facsimile: (760) 233-2631Attention: _____________

Participating Underwriter: Stone & Youngberg, a Division of Stifel NicolausOne Ferry Building, Suite 275San Francisco, CA 94111Attn: Municipal Research

SECTION 16. Severability. In case any one or more of the provisions contained herein shall for anyreason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality orunenforceability shall not affect any other provision hereof.

SECTION 17. Merger. Any person succeeding to all or substantially all of the DisseminationAgent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper orany further act.

COMMUNITY FACILITIES DISTRICT NO. 2005-5 OFTHE MORENO VALLEY UNIFIED SCHOOLDISTRICT

By:Superintendent of the Moreno Valley UnifiedSchool District on behalf of Community FacilitiesDistrict No. 2005-5 of the Moreno Valley UnifiedSchool District

SPECIAL DISTRICT FINANCING &ADMINISTRATION LLC,as Dissemination Agent

By:Its: Authorized Officer

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EXHIBIT A

NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2005-5 of the Moreno Valley Unified SchoolDistrict

Name of Bond Issue: Community Facilities District No. 2005-5 of the Moreno Valley Unified SchoolDistrict Series 2012 Special Tax Bonds

Date of Issuance: February 16, 2012

NOTICE IS HEREBY GIVEN that Community Facilities District No. 2005-5 of the Moreno ValleyUnified School District (the “Issuer”) has not provided an Annual Report with respect to the above-namedBonds as required by Section 3 of the Continuing Disclosure Agreement, dated as of February 1, 2012. [TheIssuer anticipates that the Annual Report will be filed by ________.]

Dated: __________

__________________________________,as Dissemination Agent

cc: Moreno Valley Unified School District

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APPENDIX G

BOOK-ENTRY ONLY SYSTEM

The information in this section concerning DTC and DTC’s book-entry only system has been obtained fromsources that the District believes to be reliable, but the District takes no responsibility for the completeness oraccuracy thereof. The following description of the procedures and record keeping with respect to beneficialownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds toDTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bondsand other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is basedsolely on information provided by DTC to the District which the District believes to be reliable, but the District andthe Underwriter do not and cannot make any independent representations concerning these matters and do not takeresponsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participantsnor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should insteadconfirm the same with DTC or the DTC Participants, as the case may be.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for theBonds. The Bonds 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 will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of suchmaturity, and will be deposited through the facilities of DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the NewYork Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of theFederal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code,and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues,corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’sparticipants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among DirectParticipants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movementof securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of TheDepository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National SecuritiesClearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCCis owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as bothU.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clearthrough or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“IndirectParticipants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are onfile with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which willreceive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond(“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Ownerswill not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected toreceive written confirmations providing details of the transaction, as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers ofownership interests in the Bonds are to be accomplished by entries made on the books of Direct and IndirectParticipants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing theirownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in thename of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorizedrepresentative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or suchother DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actualBeneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts

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such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants willremain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants toIndirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed byarrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices ofsignificant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to theBond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding theBonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, BeneficialOwners may wish to provide their names and addresses to the registrar and request that copies of notices beprovided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are beingredeemed, 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 any other DTC nominee) will consent or vote with respect to Bondsunless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assignsCede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on therecord date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., orsuch other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit DirectParticipants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or theFiscal Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments byParticipants to Beneficial Owners will be governed by standing instructions and customary practices, as is the casewith securities held for the accounts of customers in bearer form or registered in “street name,” and will be theresponsibility of such Participant and not of DTC, the Fiscal Agent, or the District, subject to any statutory orregulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, anddividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative ofDTC) is the responsibility of the 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 be theresponsibility of Direct and Indirect Participants.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, tothe Fiscal Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer theParticipant’s interest in the Bonds, on DTC’s records, to the Fiscal Agent. The requirement for physical delivery ofBonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownershiprights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit oftendered Bonds to the Fiscal Agent’s DTC account.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by givingreasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successordepository is not obtained, physical certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry only transfers through DTC (or asuccessor securities depository). In that event, Bonds will be printed and delivered to DTC.

THE FISCAL AGENT, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS,WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANYFAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFYANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THEVALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THEBONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

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