Draft Dated August 30, 2019

PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER [__], 2019

NEW ISSUE NOT RATED In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “LEGAL MATTERS – Tax Exemption.”

$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT

2019 SPECIAL TAX BONDS Dated: Date of Delivery Due: September 1, as shown on inside cover. Authority for Issuance. The bonds captioned above (the “Bonds”) are being issued under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), the Resolution of Issuance (as defined herein), and a Fiscal Agent Agreement, dated as of October 1, 2019 (the “Fiscal Agent Agreement”), by and between Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”), and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). The Governing Board (the “Board”) of the Menifee Union School District (the “School District”), acting as the legislative body of the Community Facilities District, and the eligible landowner voters in the Community Facilities District, have authorized the issuance of bonds in an aggregate principal amount not to exceed $9,000,000. See

rcumstances rcumstances shall this Preliminary Official Statement constitute an “THE BONDS – Authority for Issuance.” The Community Facilities District may issue parity bonds for refunding purposes only. See “THE ci

BONDS – Additional Parity Bonds for Refunding Purposes Only.” Security and Sources of Payment. The Bonds are payable from proceeds of Net Special Taxes (as defined herein) levied on taxable property within the Community Facilities District according to the rate and method of apportionment of special tax approved by the Board and the eligible landowner voters in the Community Facilities District. The Bonds are secured by a first pledge of the revenues derived from the Net Special Taxes and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.” Use of Proceeds. The Bonds are being issued (i) to acquire and construct certain school facilities to be owned and operated by the School District and certain facilities to be owned and operated by Eastern Municipal Water District (“EMWD”) (collectively, the “Project”); (ii) to make a deposit to the reserve fund for the Bonds; (iii) to fund capitalized interest on the Bonds for a limited period; and (iv) to pay certain costs of issuing the Bonds. See “FINANCING PLAN.” Bond Terms. Interest on the Bonds is payable semiannually on each March 1 and September 1, commencing March 1, 2020. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). DTC will act as securities depository for the Bonds. See “THE BONDS – General Bond Terms” and APPENDIX E – “DTC and the Book-Entry Only System.” Redemption. The Bonds are subject to optional redemption, mandatory sinking fund redemption before maturity and special mandatory redemption from prepaid Special Taxes. See “THE BONDS - Redemption.” THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE NET SPECIAL TAXES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAXES AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. MATURITY SCHEDULE (see inside cover) This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the Bonds involves risks which may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Community Facilities District by James F. Anderson Law Firm, A Professional Corporation, Laguna Hills, California, as disclosure counsel, and by Fagan, Friedman & Fulfrost LLP, Carlsbad, California, general counsel to the School District. Kutak Rock LLP, Irvine, California, is serving as counsel to the Underwriter. It is anticipated that the Bonds, in book-entry form, will be available for delivery on or about October [___, 2019.

The date of this Official Statement is September __, 2019. Preliminary Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no

This This * Preliminary, subject to change. Board Meeting Date: 09-10-2019 Page 1 of 164 offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. be unlawful. would sale or solicitation offer, such in which jurisdiction in any securities these of sale be any shall there nor to buy offer an of solicitation a sell or to offer

$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT 2019 SPECIAL TAX BONDS

MATURITY SCHEDULE

$______Serial Bonds (Base CUSIP†: 586810)

Maturity Principal Interest (September 1) Amount Rate Yield Price CUSIP† No. 2021 $ % % % 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 20__

$______% Term Bond due September 1, 20__, Yield: ______%, Price ______% CUSIP† No. 586810 ___ $______% Term Bond due September 1, 20__, Yield: ______%, Price ______% CUSIP† No. 586810 ___ $______% Term Bond due September 1, 2049, Yield: ______%, Price ______% CUSIP† No. 586810 ___

______* Preliminary, subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP® data is provided by CUSIP Global Services (“CGS”) which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. CUSIP® data is not intended to create a database and does not serve in any way as a substitute for the CGS database. The Community Facilities District, the School District and the Underwriter are not responsible for the selection, correctness or uses of the CUSIP® numbers, and no representation is made as to their correctness on the Bonds or as set forth herein. CUSIP® numbers have been assigned by an independent company not affiliated with the Community Facilities District, the School District or the Underwriter and CUSIP® numbers are provided for convenience of reference only. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result of various subsequent actions, including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

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GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the School District, the Community Facilities District, any other parties described in this Official Statement, or in the condition of property within the Community Facilities District since the date of this Official Statement.

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

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.

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

Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stabilization of and Changes to Offering Prices. The Underwriter may over-allot or take other steps that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.

Bonds are Exempt from Securities Laws Registration. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words.

Internet Site and Social Media Accounts. While the School District maintains an internet website and certain social media accounts for various purposes, none of the information on such website or social media accounts is intended to assist investors in making any investment decision or to provide any continuing information with respect to the Bonds or any other bonds or obligations of the School District.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD- LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. THE COMMUNITY FACILITIES DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

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MENIFEE UNION SCHOOL DISTRICT

BOARD OF TRUSTEES/TRUSTEE AREA

Reg Bennett, President, Trustee Area 1 Jacquelyn Johansen, Vice President, Trustee Area 4 J. Kyle Root, Clerk, Trustee Area 3 Kenyon W. Jenkins, Deputy Clerk, Trustee Area 5 Robert O’Donnell, Member, Trustee Area 2

DISTRICT ADMINISTRATION

Dr. Steve Kennedy, Superintendent Ambur Borth, Assistant Superintendent, Business James Sellers, Director of Facilities

______

PROFESSIONAL SERVICES

BOND COUNSEL

Jones Hall, A Professional Law Corporation San Francisco, California

DISCLOSURE COUNSEL

James F. Anderson Law Firm, A Professional Corporation Laguna Hills, California

MUNICIPAL ADVISOR, SPECIAL TAX CONSULTANT AND CFD ADMINISTRATOR

Cooperative Strategies, LLC Irvine, California

APPRAISER

Kitty Siino & Associates Inc. Tustin, California

FISCAL AGENT

Zions Bancorporation, National Association Los Angeles, California

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[INSERT REGIONAL MAP]

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TABLE OF CONTENTS

Page Page INTRODUCTION ...... 1 BOND OWNERS’ RISKS ...... 79 FINANCING PLAN ...... 4 Risks of Real Estate Secured Investments Estimated Sources and Uses of Funds ...... 5 Generally ...... 79 Limited Obligation of the Community Facilities THE BONDS ...... 6 District to Pay Debt Service ...... 79 Authority for Issuance ...... 6 Future Property Development ...... 79 General Bond Terms...... 8 Extraordinary Redemption From Prepaid Redemption ...... 9 Special Taxes ...... 80 Additional Parity Bonds for Refunding Purposes Concentration of Ownership ...... 80 Only ...... 12 Levy and Collection of the Special Tax ...... 80 Registration, Transfer and Exchange ...... 12 Risks Related to Declines in Home Values ...... 82 Debt Service Schedule ...... 14 Payment of Special Tax is not a Personal SECURITY FOR THE BONDS ...... 15 Obligation of the Property Owners ...... 82 General ...... 15 Appraised Values ...... 82 Limited Obligation ...... 15 Property Values ...... 83 Special Taxes ...... 16 Other Possible Claims Upon the Value of Rate and Method ...... 17 Taxable Property ...... 85 Covenant to Foreclose ...... 22 Value-to-Debt Ratios ...... 86 Special Tax Fund ...... 24 Exempt Properties ...... 86 Bond Fund ...... 25 Depletion of Reserve Fund ...... 87 Reserve Fund ...... 26 Bankruptcy Delays ...... 87 Letter of Credit Fund ...... 26 Disclosure to Future Purchasers ...... 88 Investment of Moneys in Funds ...... 27 Limitations on Remedies ...... 88 Parity Bonds for Refunding Purposes Only ...... 27 No Acceleration Provisions ...... 88 THE COMMUNITY FACILITIES DISTRICT ...... 28 Tax Cuts and Jobs Act of 2017 ...... 88 General ...... 28 Loss of Tax Exemption ...... 89 Special Taxes and Projected Debt Service IRS Audit of Tax-Exempt Bond Issues ...... 89 Coverage ...... 29 Legislative Proposals, Clarifications of the Code Historical Assessed Values ...... 31 and Court Decisions on Tax Exemption ...... 89 Appraised Property Value ...... 31 Backup Withholding ...... 89 Special Tax Levy ...... 33 Voter Initiatives and State Constitutional Appraised Value-to-Debt Ratio ...... 40 Provisions ...... 89 Direct and Overlapping Governmental Limited Secondary Market for Bonds ...... 91 Obligations ...... 43 Cyber Security ...... 91 Estimated Property Tax Rates and Tax Burden LEGAL MATTERS ...... 92 on Single-Family Home ...... 45 Legal Opinion ...... 92 Special Tax Collection History and Tax Exemption ...... 92 Delinquencies...... 46 No Litigation ...... 93 PROPERTY OWNERSHIP AND CONTINUING DISCLOSURE ...... 94 DEVELOPMENT ...... 47 Community Facilities District ...... 94 Brookfield Homes/Riverside Mitland 03 LLC .... 48 KB ...... 95 DR Horton ...... 56 NO RATINGS ...... 96 KB ...... 63 Pardee Homes ...... 71 UNDERWRITING ...... 96 FINANCIAL INTERESTS ...... 97 EXECUTION ...... 98

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TABLE OF CONTENTS (Continued)

APPENDIX A – General Information About the City of Murrieta and Riverside County ...... A-1 APPENDIX B – Rate and Method of Apportionment of Special Taxes of Community Facilities District No. 2018-2 of the Menifee Union School District ...... B-1 APPENDIX C – Appraisal Report ...... C-1 APPENDIX D – Summary of Certain Provisions of the Fiscal Agent Agreement ...... D-1 APPENDIX E – DTC and the Book-Entry Only System ...... E-1 APPENDIX F – Form of Continuing Disclosure Certificate (Community Facilities District) ...... F-1 APPENDIX G – Form of Continuing Disclosure Certificate (KB) ...... G-1 APPENDIX H – Form of Opinion of Bond Counsel ...... H-1 APPENDIX I – Community Facilities District Boundary Map...... I-1

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OFFICIAL STATEMENT

$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT 2019 SPECIAL TAX BONDS

INTRODUCTION

This Official Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “Bonds”) to be issued by Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”).

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

Capitalized terms used but not defined in this Official Statement have the definitions given in the Fiscal Agent Agreement (as defined below).

The School District. The Menifee Union School District (the “School District”) is located in the southwestern portion of Riverside County (the “County”), and the School District primarily serves the City of Menifee (the “City”) but also serves portions of the Cities of Lake Elsinore, Murrieta, Perris and Wildomar and a portion of the unincorporated area of the County. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged into a single school district. The School District currently operates two preschools, ten elementary schools, one K-8 Harvest Hill STEAM Academy, and three middle schools, serving approximately 10,410 students in Fiscal Year 2018-19. For economic and demographic information regarding the area in and around the School District, see “APPENDIX A.”

The administration headquarters of the School District are located at 29775 Haun Road, Menifee, California. For further information on the School District, see its Internet home page at www.menifeeusd.org. This internet address is included for reference only and the information on the Internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement.

The Community Facilities District. The Community Facilities District was formed and established on June 12, 2018, by the Governing Board of the School District (the “Board”), as the legislative body of the Community Facilities District, under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), pursuant to a resolution adopted by the Board following a public hearing, and landowner elections held on the same date at which the qualified electors of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved the levy of special taxes with respect to the Community Facilities District. See “THE BONDS – Authority for Issuance.”

* Preliminary, subject to change.

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The following agreements relate to the Community Facilities District:

 an agreement entitled “School Facilities Mitigation Agreement” dated as of April 24, 2018, by and among the School District; Riverside Mitland 03 LLC, a Delaware limited liability company (“Riverside Mitland”); Brookfield Homes (as defined herein); Pardee Homes (as defined herein); and KB (as defined herein), as it may be amended and supplemented; and

 an agreement entitled “Joint Community Facilities Agreement” dated as of October 9, 2018 (the “EMWD JCFA”), by and among the School District, Eastern Municipal Water District (“EMWD”) and Riverside Mitland, as it may be amended and supplemented.

Authority for Issuance of the Bonds. The Bonds are issued under the Act, certain resolutions adopted by the Board, including the Resolution of Issuance, adopted on September 10, 2019 (the “Resolution of Issuance”), and a Fiscal Agent Agreement, dated as of October 1, 2019 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). See “THE BONDS – Authority for Issuance.”

The Board and the eligible landowner voters in the Community Facilities District have authorized the Community Facilities District to incur bonded indebtedness in an amount not to exceed $9,000,000. After issuance of the Bonds, the Community Facilities District will have $[______* of remaining authorization with respect to the Community Facilities District. See “THE BONDS – Authority for Issuance.” However, pursuant to the Fiscal Agent Agreement, except for refunding bonds, the Bonds are the only series of bonds to be issued under this authorization. See “THE BONDS – Additional Parity Bonds for Refunding Purposes Only.”

Purpose of the Bonds. Proceeds of the Bonds will be used primarily to acquire and construct eligible facilities of the School District (the “School District Facilities”) and certain facilities to be owned and operated by EMWD (collectively, the “Project”).

Bond proceeds will also fund a reserve fund for the Bonds, fund capitalized interest with respect to the Bonds for a limited period, and pay the costs of issuing the Bonds. See “FINANCING PLAN – Estimated Sources and Uses of Funds.”

Redemption of Bonds Before Maturity. The Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid Special Taxes. See “THE BONDS – Redemption.”

Security and Sources of Payment for the Bonds. The Board annually levies special taxes on real property in the Community Facilities District (the “Special Taxes”) in accordance with the Rate and Method of Apportionment of Special Taxes of Community Facilities District No. 2018-2 of Menifee Union School District (the “Rate and Method”). The Bonds are secured by and payable from a first pledge of the net proceeds of the Special Taxes (as more particularly defined in the Fiscal Agent Agreement, the “Net Special Taxes”) levied on the property in the Community Facilities District. The Bonds will be additionally secured by certain funds and accounts established and held under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.”

The Community Facilities District will covenant in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against parcels in the Community Facilities District with delinquent installments of the Special Taxes if certain conditions are met. For a more detailed description of the foreclosure covenant see “SECURITY FOR THE BONDS – Covenant to Foreclose.”

* Preliminary, subject to change.

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Property Ownership and Proposed Development. The Community Facilities District is part of the master planned community known as “Spencer’s Crossing.” The property encompassed by Tract No. 37053-1 is covered under the French Valley #312 Specific Plan. Amendment No. 2 to the French Valley #312 Specific Plan (February 2017), increases the acreage within the Specific Plan to approximately 628.5 acres, increases the target single-family residential unit count to 1,820 units, includes approximately 11.6 acres for an elementary school site, 40.1 gross acres for parks and open space, and approximately 43.4 acres for stormwater drainage and detention facilities. Harvest Hill STEAM Academy (K-6), Bell Mountain Middle School (7-8)(1), and Paloma Valley High School are expected to serve the grade K-12 students residing within the Community Facilities District.

The property within the Community Facilities District is entitled for the development of 307 homes and is being developed into four residential subdivisions within the Spencer’s Crossing master planned community: Agave at Spencer’s Crossing by Brookfield Homes Southern California LLC, a Delaware limited liability company, referred to herein as “Brookfield Homes”, Larkspur at Spencer’s Crossing by DR Horton, which is Western Pacific Housing, Inc., a Delaware corporation, doing business under the name DR Horton, America’s Builder (“DR Horton”); Santolina at Spencer’s Crossing by KB HOME Coastal Inc., a California corporation (“KB”) and Braeburn at Spencer’s Crossing by Pardee Homes, a California corporation (“Pardee Homes”). Brookfield Homes, DR Horton, KB and Pardee Homes are collectively referred to in this Official Statement as the “Developers.” See “PROPERTY OWNERSHIP AND DEVELOPMENT.”

Appraisal Report. An appraisal of the 307 taxable properties within the Community Facilities District, dated August 27, 2019 (the “Appraisal Report”), was prepared by Kitty Siino & Associates Inc., Tustin, California (the “Appraiser”), in connection with issuance of the Bonds.

The purpose of the Appraisal Report was to estimate the value of the fee simple interest of the subject property, subject to the Special Tax lien of the Bonds, as of the date of value, July 15, 2019. The subject property consists of 307 single-family detached lots encompassed by Subdivision Tract No. 37053-1, which encompasses four subdivisions being developed by the Developers within a development known as “Spencer’s Crossing.” See the section for each Developer in the section entitled, “PROPERTY OWNERSHIP AND DEVELOPMENT” for detailed information regarding development for each Developer’s project.

The Appraisal Report is based on certain assumptions, extraordinary assumptions and limiting conditions therein. Subject to these assumptions, extraordinary assumptions and limiting conditions, as of July 15, 2019, the Appraiser estimated that the aggregate value of the Taxable Property (as defined herein) within the Community Facilities District was $70,210,496. The aggregate value as of July 15, 2019, included 70 homes closed and sold to individuals, 23 homes representing standing inventory which are completed (17 in escrow) and 12 homes under construction which are over 95% complete (including 12 model homes(2)), 72 homes under construction which are less than 95% complete and 130 remaining finished lots. In the Appraisal Report, houses which are under construction but less than 95 percent complete are valued on the basis of a finished lot rather than attribute value to a partially complete improvement. See Table 5A and the footnotes thereto under the caption “THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value,” “ – Appraised Value-to-Debt Ratio,” “ – Direct and Overlapping Governmental Obligations” and “BOND OWNERS’ RISKS – Value-to-Debt Ratios” herein and APPENDIX C – “Appraisal Report” appended hereto for further information on the Appraisal Report, including valuation by ownership and assumptions, extraordinary assumptions and limiting conditions relating to the Appraisal Report.

(1) 7th grade students are expected to begin attending Harvest Hill STEAM Academy in the 2019-20 school year and 7th and 8th grade students are expected to attend Harvest Hill STEAM Academy in the 2020-21 school year. (2) Each Developer has three completed model homes which, as of July 15, 2019, had not been released for sale.

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Value-to-Debt Ratio. The estimate of value contained in the Appraisal Report results in an overall appraised value-to-debt ratio of approximately 9.50 to 1* based on the estimated amount of direct and overlapping debt allocated to parcels within the Community Facilities District, including the Bonds, all overlapping debt secured by a tax or assessment on the property within the Community Facilities District, but excluding all overlapping general obligation debt. See “THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to- Debt Ratio.”

Risk Factors Associated with Purchasing the Bonds. Investment in the Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the Bonds.

FINANCING PLAN

The Bonds are being issued for the primary purpose of providing funds to (i) finance the acquisition and construction, either directly or indirectly, of the Project, (ii) fund a Reserve Fund for the Bonds, (iii) fund capitalized interest on the Bonds for a limited period of time, and (iv) pay certain costs of issuing the Bonds.

School District Facilities. $[______of the proceeds from the sale of the Bonds will be used to finance the planning and construction of eligible school facilities of the School District. The Fiscal Agent will deposit such proceeds of the Bonds in the Improvement Fund established under the Fiscal Agent Agreement (the “Improvement Fund”).

EMWD Facilities. $[______of the proceeds from the sale of the Bonds will be used to finance the planning and construction of EMWD Facilities (as defined below). The Fiscal Agent will deposit such proceeds of the Bonds in the Improvement Fund.

[Remainder of Page Intentionally Left Blank.]

* Preliminary, subject to change.

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Estimated Sources and Uses of Funds

The estimated proceeds from the sale of the Bonds will be deposited into the following funds established under the Fiscal Agent Agreement:

SOURCES Principal Amount of Bonds $ [Plus/Less: Net Original Issue Premium/Discount] Underwriter’s Discount ( . ) Total Sources $

USES Deposit into Improvement Fund (1) School Facilities Account $ Other Facilities Account Deposit into Reserve Fund (2) Deposit into Costs of Issuance Fund (3) Deposit into Capitalized Interest Account (4) Total Uses $

(1) Will be used to acquire and construct School District Facilities and EMWD Facilities. (2) Equal to the Reserve Requirement with respect to the Bonds as of their date of delivery. See “SECURITY FOR THE BONDS – Reserve Fund.” (3) An amount to pay costs of issuance, which includes, among other things, the fees and expenses of Bond Counsel, Disclosure Counsel, the cost of printing the Preliminary and final Official Statements, the cost of the Appraisal Report, fees and expenses of the Fiscal Agent, and the fees of the Municipal Advisor and the Special Tax Consultant and formation deposit reimbursements to Riverside Mitland. (4) An amount to pay interest payable through September 1, 2020. *

* Preliminary, subject to change.

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THE BONDS

This section generally describes the security for the Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX D. Capitalized terms used but not defined in this section are defined in APPENDIX D.

Authority for Issuance

Community Facilities District Proceedings. The Bonds are issued under the Act, the Resolution of Issuance and the Fiscal Agent Agreement. In addition, as required by the Act, the Board has taken the following actions with respect to establishing the Community Facilities District and authorizing issuance of the Bonds:

Resolutions of Intention: On April 24, 2018, the Board adopted Resolution No. 2018-63 stating its intention to establish the Community Facilities District and to authorize the levy of a special tax therein. On April 24, 2018, the Board adopted Resolution No. 2018-72 stating its intention to incur bonded indebtedness in an amount not to exceed $13,000,000 with respect to the Community Facilities District for the purpose of financing the School District Facilities and water and sewer facilities to be owned by EMWD (the “EMWD Facilities”). See “FINANCING PLAN.”

Resolution Approving Joint Community Facilities Agreement: On October 9, 2018, the Board adopted Resolution No. 2019-47 approving the EMWD JCFA.

Resolution of Formation: Immediately following a noticed public hearing on June 12, 2018, the Board adopted Resolution No. 2018-71, which established the Community Facilities District and authorized the levy of special taxes to fund authorized public facilities.

Resolution of Necessity: On June 12, 2018, the Board adopted Resolution No. 2018-72 declaring the necessity to incur bonded indebtedness and authorized the Community Facilities District to issue bonds to finance the costs of the authorized public facilities in the maximum authorized amount of $13,000,000.

Landowner Election for The Community Facilities District and Declaration of Results: On June 26, 2018, after adoption of Resolution No. 2018-73, an election was held within the Community Facilities District in which the qualified electors within the Community Facilities District approved a ballot proposition authorizing the Community Facilities District to incur bonded indebtedness of up to $13,000,000 to finance the acquisition and construction of the School District Facilities and the EMWD Facilities, the levy of a special tax and the establishment of an appropriations limit for the Community Facilities District. On June 26, 2018, the Board adopted Resolution No. 2018-74, pursuant to which the Board approved the canvass of the votes in the landowner voter election and declared the authority to levy the Special Taxes applicable to the Community Facilities District in accordance with the approved Rate and Method, to incur the bonded indebtedness and to have established an appropriations limit.

Special Tax Lien and Levy: A Notice of Special Tax Lien for the Community Facilities District was recorded in the real property records of the County on June 26, 2018.

Ordinance Levying Special Taxes: On June 26, 2018, the Board adopted Ordinance No. 2018-02 levying the Special Taxes within the Community Facilities District.

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Resolution of Issuance: On September 10, 2019, the Board adopted a resolution approving issuance of the Bonds for the Community Facilities District in a principal amount not to exceed $9,000,000.

School District’s Goals and Policies. The School District adopted “Local Agency Goals and Policies for Community Facilities Districts” on October 12, 1999, as amended by a resolution adopted on August 13, 2002 (as amended, the “Goals and Policies”).

The Goals and Policies establish an order of priority for financing by community facilities districts and certain credit quality requirements for bonds issued by community facilities districts, namely a 3:1 property value to public debt ratio (public debt is defined as community facilities district bonds and other bonds secured by special taxes or special assessments). Property value may be based on an appraisal or on assessed values. Although the Goals and Policies do not require the value-to-debt ratio to be 3:1 on a parcel by parcel basis, consideration must be given to the ratio when apportioning special taxes to different parcels, to assure that the property owner will accept its special tax responsibilities.

The Goals and Policies also require a debt service reserve fund and declare that bonds may not be issued if delinquencies for the collection of taxes and assessments are greater than 10% on the date of issuance of the bonds.

Exceptions to these policies may be considered by the School District for bonds that do not represent an unusual credit risk, either due to credit enhancement or other reasons specified by the School District. In addition, the School District, by a four-fifths vote of its Board, may determine that a bond issue should proceed for specified public policy reasons without complying with the stated policies.

The 2002 amendment to the Goals and Policies added the requirement that debt service on community facilities district bonds be generally level and not escalate over the term of the bonds, however, the Board waived this requirement with respect to the Community Facilities District in the Resolution of Intention and the Resolution of Formation.

Taking into account this waiver, the School District and the Community Facilities District have determined that issuance of the Bonds conforms with the School District’s Goals and Policies, as amended.

[Remainder of Page Intentionally Left Blank.]

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General Bond Terms

Dated Date, Maturity and Authorized Denominations. The Bonds will be dated their date of delivery (the “Delivery Date”) and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple of $5,000.

Interest. The Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2020 (each an “Interest Payment Date”) until the principal sum of the Bonds has been paid.

Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless

(i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or

(ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as hereinafter defined) preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or

(iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from the Closing Date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

Record Date. “Record Date” means the 15th day of the calendar month (whether or not such day is a business day) next preceding the month of the applicable Interest Payment Date.

DTC and Book-Entry Only System. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). See APPENDIX E – “DTC and the Book-Entry Only System.”

Payments of Interest and Principal. For so long as DTC is used as depository for the Bonds, principal of, premium, if any, and interest payments on the Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the Bonds, for distribution to the beneficial owners of the Bonds in accordance with the procedures adopted by DTC.

Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered Owner thereof at the registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer (i) to the Depository (so long as the Bonds are in book-entry form), or (ii) to an account within the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds, which instructions will continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner.

The principal of the Bonds and any premium on the Bonds are payable by check in lawful money of the United States of America upon surrender of the Bonds at the Principal Office of the Fiscal Agent.

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Redemption *

Optional Redemption. The Bonds maturing on or before September 1, 20__, are not subject to optional call and redemption prior to maturity. The Bonds maturing on or after September 1, 20__, are subject to optional call and redemption prior to maturity, as a whole or in part among such maturities as are selected by the Community Facilities District and by lot within a maturity, on any Interest Payment Date on or after September 1, 20__, from funds derived by the Community Facilities District from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:

Redemption Date Redemption Price September 1, 20__ and March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102 September 1, 20__ and March 1, 20__ 101 September 1, 20__ and any Interest Payment Date thereafter 100

Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory call and redemption prior to maturity, as a whole or in part among such maturities as are selected by the Community Facilities District and by lot within a maturity, on any Interest Payment Date on or after March 1, 2020, from amounts in the Special Tax Prepayments Account available to redeem Bonds under the Fiscal Agent Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:

Redemption Date Redemption Price Any Interest Payment Date through March 1, 2027 103% September 1, 2027 and March 1, 2028 102 September 1, 2028 and March 1, 2029 101 September 1, 2029 and any Interest Payment Date thereafter 100

Such Prepayments could be made by any of the owners of any of the property within the Community Facilities District including any of the Developers, or any individual owner; and they could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. The resulting redemption of Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such Bonds. See “BOND OWNERS’ RISKS – Extraordinary Redemption from Prepaid Special Taxes.”

Mandatory Sinking Payment Redemption. The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20__, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

* Preliminary, subject to change.

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20__ Term Bonds

Sinking Fund Redemption Date (September 1) Sinking Payments 20__ $ 20__ 20__ 20__ 20__ (final maturity)

The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20__, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

20__ Term Bonds

Sinking Fund Redemption Date (September 1) Sinking Payments 20__ $ 20__ 20__ 20__ 20__ (final maturity)

The Bonds maturing on September 1, 20_ (the “20__ Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20__, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

2049 Term Bonds

Sinking Fund Redemption Date (September 1) Sinking Payments 20__ $ 20__ 20__ 20__ 20__ 20__ (final maturity)

The amounts in the foregoing tables will be reduced as a result of any prior partial optional redemption of the Bonds or prior partial mandatory redemption of the Bonds from Special Tax Prepayments as described above, as specified in writing by an Authorized Officer to the Fiscal Agent.

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Purchase in Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of a written direction of an Authorized Officer requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such written direction may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Bonds were to be redeemed in accordance with the Fiscal Agent Agreement.

Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Underwriter, to the Securities Depositories, to the Information Service, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such Bonds.

However, while the Bonds are subject to DTC’s book-entry system, the Fiscal Agent will be required to give notice of redemption only to DTC as provided in the letter of representations executed by the Community Facilities District and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the beneficial owners of the Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption, set forth in the Fiscal Agent Agreement.

Selection of Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of a single maturity, the Fiscal Agent will select the Bonds of that maturity to be redeemed by lot in any manner which the Fiscal Agent in its sole discretion deems appropriate. For purposes of such selection, the Fiscal Agent will treat each Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate Bond.

Conditional Redemption Notice and Rescission of Redemption. Any notice of optional redemption may specify that redemption of the Bonds designated for redemption on the specified date will be subject to the receipt by the Community Facilities District or the Fiscal Agent, as applicable, of moneys sufficient to cause such redemption (and will specify the proposed source of such moneys), and neither the Community Facilities District nor the Fiscal Agent will have any liability to the Owners of any Bonds, or any other party, as a result of the Community Facilities District’s failure to redeem the Bonds designated for redemption as a result of insufficient moneys therefor.

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

Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Bonds so called for redemption have been deposited in the Bond Fund, such Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other

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than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice.

Additional Parity Bonds for Refunding Purposes Only

The Community Facilities District may from time to time issue additional Parity Bonds in addition to the Bonds authorized under the Fiscal Agent Agreement but only to refund and discharge the Bonds or any portion thereof, without the consent of any Owners in accordance with the Act. Any such Parity Bonds will constitute Bonds under the Fiscal Agent Agreement and will be secured by a lien on the Net Special Taxes and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other Outstanding Bonds under the Fiscal Agent Agreement.

Registration, Transfer and Exchange

The following provisions regarding the exchange and transfer of the Bonds apply only during any period in which the Bonds are not subject to DTC’s book-entry system. While the Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See APPENDIX E – “DTC and the Book-Entry Only System.” Registration. The Fiscal Agent will keep or cause to be kept, at its Principal Office, sufficient books for the registration and transfer of the Bonds, which books will show the series number, date, amount, rate of interest and last known Owner of each Bond, and will at all times be open to inspection by the Community Facilities District during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as provided in the Fiscal Agent Agreement.

The Community Facilities District and the Fiscal Agent will treat the owner of any Bond whose name appears on the Bond Register as the absolute Owner of such Bond for any and all purposes, and the Community Facilities District and the Fiscal Agent will not be affected by any notice to the contrary. The Community Facilities District and the Fiscal Agent may rely on the address of the Owner as it appears in the Bond Register for any and all purposes.

Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept by the Fiscal Agent by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer will be paid by the Community Facilities District. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer.

Whenever any Bond or Bonds are surrendered for transfer, the Community Facilities District will execute and the Fiscal Agent will authenticate and deliver a new Bond or Bonds, for like aggregate principal amount of authorized denominations.

No transfers of Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date.

Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange will

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be paid by the Community Facilities District. The Fiscal Agent will collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange.

No exchanges of Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date.

[Remainder of Page Intentionally Left Blank.]

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Debt Service Schedule

The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming there are no optional or special mandatory redemptions.

Table 1 Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Debt Service Schedule

Year Ending Total September 1 Principal Interest Debt Service 2020 $ $ $ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 Total: $ $ $ ______Source: Underwriter.

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SECURITY FOR THE BONDS

This section generally describes the security for the Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX D. Capitalized terms used but not defined in the section are defined in APPENDIX D.

General

The payment of the principal of, and interest and any premium on, the Bonds are secured by a first pledge of the following:

• all of the Net Special Taxes;

• the Letter of Credit or Cash Deposit (until released); and

• all moneys deposited in the Bond Fund, in the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund.

The Net Special Taxes and all moneys deposited into these funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose in accordance with the Fiscal Agent Agreement.

Amounts in the Administrative Expense Fund, the Costs of Issuance Fund, the Improvement Fund and the Special Tax Remainder Account are not pledged to the repayment of the Bonds. The facilities constructed or acquired with the proceeds of the Bonds are not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation or destruction of any facilities financed with the proceeds of the Bonds are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.

“Net Special Taxes” is defined in the Fiscal Agent Agreement as, after the Administrative Expense Requirement is funded to the Administrative Expense Fund pursuant to the Fiscal Agent Agreement (an amount equal to $25,000.00 for Fiscal Year 2019-20 and for each Fiscal Year thereafter, an amount equal to the Administrative Expense Requirement for the prior Fiscal Year increased by 2.00%), the proceeds of the Special Taxes received by the Community Facilities District, including any scheduled payments, interest thereon, collections of any delinquent Special Taxes and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon.

Net Special Taxes does not include any penalties or costs of collecting delinquent Special Taxes collected in connection with delinquent Special Taxes.

Limited Obligation

The Bonds and interest thereon are not payable from the general fund of the Community Facilities District or the School District. Except with respect to the Net Special Taxes, neither the credit nor the taxing power of the Community Facilities District or the School District is pledged for the payment of the Bonds or interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the Community Facilities District or the School District or the forfeiture of any of their property.

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The principal of and interest on the Bonds and premiums upon the redemption of any thereof are not a debt of the Community Facilities District (except to the limited extent described in this Official Statement) or the School District, the State of California (the “State”) nor any of its political subdivisions, within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon any property or income, receipts or revenues of the Community Facilities District or the School District, except the Net Special Taxes that are, under the terms of the Fiscal Agent Agreement, set aside for the payment of the Bonds and interest thereon. Neither the members of the Board nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance.

Special Taxes

Covenant to Levy Special Taxes to Meet Special Tax Requirement. The Community Facilities District will covenant in the Fiscal Agent Agreement to comply with all requirements of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of delinquent Special Taxes.

On or within 5 Business Days of each June 1, the Fiscal Agent will provide an Authorized Officer with a notice stating the amount then on deposit in the Bond Fund, the Special Tax Fund, and the Reserve Fund, and informing the Community Facilities District of the amount needed to provide for Annual Debt Service, Administrative Expenses known to the Fiscal Agent and replenishment (if necessary) of the Reserve Fund so that the balance therein equals the Reserve Requirement.

Upon receipt of such notice, the Authorized Officer will communicate with the County Auditor (the “Auditor”) to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year.

An Authorized Officer will effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 10 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the Community Facilities District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, an Authorized Officer will prepare or cause to be prepared, and will transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll.

An Authorized Officer will fix and levy the amount of Special Taxes within the Community Facilities District required for the payment of principal of and interest on any Outstanding Bonds of the Community Facilities District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any obligation under the Fiscal Agent Agreement for rebating excess earnings to the federal government) during such year.

The Special Taxes so levied may not exceed the authorized amounts as provided in the Community Facilities District proceedings or the Rate and Method.

Manner of Collection. The Fiscal Agent Agreement provides that the Special Taxes will be payable and be collected in the same manner and at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

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Notwithstanding the foregoing, an Authorized Officer may, in his discretion, cause the collection of any Special Taxes by direct, first-class mail billing to the then owner of each parcel so owned in lieu of billing for such Special Taxes in the same manner as general taxes as described above. Such direct mail billing will be made not later than November 1 of the Fiscal Year and will direct the owner of the property affected to pay the Special Taxes directly to the Community Facilities District in two equal installments, the first of which will be due and delinquent if not paid on December 10 and the second of which may be paid with the first and which, in any event, will be due and delinquent if not paid on April 10 of the Fiscal Year. Any such Special Taxes so billed will have the same priority and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

Other Covenants Regarding Special Tax Levy. The Community Facilities District will covenant not to conduct or consent to proceedings with respect to a reduction in the Maximum Special Taxes that may be levied in the Community Facilities District on Developed Property below an amount, for any Fiscal Year, equal to the Administrative Expense Requirement plus 110% of Annual Debt Service in such Fiscal Year. The ability of the Community Facilities District to increase the Special Tax levy on residential property in the Community Facilities District is subject to limitations under the Act. See “BOND OWNERS’ RISKS.”

Because the Special Tax levy is subject to limitations under the Act and is limited to the Maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the Bonds.

Rate and Method

General. The Special Taxes will be levied and collected according to the Rate and Method, which provides the means by which the Board may annually levy the Special Taxes within the Community Facilities District, up to the Maximum Special Tax, and to determine the amount of the Special Taxes that will need to be collected each Fiscal Year from the “Taxable Property” within the Community Facilities District.

The following is a synopsis of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method, including its attachments, which is attached as APPENDIX B. Capitalized terms used but not defined in this section have the meanings as set forth in APPENDIX B. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as APPENDIX B.

Special Tax Requirement.

The Rate and Method defines the “Special Tax Requirement” as the amount required in any Fiscal Year to pay the following:

(i) the debt service or the periodic costs on all outstanding Bonds,

(ii) Administrative Expenses,

(iii) the costs associated with the release of funds from any escrow account(s) established in association with the Bonds,

(iv) any amount required to establish or replenish any reserve funds (or accounts thereof) established in association with the Bonds,

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(v) the collection or accumulation of funds for the acquisition or construction of school facilities and certain costs associated with the maintenance and operations of school facilities authorized by the Community Facilities District provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property, Undeveloped Property or Provisional Undeveloped Property, and

(vi) less any amounts available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, trust agreement, or equivalent agreement or document.

In arriving at the Special Tax Requirement, the Administrator (as defined in the Rate and Method) will take into account the reasonably anticipated delinquent Special Taxes, provided that the amount included cannot cause the Annual Special Tax of an Assessor Parcel of Developed Property to increase by greater than 10% of what would have otherwise been levied.

Classification of Assessor’s Parcels. For each Fiscal Year, the property within the Community Facilities District will be classified as follows:

(i) each Assessor’s Parcel has been and will be classified as Taxable Property or Exempt Property, and

(ii) each Assessor’s Parcel of Taxable Property has been and will be classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property, all as defined below.

In addition, each Assessor’s Parcel of Developed Property will be further classified based on the Building Square Footage of the Unit.

The classification of Exempt Property will take into consideration the Minimum Taxable Acreage as determined pursuant to Section K of the Rate and Method.

“Taxable Property” means all Assessor’s Parcels that are not Exempt Property.

“Exempt Property” is defined as follows:

(i) Assessor’s Parcels owned by the State of California, federal or other local governments,

(ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization,

(iii) Assessor’s Parcels owned by a homeowner’s association,

(iv) Assessor’s Parcels burdened with public or utility easements making impractical their utilization for other than the purposes set forth in the easement,

(v) any other Assessor’s Parcels at the reasonable discretion of the Board,

provided that no such classification would reduce the Net Taxable Acreage to less than 39.9194 Acres of Acreage (“Minimum Taxable Acreage”).

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Notwithstanding the above, the Administrator or Board may not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than the Minimum Taxable Acreage. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the Minimum Taxable Acreage will be classified as Provisional Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

“Developed Property” means all Assessor’s Parcels of Taxable Property for which building permits were issued on or before May 1 of the prior Fiscal Year, provided that each such Assessor’s Parcel was created on or before January 1 of the prior Fiscal Year, as determined reasonably by the Administrator.

“Undeveloped Property” means all Assessor’s Parcels of Taxable Property that are not Developed Property, Approved Property or Provisional Undeveloped Property.

“Approved Property” means all Assessor’s Parcels of Taxable Property that (i) are associated with a Lot in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) have not been issued a building permit prior to the May 1st preceding the Fiscal Year in which the Special Tax is being levied.

“Provisional Undeveloped Property” means all Assessor Parcels of Taxable Property that would otherwise be classified as Exempt Property but cannot be classified as Exempt Property because to do so would reduce the Net Taxable Acreage below the required minimum Acreage.

Maximum Special Taxes, Assigned Annual Special Tax and Backup Annual Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows:

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

Assigned Annual Special Tax. The Assigned Annual Special Tax for Developed Property for Fiscal Year 2019-20 varies from $1,260.04 to $1,728.06, based on Building Square Footage, subject to increases described below.

Backup Annual Special Tax. The Backup Annual Special Tax in any Fiscal Year for Developed Property within a Final Map is the rate per Lot calculated according to the following formula

 the Assigned Annual Special Tax per acre of Undeveloped Property, multiplied by  the Acreage of Residential Property expected to exist in such Final Map at the time of calculation, as determined by the Administrator, divided by

 the number of Lots in the Final Map at the time of calculation.

The Backup Annual Special Tax is subject to adjustment if all or any portion of a Final Map is changed or modified, as set forth in Section E of the Rate and Method.

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Approved Property, Undeveloped Property and Provisional Undeveloped Property. The Assigned Annual Special Tax in Fiscal Year 2019-20 for each Assessor’s Parcel of Approved Property, Undeveloped Property, or Provisional Undeveloped Property shall be $11,059.72] per acre of Acreage, subject to increases as described below.

Increases in the Assigned Annual Special Tax.

 Developed Property. On each July 1, the Assigned Annual Special Tax rate applicable to Developed Property in the Fiscal Year in which such Assessor’s Parcel is first classified as Developed Property shall be increased by 2.00% of the amount in effect the prior Fiscal Year.

 Approved Property, Undeveloped Property and Provisional Undeveloped Property. On each July 1, the Assigned Annual Special Tax rate for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall increase by 2.00% of the amount in effect the prior Fiscal Year.

Increase in the Backup Annual Special Tax. On each July 1, commencing the July 1 following the initial calculation of the Backup Annual Special Tax rate for Developed Property within a Final Map, the Backup Annual Special Tax for each Lot within such Final Map shall be increased by 2.00% of the amount in effect the prior Fiscal Year.

Method of Apportionment. Under the Rate and Method, the Board will levy Annual Special Taxes each Fiscal Year as follows:

Step One: The Annual Special Tax will be levied on each Assessor’s Parcel of Developed Property in an amount equal to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel.

Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Approved Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the second step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the third step has been completed, the Annual Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Special Tax is the Backup Annual Special Tax will be increased Proportionately from the Assigned Annual Special Tax up to 100% of the Backup Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the fourth step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

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Full Prepayment of Annual Special Taxes. The Annual Special Tax obligation of an Assessor’s Parcel of Taxable Property may be prepaid in full, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

 There are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid;

 No prepayment will be allowed unless the amount of Assigned Annual Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination will include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

The Prepayment Amount is generally calculated as the present value of the current and future Special Taxes applicable to the parcel being prepaid, less a credit for the corresponding reduction in the reserve requirement for the Bonds, plus the fees and administrative expenses of the Community Facilities District associated with the prepayment, all as set forth in further detail in APPENDIX B.

Partial Prepayment of Annual Special Taxes. The Annual Special Tax obligation of an Assessor’s Parcel may be partially prepaid in increments of ten (10) Lots, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

 There are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be partially prepaid.

 No partial prepayment will be allowed unless the amount of Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such partial prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such partial prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination will include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

The Partial Prepayment Amount is calculated as the Prepayment Amount determined for full prepayment of Special Taxes, as set forth above, multiplied by the percentage by which the owner of the Assessor’s Parcel is partially prepaying the Annual Special Tax obligation, all as set forth in further detail in APPENDIX B.

Appeals. Any property owner claiming that the amount or application of the Special Tax levied in a Fiscal Year is not correct may file a written claim with the Administrator of the Community Facilities District, subject to the conditions set forth in the Rate and Method.

Duration of Special Tax Levy. Annual Special Taxes will be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds, provided that the Annual Special Taxes may not be levied later than Fiscal Year 2061-62.

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Manner of Collection. The Annual Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes, and will be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Community Facilities District may directly bill all or a portion of the Special Tax, and may collect Annual Special Taxes at a different time or in a different manner if necessary to meet its financial obligations.

Covenant to Foreclose

Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that the Special Taxes are to be payable and collected in the same manner at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. Under the procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County. The Community Facilities District may also cause the collection of any Special Taxes by direct, first-class mail billing to the then owner of each parcel so owned in lieu of billing for such Special Taxes as described above. Finally, the Fiscal Agent Agreement contains a special covenant for foreclosure described below.

Foreclosure Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in the payment of the Special Tax, the Community Facilities District may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale.

Such judicial foreclosure action is not mandatory. However, the Community Facilities District will agree in the Fiscal Agent Agreement that, on or about February 15 and June 15 of each Fiscal Year, an Authorized Officer will compare the amount of Special Taxes to be collected on the December 10 and April 10 installments of the secured property tax bills to the amount of Special Taxes actually received by the Community Facilities District in those installments, and proceed as set forth below:

Individual Delinquencies. If the Authorized Officer determines that any single parcel subject to the Special Tax in the Community Facilities District is delinquent in the payment of 5 or more installments of the Special Taxes, or a single owner of multiple parcels is delinquent in the payment of Special Taxes in the amount of $15,000 or more, then the Authorized Officer will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Community Facilities District within 90 days of a June 15th determination against each such parcel; provided, however, that the Community Facilities District may elect not to go forward on foreclosure proceedings if the Reserve Fund established by the Fiscal Agent Agreement is fully funded at the Reserve Requirement and such delinquencies are not expected to result in a draw on the Reserve Fund in both the then current and immediately following Fiscal Years.

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Aggregate Delinquencies. If the Authorized Officer determines that the total amount of delinquent Special Taxes for the prior Fiscal Year (after both the first and second installments) for the Community Facilities District (including the total of individual delinquencies determined as set forth above), exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the Community Facilities District will notify or cause to be notified all property owners who are then delinquent in the payment of Special Taxes and demand immediate payment of the delinquency within 45 days of a June 15th determination, and will commence foreclosure proceedings within 90 days of a June 15th determination against each parcel in the Community Facilities District with a Special Tax delinquency; provided, however, that the Community Facilities District may elect not to go forward with foreclosure proceedings for aggregate delinquencies if the Reserve Fund established by the Fiscal Agent Agreement is fully funded at the Reserve Requirement and such delinquencies are not expected to result in a draw on the Reserve Fund in both the then-current and immediately following Fiscal Years.

Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Community Facilities District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post-judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.5 of the Act, the Community Facilities District, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the Community Facilities District could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Taxes. If the Community Facilities District becomes the purchaser under a credit bid, the Community Facilities District must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale.

Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the Community Facilities District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the “FDIC”). See “BOND OWNERS’ RISKS - Bankruptcy Delays.”

No Teeter Plan. Because the Community Facilities District does not participate in the “Teeter Plan” (which is the County’s Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code), collections of Special Taxes will reflect actual delinquencies.

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Special Tax Fund

Deposits. Under the Fiscal Agent Agreement, the Community Facilities District will authorize direct deposit of all Special Taxes received by the Community Facilities District in the Special Tax Fund; provided that any proceeds of Special Tax Prepayments will be transferred by an Authorized Officer to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account.

Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the Community Facilities District and the Owners, will be disbursed as described below and, pending disbursement, will be subject to a lien in favor of the Owners and the Community Facilities District.

Disbursements. From time to time as needed to pay the obligations of the Community Facilities District, but no later than the Business Day before each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority:

(i) to the Administrative Expense Fund an amount, up to the Administrative Expense Requirement (an amount equal to $25,000.00 for Fiscal Year 2019-20 and for each Fiscal Year thereafter, an amount equal to the Administrative Expense Requirement for the prior Fiscal Year increased by 2.00%), that an Authorized Officer directs the Fiscal Agent in writing to deposit in the Administrative Expense Fund for payment of Administrative Expenses;

(ii) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund, and the capitalized interest account therein, including any expected transfers from the Improvement Fund and the Special Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on the next Interest Payment Date;

(iii) the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement;

(iv) to the Letter of Credit Fund amounts to reimburse any Letter of Credit or Cash Deposit that has been drawn on due to delinquencies in the Bonds Fund, but in any event only from amounts of delinquent Special Taxes deposited into the Special Tax Fund with respect to properties for which there has been a draw on the Letter of Credit or Cash Deposit; and

(v) to the Administrative Expense Fund the amount of Administrative Expenses in excess of the amount previously transferred thereto under (i) above, as directed in writing by an Authorized Officer; provided that the amounts the Authorized Officer directs the Fiscal Agent to transfer from time to time to the Administrative Expense Fund may not exceed, in any Fiscal Year, the amount included in the Special Tax levy for such Fiscal Year for Administrative Expenses.

At any time following the deposit of Special Taxes in an amount sufficient to make payment of all of the foregoing deposits for the current Bond Year, any amounts in excess of such amounts remaining in the Special Tax Fund will, upon the written direction of an authorized officer, be transferred by the Fiscal Agent to the Special Tax Remainder Account, to be used for any lawful purpose under the Act. In the absence of such written direction, all amounts remaining in the Special Tax Fund on the first day of the succeeding Bond Year shall be retained in the Special Tax Fund and applied to the succeeding Bond Year’s Annual Debt Service; provided however, that in no event shall such amounts be invested at a yield in excess of the yield on the Bonds.

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Bond Fund

General. Moneys in the Bond Fund and the accounts therein will be held by the Fiscal Agent for the benefit of the Owners, will be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement, and, pending such disbursement, will be subject to a lien in favor of the Owners.

Principal and Interest. On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments required by the Fiscal Agent Agreement or a mandatory redemption of the Bonds from Special Tax prepayments, such payments to be made in the priority listed below.

Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer from excess amounts in the Improvement Fund or excess amounts in the Reserve Fund will be used to pay the principal of and interest on the Bonds prior to the use of any other amounts in the Bond Fund for such purpose.

If amounts in the Bond Fund are insufficient for the purposes described in the preceding paragraph, the Fiscal Agent will withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund will be deposited in the Bond Fund.

If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make all of the payments of principal, and interest and any premium, then due and payable on the Bonds, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled will be added to the sinking payment to be made on the next sinking payment date.

Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption can timely be given for mandatory redemption of Bonds, and notice to the Fiscal Agent can timely be given under the Fiscal Agent Agreement, and will be used (together with any amounts transferred from the Reserve Fund) to redeem Bonds on the redemption date selected in accordance with the Fiscal Agent Agreement.

Capitalized Interest Account. The Fiscal Agent will withdraw from the Capitalized Interest Account and transfer to the Bond Fund the following amounts on the following dates for the purpose of paying interest then due on the Bonds:

March 1, 2020: $[______September 1, 2020: $[______March 1, 2021: $[______

On March 2, 2021, the Fiscal Agent shall transfer all remaining amounts in the Capitalized Interest Account to the Bond Fund, and the Fiscal Agent shall close the Capitalized Interest Account.

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Reserve Fund

General. Moneys in the Reserve Fund will be held by the Fiscal Agent for the benefit of the Owners as a reserve for the payment of principal of, and interest and any premium on, the Bonds and will be subject to a lien in favor of the Owners.

Disbursements. Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the Fiscal Agent Agreement, for the purpose of redeeming Bonds.

See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent Agreement” for a complete description of the timing, purpose and manner of disbursements from the Reserve Fund.

Reserve Requirement. The “Reserve Requirement” is defined in the Fiscal Agent Agreement to mean, as of any date of calculation, an amount equal to the least of the following:

(i) the then Maximum Annual Debt Service on the Bonds and Parity Bonds,

(ii) 125% of the then average Annual Debt Service on the Bonds and Parity Bonds, or

(iii) 10% of the initial principal amount of the Bonds and Parity Bonds.

As of the Closing Date, the Reserve Requirement is $634,245.56.* See “FINANCING PLAN – Estimated Sources and Uses of Funds.”

Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed and the original aggregate principal amount of the Bonds, and calculated with reference to the calculation of the Special Tax prepayment amount in the Rate and Method) shall be applied to the redemption of the Bonds, provided, however, that such amount shall be transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed) following such transfer.

Letter of Credit Fund

Requirement to Provide Cash Deposits and/or Letters of Credit; Satisfaction of Requirement. As a condition precedent to issuance of the Bonds and prior to the Delivery Date, the Community Facilities District is required to cause Brookfield Homes, DR Horton, KB and Pardee Homes to provide one or more Cash Deposits and/or Letters of Credit for each applicable Project Area in an amount equal to the Stated Amount for each Project Area, naming the Fiscal Agent as beneficiary.

The requirements of the Fiscal Agent Agreement regarding the Cash Deposits or Letters of Credit are applicable to the Developers and their respective successors and assigns other than individual homeowners of residential assessor’s parcels with record title.

* Preliminary, subject to change.

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The Letter of Credit/Cash Deposit requirement will be satisfied prior to the Delivery Date of the Bonds as follows:

Developer Project Area Stated Amount Letter of Credit Issued By Brookfield Homes Agave $52,286.56 Wells Fargo Bank, N.A. DR Horton Larkspur 74,029.10 Wells Fargo Bank, N.A. KB Santolina 127,133.66 Bank of the West Pardee Homes Braeburn 88,604.24 Wells Fargo Bank, N.A.

(1) Brookfield Homes will provide a Letter of Credit in an aggregate amount of $140,890.80, with respect to the Agave and Braeburn project areas.

Stated Amount. The Fiscal Agent Agreement defines the “Stated Amount” initially as the amount of each applicable Letter of Credit or Cash Deposit available to be drawn down upon equal to the estimated mount of Special Taxes to be levied on the property within the Community Facilities District owned by the applicable Developer(s) during the that Fiscal Year, without regard to capitalized interest and assuming build out of each Developer’s proposed development within the Community Facilities District. As of the date of issuance of the Bonds, the initial Stated Amount for each Project Area are as set forth above.

Duration and Reduction. The requirement for the Developers to provide the Letters of Credit or Cash Deposits remains in effect for so long as individual homeowners own fewer than 60% of the 307 parcels within the Community Facilities District designated for residential development or 185 of the total of 307 parcels within the Community Facilities District designated for residential development.

Other Provisions Relating to the Cash Deposits. See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent Agreement” for a complete description of the Letter of Credit Fund and other terms and provisions relating to the Cash Deposits, including provisions regarding recalculation of the Cash Deposits, final release of the Cash Deposits, assessor’s parcel transfers between property owners, draws on a Cash Deposits in the event of Special Tax delinquencies, and reimbursements following draws on a Cash Deposit.

Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Authorized Investments, as directed in writing by the Community Facilities District, subject to certain restrictions in the Fiscal Agent Agreement. See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent Agreement” for a definition of “Authorized Investments” and other restrictions on the investment of moneys in the funds and accounts held under the Fiscal Agent Agreement.

Parity Bonds for Refunding Purposes Only

The Community Facilities District may from time to time issue additional Parity Bonds with respect to the Community Facilities District in addition to the Bonds, but only to refund and discharge the Bonds or any portion thereof in accordance with the Act. Any such Parity Bonds shall be secured by a lien on the Net Special Taxes and funds pledged for the payment of the Bonds on a parity with all other Outstanding Bonds.

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THE COMMUNITY FACILITIES DISTRICT

General

Background. The Community Facilities District was formed on June 12, 2018, and is authorized to levy its own special taxes and to issue its own series of special tax bonds secured by those special taxes within the Community Facilities District. See “THE BONDS – Authority for Issuance.” The Bonds are secured only by Net Special Taxes, which in general consist of the Special Taxes levied within the Community Facilities District, less the Administrative Expense Requirement, and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.”

Location. The property within the Community Facilities District is located in an unincorporated area of the County, just north of the City of Murrieta, in the southwestern portion of Riverside County, north of Baxter Road, generally west of Leon Road.

See APPENDIX A – “General Information About the City of Murrieta and Riverside County” for demographic and other information regarding the City of Murrieta and the County. The boundary map showing the boundaries of the Community Facilities District is attached as APPENDIX I.

Description. The following table describes the proposed development within the Community Facilities District:

Table 2 Menifee Union School District Community Facilities District No. 2018-2

Proposed Development Description

Developer / Neighborhood Lots Homes/Product

Brookfield Homes Agave 49 Detached single-family, 2,818 SF to 3,453 SF

DR Horton Larkspur 68 Detached single-family, 2,319 SF to 2,929 SF

KB Santolina 108 Detached single-family, 2,358 SF to 3,368 SF

Pardee Homes Braeburn 82 Detached single-family, 2,010 SF to 2,884 SF

TOTAL 307 ______Source: Appraisal Report.

See “THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value” and APPENDIX C – “Appraisal Report.”

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Specific Plan. The property encompassed by Tract No. 37053-1 is covered under the French Valley #312 Specific Plan. Amendment No. 2 to the French Valley #312 Specific Plan (February 2017), increases the acreage within the Specific Plan to approximately 628.5 acres, increases the target single-family residential unit count to 1,820 units, includes approximately 11.6 acres for an elementary school site, 40.1 gross acres for parks and open space, and approximately 43.4 acres for stormwater drainage and detention facilities. Harvest Hill STEAM Academy (K-6), Bell Mountain Middle School (7-8)(1), and Paloma Valley High School are expected to serve the grade K-12 students residing within the Community Facilities District.

Surrounding Community. The Community Facilities District is located within the Menifee Union School District (K – 8th) and the Perris Union High School District (9th – 12th). The community is served by Harvest Hill STEAM Academy (K-6), Bell Mountain Middle School (7-8)(1), and Paloma Valley High School (9- 12). Mt. San Jacinto Community College and Brandman University are located in Menifee, approximately 20 miles northeast of the Community Facilities District. University of California, Riverside, is the largest four-year public university in the area, located approximately 30 miles north of the Community Facilities District.

Community Facilities District. As of the date of value of the Appraisal Report (July 15, 2019), the Taxable Property in the Community Facilities District was planned for development of 307 single family homes, with 70 homes closed and sold to individuals, 35 homes which are completed or over 95% complete (17 in escrow; of the 35 homes 12 model homes(2)), 72 homes under construction which are less than 95% complete and 130 remaining finished lots. See “PROPERTY OWNERSHIP AND DEVELOPMENT” below.

Anticipated Net Taxable Acres. The Community Facilities District currently contains approximately 44.18 net acres of Taxable Property.

Special Taxes and Projected Debt Service Coverage

The debt service on the Bonds is structured such that the projected Net Special Taxes from the Assigned Annual Special Tax on Developed Property, when applied to the projected debt service on the Bonds, is anticipated to result in a debt service coverage ratio of at least 110% for the life of the Bonds. The following table provides the number of permitted units, gross Special Tax revenues, Administrative Expenses and Net Special Tax Revenues for Fiscal Years 2018-19 and thereafter, and also includes the net debt service and debt service coverage.

[Remainder of Page Intentionally Left Blank.]

(1) Confirm: 7th grade students are expected to begin attending Harvest Hill STEAM Academy in the 2019-20 school year and 7th and 8th grade students are expected to attend Harvest Hill STEAM Academy in the 2020-21 school year. (2) Each Developer has three completed model homes which, as of July 15, 2019, had not been released for sale.

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Table 3 Community Facilities District No. 2018-2 of the Menifee Union School District Projected Special Taxes and Debt Service Coverage

Permitted Projected Aggregate Net Number of Number of Total Levy at Levy at Levy at Less: Net Special Tax Proposed Units Projected Projected Assigned Assigned Assigned Administrative Revenue Debt Debt Service Fiscal Year Permitted (1) Units (1) Units for Levy Rates Rates Rates Expenses Constraint Service (3) * Coverage * 2019-20 (1) 150 0 150 $217,501.36 $0.00 $217,501.36 ($25,000.00) $192,501.36 $0.00 N/A 2020-21 (1) 180 99 279 266,830.28 139,493.54 406,323.82 (25,500.00) 380,823.82 343,311.67 110.93% 2021-22 (1) 180 127 307 272,165.48 186,549.88 458,715.36 (26,010.00) 432,705.36 390,150.00 110.91 2022-23 180 127 307 277,608.46 190,280.68 467,889.14 (26,530.20) 441,358.94 398,750.00 110.69 2023-24 180 127 307 283,159.04 194,085.40 477,244.44 (27,060.80) 450,183.64 406,950.00 110.62 2024-25 180 127 307 288,821.00 197,966.36 486,787.36 (27,602.02) 459,185.34 414,750.00 110.71 2025-26 180 127 307 294,597.42 201,925.69 496,523.11 (28,154.06) 468,369.05 421,500.00 111.12 2026-27 180 127 307 300,489.37 205,964.20 506,453.57 (28,717.14) 477,736.43 432,750.00 110.40 2027-28 180 127 307 306,499.16 210,083.48 516,582.64 (29,291.48) 487,291.16 438,250.00 111.19 2028-29 180 127 307 312,629.14 214,285.15 526,914.29 (29,877.31) 497,036.98 448,250.00 110.88 2029-30 180 127 307 318,881.72 218,570.86 537,452.58 (30,474.86) 506,977.72 457,500.00 110.81 2030-31 180 127 307 325,259.36 222,942.27 548,201.63 (31,084.36) 517,117.27 466,000.00 110.97 2031-32 180 127 307 331,764.54 227,401.12 559,165.66 (31,706.04) 527,459.62 478,750.00 110.17 2032-33 180 127 307 338,399.83 231,949.14 570,348.98 (32,340.17) 538,008.81 485,500.00 110.82 2033-34 180 127 307 345,167.83 236,588.13 581,755.96 (32,986.97) 548,768.99 496,500.00 110.53 2034-35 180 127 307 352,071.19 241,319.89 593,391.08 (33,646.71) 559,744.37 506,500.00 110.51 2035-36 180 127 307 359,112.61 246,146.29 605,258.90 (34,319.64) 570,939.25 517,700.00 110.28 2036-37 180 127 307 366,294.86 251,069.21 617,364.08 (35,006.04) 582,358.04 528,100.00 110.27 2037-38 180 127 307 373,620.76 256,090.60 629,711.36 (35,706.16) 594,005.20 537,700.00 110.47 2038-39 180 127 307 381,093.18 261,212.41 642,305.58 (36,420.28) 605,885.30 546,500.00 110.87 2039-40 180 127 307 388,715.04 266,436.66 655,151.70 (37,148.68) 618,003.01 559,500.00 110.46 2040-41 180 127 307 396,489.34 271,765.39 668,254.73 (37,891.66) 630,363.07 568,250.00 110.93 2041-42 180 127 307 404,419.13 277,200.70 681,619.82 (38,649.49) 642,970.33 580,750.00 110.71 2042-43 180 127 307 412,507.51 282,744.71 695,252.22 (39,422.48) 655,829.74 591,750.00 110.83 2043-44 180 127 307 420,757.66 288,399.61 709,157.26 (40,210.93) 668,946.33 606,250.00 110.34 2044-45 180 127 307 429,172.81 294,167.60 723,340.41 (41,015.15) 682,325.26 619,000.00 110.23 2045-46 180 127 307 437,756.27 300,050.95 737,807.22 (41,835.45) 695,971.77 630,000.00 110.47 2046-47 180 127 307 446,511.39 306,051.97 752,563.36 (42,672.16) 709,891.20 644,250.00 110.19 2047-48 180 127 307 455,441.62 312,173.01 767,614.63 (43,525.61) 724,089.02 656,500.00 110.30 2048-49 (3) 180 127 307 464,550.45 318,416.47 782,966.92 (44,396.12) 738,570.81 666,750.00 110.77 Total NA NA NA $10,568,287 $7,051,331.35 $17,619,619 ($1,014,201.98) $16,605,417.18 $14,838,411 NA ______(1) Permitted status and projected buildout is based on information provided by the Developers as of July 15, 2019. A total of 150 building permits were issued prior to May 1, 2019, and will be levied in Fiscal Year 2019-20 as Developed Property. As of July 15, 2019, 30 building permits were issued after May 1, 2019, and are expected to be classified and levied as Developed Property in Fiscal Year 2020-21 . 9 building permits were issued on July 16, 2019. Additionally, after taking into account 9 building permits issued on July 16, 2019, there are an additional 90 units, currently projected to be permitted prior to May 1, 2020, which are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. The remaining 28 units are expected to have building permits issued between May 1, 2020 and May 1, 2021, and are expected to commence levy as Developed Property in Fiscal Year 2021-22. (2) Projected development based on the product mix provided by the Developers. (3) Net proposed debt service is less $328,513.75 of capitalized interest through March 1, 2021. (4) The Annual Special Tax shall be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds, provided that the Annual Special Tax shall not be levied later than Fiscal Year 2061-62. * Preliminary, subject to change. Source: Cooperative Strategies, LLC; debt service estimate provided by the Underwriter. 30

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The Community Facilities District will covenant not to conduct or consent to proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the Community Facilities District on Developed Property below an amount, for any Fiscal Year, equal to the Administrative Expense Requirement plus 110% of the aggregate of the debt service due on the Bonds in such Fiscal Year. The ability of the Community Facilities District to increase the Special Tax levy on residential property is subject to limitations under the Act and the maximum Special Tax under the Rate and Method. See “BOND OWNERS’ RISKS.”

Historical Assessed Values

Property within the Community Facilities District has a total taxable assessed valuation for Fiscal Year 2018-19 of $28,737,302 and for Fiscal Year 2019-20 of $53,619,848.

Appraised Property Value

The purpose of the Appraisal Report was to estimate the value of the fee simple interest of 307 parcels of the subject property, subject to the Special Tax lien of the Bonds, as of the July 15, 2019, date of value. The subject property consists of 307 single-family detached lots encompassed by Subdivision Tract No. 37053-1, which encompasses four neighborhoods being developed by the Developers within a development known as “Spencer’s Crossing.” See the section for each Developer in the Section entitled, “PROPERTY OWNERSHIP AND DEVELOPMENT” for detailed information regarding development for each Developer’s project.

The Appraisal Report was intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice for an Appraisal Report, and with the appraisal standard proposed by the California Debt and Investment Advisory Commission. The property rights appraised were of a fee simple interest subject to easements of record and the lien of the Special Taxes. The Appraisal Report is based on certain assumptions, extraordinary assumptions and limiting conditions therein. Subject to these assumptions, extraordinary assumptions and limiting conditions, as of July 15, 2019, the Appraiser estimated that the aggregate value of the Taxable Property within the Community Facilities District was $70,210,496. The aggregate value as of July 15, 2019, included 70 homes closed and sold to individuals, 35 homes which are completed or over 95% complete (17 in escrow; of the 35 homes 12 model homes( 1 )), 72 homes under construction which are less than 95% complete and 130 remaining finished lots. In the Appraisal Report, houses which are under construction are valued on the basis of a finished lot unless the status of construction was estimated to be 95% or more, rather than attribute value to a partially complete improvement. See Table 5A and the footnotes thereto under the caption “THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to- Debt Ratio.”

(1) Each Developer has three completed model homes which, as of July 15, 2019, had not been released for sale.

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Subject to the assumptions contained in the Appraisal Report, the Appraiser estimated that the property within the Community Facilities District, subject to the lien of the Special Taxes and overlapping liens, had an estimated value as follows:

No. of Appraised Ownership Lots/Units Value Brookfield Homes – Agave 32 $8,171,436 DR Horton – Larkspur 54 8,258,689 KB – Santolina 86 13,473,426 Pardee Homes – Braeburn 65 10,475,500 Individually Owned Homes Minimum Market Value 70 29,831,545 Total 307 $70,210,496

Brookfield Homes (Agave). As July 15, 2019, the date of value as referenced in the Appraisal Report, 17 homes were owned by individual homeowners, while the remaining 32 residential lots owned by Brookfield Homes ranged in condition from 14 completed homes (including 3 models and 11 homes representing standing inventory which are completed (8 in escrow), 12 homes under construction (8 in escrow), and 6 remaining finished lots.

DR Horton (Larkspur). As July 15, 2019, the date of value as referenced in the Appraisal Report, 14 homes were owned by individual homeowners, while the remaining 54 residential lots owned by DR Horton ranged in condition from 4 completed homes (including 3 models), 17 home under construction (6 in escrow), and 33 remaining finished lots.

KB (Santolina). As July 15, 2019, the date of value as referenced in the Appraisal Report, 22 homes were owned by individual homeowners, while the remaining 86 residential lots owned by KB ranged in condition from 6 completed homes (including 3 models and 3 homes under construction which are over 95% complete (l in escrow)), 16 homes under construction which are under 95% complete (12 in escrow), and 64 remaining finished lots (5 in escrow).

Pardee Homes (Braeburn). As July 15, 2019, the date of value as referenced in the Appraisal Report, 17 homes were owned by individual homeowners, while the remaining 65 residential lots owned by Pardee Homes ranged in condition from 11 completed homes, including 3 models and 8 homes representing standing inventory which are completed (8 in escrow), 27 homes under construction which are less than 95% complete (19 in escrow), and 27 remaining finished lots.

Valuation Methods. The Appraiser estimated the value of the taxable property in the Community Facilities District using the Sales Comparison Approach, along with a mass appraisal technique as defined within the Appraisal Report. In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject property that have recently been sold, are listed for sale or are under contract. Neither a cost nor income approach was utilized as they were not considered necessary to arrive at credible results.

The School District, the Community Facilities District and the Underwriter make no representation as to the accuracy or completeness of the Appraisal Report. See APPENDIX C for the Appraisal Report.

See “ – Appraised Value-to-Debt Ratios,” “ – Direct and Overlapping Governmental Obligations” and “BOND OWNERS’ RISKS – Value-to-Debt Ratios” and APPENDIX C – “Appraisal Report” appended hereto for further information on the Appraisal Report for assumptions, extraordinary assumptions and limiting conditions relating to the Appraisal Report.

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Special Tax Levy

Fiscal Year 2019-20 Special Tax Levy. The table below shows the Assigned Annual Special Tax rates and the actual Fiscal Year 2019-20 Special Tax Levy for the Community Facilities District. Special Taxes were levied on 150 parcels classified as Developed Property for Fiscal Year 2019-20.

Table 4A Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Fiscal Year 2019-20 Special Tax Levy

Fiscal Year Fiscal Year 2019-20 2019-20 Special Building No. of Assigned Annual Annual Percentage Tax Class Square Feet Parcels (1) Special Tax Rate Special Taxes Levy of Total

1 < 2,350 15 $1,260.04 per Unit $18,900.60 8.69% 2 2,350 - 2,550 31 1,321.84 per Unit 40,977.04 18.84 3 2,551 - 2,750 30 1,374.84 per Unit 41,245.20 18.96 4 2,751 - 2,950 42 1,454.30 per Unit 61,080.60 28.08 5 2,951 - 3,150 0 1,581.96 per Unit 0.00 0.00 6 3,151 - 3,350 0 1,709.62 per Unit 0.00 0.00 7 > 3,350 32 1,728.06 per Unit 55,297.92 25.42

TOTAL (2) 150 NA $217,501.36 100.00%

(1) Reflects all taxable lots classified as Developed Property pursuant to the Rate and Method for Fiscal Year 2019-20. (2) Columns may not sum to totals due to rounding. Source: Cooperative Strategies, LLC.

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Projected Fiscal Year 2020-21 Special Tax Levy. The table below shows the Assigned Annual Special Tax rates and the projected Fiscal Year 2020-21 Special Tax Levy for the Community Facilities District, assuming Special Taxes are levied on the 279 parcels expected to constitute Developed Property for Fiscal Year 2020-21.

Table 4B Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Projected Fiscal Year 2020-21 Special Tax Levy

Projected Projected Fiscal Year Fiscal Year 2020-21 2020-21 Special Building No. of Assigned Annual Annual Percentage Tax Class Square Feet Parcels (1) Special Tax Rate (2) Special Taxes (2) Levy of Total

1 < 2,350 40 $1,285.24 per Unit $51,409.60 12.65% 2 2,350 - 2,550 62 1,348.28 per Unit 83,593.36 20.57 3 2,551 - 2,750 46 1,402.34 per Unit 64,507.64 15.88 4 2,751 - 2,950 82 1,483.38 per Unit 121,637.16 29.94 5 2,951 - 3,150 8 1,613.58 per Unit 12,908.64 3.18 6 3,151 - 3,350 0 1,743.80 per Unit $0.00 0.00 7 > 3,350 41 1,762.62 per Unit 72,267.42 17.79

TOTAL (3) 279 NA $406,323.82 100.00% ______(1) Projected development based on the product mix provided by the Developers. (2) Amounts shown reflect the projected Fiscal Year 2020-21 Special Taxes that would be levied on all parcels within the Community Facilities District for which building permits are expected to have been issued as of May 1, 2020, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units expected to be built and are not intended to represent the actual Special Tax levy. (3) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Projected Fiscal Year 2021-22 Special Tax Levy. The table below shows the Assigned Annual Special Tax rates and the projected Fiscal Year 2021-22 Special Tax Levy for the Community Facilities District, assuming Special Taxes are levied on the 307 parcels expected to constitute Developed Property for Fiscal Year 2021-22.

Table 4C Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Projected Fiscal Year 2021-22 Special Tax Levy

Projected Projected Fiscal Year Fiscal Year Lots Projected 2021-22 2021-22 Special Building at Development Assigned Annual Assigned Annual Percentage Tax Class Square Feet Completion (1) Special Tax Rate (2) Special Taxes (2) Levy of Total

1 < 2,350 42 $1,310.94 per Unit $55,059.48 12.00% 2 2,350 - 2,550 68 1,375.24 per Unit 93,516.32 20.38 3 2,551 - 2,750 46 1,430.38 per Unit 65,797.48 14.34 4 2,751 - 2,950 91 1,513.04 per Unit 137,686.64 30.02 5 2,951 - 3,150 8 1,645.84 per Unit 13,166.72 2.87 6 3,151 - 3,350 0 1,778.68 per Unit 0.00 0.00 7 > 3,350 52 1,797.86 per Unit 93,488.72 20.38

TOTAL (3) 307 NA $458,715.36 100.00% ______(1) Projected development based on the product mix provided by the Developers. (2) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Community Facilities District for which building permits are expected to have been issued as of May 1, 2021, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units expected to be built and are not intended to represent the actual Special Tax levy. (3) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Fiscal Year 2019-20 Special Tax Levy by Ownership. Table 4D below illustrates the Fiscal Year 2019- 20 Special Tax levy based upon the Rate and Method, based on the 150 building permits issued prior to May 1, 2019, allocated by property ownership as of July 15, 2019. As indicated previously, the Special Taxes in Fiscal Year 2019-20 were levied on 150 parcels classified as Developed Property (which was determined based on the issuance of building permits as of May 1, 2018). See the respective description of home sales and projected absorption for each Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

Table 4D Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Projected Fiscal Year 2019-20 Special Tax Levy by Ownership

Currently Fiscal Year 2019-20 Percent of Property Ownership (1) Permitted Status (2) Owned Lots Special Taxes (3) Total Individual Homeowners Permitted 70 $100,194.24 46.07%

Brookfield Permitted 14 $23,371.56 10.75% Unpermitted 18 0.00 0.00 Subtotal, Brookfield NA 32 $23,371.56 10.75%

KB Homes Permitted 34 $50,320.68 23.14% Unpermitted 52 0.00 0.00 Subtotal, KB Homes NA 86 $50,320.68 23.14%

Pardee Homes Permitted 11 $14,875.82 6.84% Unpermitted 54 0.00 0.00 Subtotal, Pardee Homes NA 65 $14,875.82 6.84%

DR Horton Permitted 21 $28,739.06 13.21% Unpermitted 33 0.00 0.00 Subtotal, DR Horton NA 54 $28,739.06 13.21%

Subtotal, Permitted 150 $217,501.36 100.00% Subtotal, Unpermitted 157 $0.00 0.00%

TOTAL (4) NA 307 $217,501.36 100.00%

(1) Ownership information is as of July 15, 2019, and based on information provided by the Developers. (2) Permitted status is as of May 1, 2019. A total of 150 building permits were issued prior to May 1, 2019, and will be levied in Fiscal Year 2019-20 as Developed Property. As of July 15, 2019, 30 building permits were issued after May 1, 2019, and are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. 9 building permits were issued on July 16, 2019. Additionally, after taking into account 9 building permits issued on July 16, 2019, there are an additional 90 units, currently projected to be permitted prior to May 1, 2020, which are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. The remaining 28 units are expected to have building permits issued between May 1, 2020 and May 1, 2021, and are expected to commence levy as Developed Property in Fiscal Year 2021-22. (3) Amounts shown reflect the Fiscal Year 2019-20 Special Taxes levied on properties within the Community Facilities District that had a building permit issued prior to May 1, 2019. (4) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Projected Fiscal Year 2020-21 Special Tax Levy by Ownership. Table 4E below illustrates the Projected Fiscal Year 2020-21 Special Tax levy based upon the Rate and Method, [assuming all building permits are issued prior to May 1, 2020], allocated by property ownership as of July 15, 2019. As indicated previously, the Special Taxes in Fiscal Year 2019-20 were levied on 150 parcels classified as Developed Property (which was determined based on the issuance of building permits as of May 1, 2019, and subsequent to May 1, 2019, through July 15, 2019, an additional 30 building permits had been issued). See the respective description of home sales and projected absorption for each Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

Table 4E Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Projected Fiscal Year 2020-21 Special Tax Levy by Ownership

Projected Fiscal Year 2020-21 Currently Annual Percent of Property Ownership (1) Permitted Status (2) Owned Lots Special Taxes Total Individual Homeowners Permitted 70 $102,198.08 25.15%

Brookfield Permitted 26 $43,594.20 10.73% Unpermitted 6 0.00 0.00 Subtotal, Brookfield NA 32 $43,594.20 10.73%

KB Homes Permitted 34 $51,327.08 12.63% Unpermitted 52 64,248.14 15.81 Subtotal, KB Homes NA 86 $115,575.22 28.44%

Pardee Homes Permitted 29 $40,397.10 9.94% Unpermitted 36 30,418.74 7.49 Subtotal, Pardee Homes NA 65 $70,815.84 17.43%

DR Horton Permitted 21 $29,313.82 7.21% Unpermitted 33 44,826.66 11.03 Subtotal, DR Horton NA 54 $74,140.48 18.25%

Subtotal, Permitted 180 $266,830.28 65.67% Subtotal, Unpermitted 127 $139,493.54 34.33%

TOTAL (4) NA 307 $406,323.82 100.00%

(1) Ownership information is as of July 15, 2019, and based on information provided by the Developers. (2) Permitted status is based on information provided by the Developers as of July 15, 2019. A total of 150 building permits were issued prior to May 1, 2019, and will be levied in Fiscal Year 2019-20 as Developed Property. As of July 15, 2019, 30 building permits were issued after May 1, 2019, and are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. 9 building permits were issued on July 16, 2019]. Additionally, after taking into account 9 building permits issued on July 16, 2019, there are an additional 90 units, currently projected to be permitted prior to May 1, 2020, which are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. The remaining 28 units are expected to have building permits issued between May 1, 2020 and May 1, 2021, and are expected to commence levy as Developed Property in Fiscal Year 2021-22. (3) Amounts shown reflect the Fiscal Year 2020-21 Special Taxes levied on properties within the Community Facilities District planned for residential construction, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. (4) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Projected Fiscal Year 2021-22 Special Tax Levy by Ownership. Table 4F below illustrates the Projected Fiscal Year 2021-22 Special Tax levy based upon the Rate and Method, assuming all building permits are issued prior to May 1, 2021, allocated by property ownership as of July 15, 2019. As indicated previously, the Special Taxes in Fiscal Year 2019-21 were levied on 150 parcels classified as Developed Property (which was determined based on the issuance of building permits as of May 1, 2019, and subsequent to May 1, 2019, through July 15, 2019, an additional 30 building permits had been issued). See the respective description of home sales and projected absorption for each Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

Table 4F Community Facilities District No. 2018-2 of the Menifee Union School District Assigned Annual Special Tax Rates and Revenues Projected Fiscal Year 2021-22 Special Tax Levy by Ownership

Projected Fiscal Year 2021-22 Lots Owned as Annual Percent of Property Ownership (1) Permitted Status (2) of July 15, 2019 Special Taxes Total Individual Homeowners Permitted 70 $104,241.52 22.72%

Brookfield Permitted 26 $44,465.80 9.69% Unpermitted 6 9,932.70 2.17 Subtotal, Brookfield NA 32 $54,398.50 11.86%

KB Permitted 34 $52,353.34 11.41% Unpermitted 52 79,915.64 17.42 Subtotal, KB NA 86 $132,268.98 28.83%

Pardee Homes Permitted 29 $41,204.86 8.98% Unpermitted 36 50,978.54 11.11 Subtotal, Pardee Homes NA 65 $92,183.40 20.10%

DR Horton Permitted 21 $29,899.96 6.52% Unpermitted 33 45,723.00 9.97 Subtotal, DR Horton NA 54 $75,622.96 16.49%

Subtotal, Permitted 180 $272,165.48 59.33% Subtotal, Unpermitted 127 $186,549.88 40.67%

TOTAL NA 307 $458,715.36 100.00%

(1) Ownership information is based on the Appraisal Report as of July 15, 2019. See descriptions of development plans for each Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT” for development status as of more recent dates for each Developer. (2) Permitted status is based on information provided by the Developers as of July 15, 2019. A total of 150 building permits were issued prior to May 1, 2019, and will be levied in Fiscal Year 2019-20 as Developed Property. As of July 15, 2019, [30] building permits were issued after May 1, 2019, and are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. 9 building permits were issued on July 16, 2019. Additionally, after taking into account 9 building permits issued on July 16, 2019, there are an additional 90 units, currently projected to be permitted prior to May 1, 2020, which are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. The remaining [28 units are expected to have building permits issued between May 1, 2020 and May 1, 2021, and are expected to commence levy as Developed Property in Fiscal Year 2021-22. (3) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Community Facilities District for which building permits are expected to have been issued as of May 1, 2021, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units expected to be built and are not intended to represent the actual Special Tax levy. (4) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Projected Development Absorption Schedule. Table 4G below illustrates the projected Fiscal Year 2019-20 Special Tax levy based upon the projected development absorption schedule of homes in the Community Facilities District and the Rate and Method. See the respective description of home sales and projected absorption for each Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

Table 4G Community Facilities District No. 2018-2 of the Menifee Union School District Projected Development Absorption Schedule

Projected Developed Lots Projected Lots Projected Total Lots Fiscal Year Property for Lots Permitted to be Permitted to be Permitted Projected for 2021-22 Property Fiscal Year After Prior to Prior to Levy at Annual Percent Ownership (1) 2019-20 (2) May 1, 2019 (2) May 1, 2020 (2) May 1, 2021 (2) Build-Out (2) Special Taxes (3) of Total

Individual Homeowners 70 0 0 0 70 $104,241.52 22.72%

Brookfield 14 12 0 6 32 $54,398.50 11.86%

KB 34 0 44 8 86 $132,268.98 28.83%

Pardee Homes 11 18 22 14 65 $92,183.40 20.10%

DR Horton 21 0 33 0 54 $75,622.96 16.49%

TOTAL (4) 150 30 99 28 307 $458,715.36 100.00%

(1) Ownership information is as of July 15, 2019, and is based on information provided by the Developers. (2) Building permit issuance projections are based on information provided by the Developers as of July 15, 2019. A total of 150 building permits were issued prior to May 1, 2019, and will be levied in Fiscal Year 2019-20 as Developed Property. As of July 15, 2019, 30 building permits were issued after May 1, 2019, and are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. 9 building permits were issued on July 16, 2019. Additionally, after taking into account 9 building permits issued on July 16, 2019, there are an additional 90 units, currently projected to be permitted prior to May 1, 2020, which are expected to be classified and levied as Developed Property in Fiscal Year 2020-21. The remaining 28 units are expected to have building permits issued between May 1, 2020 and May 1, 2021, and are expected to commence levy as Developed Property in Fiscal Year 2021-22. (3) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Community Facilities District for which building permits are expected to have been issued as of the applicable May 1, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units expected to be built and are not intended to represent the actual Special Tax levy. (4) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Appraised Value-to-Debt Ratio

The table below shows the approximate value-to-debt ratio for the Taxable Property in the Community Facilities District based on the principal amount of the Bonds and the estimated values set forth in the Appraisal Report, which has been allocated based by property ownership based on the projected Special Tax levy at buildout. As noted in the Appraisal Report, houses which were under construction but under 95% complete were valued on the basis of a finished lot rather than attributing value to a partially complete improvement.

[Remainder of Page Intentionally Left Blank.]

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Table 5A Community Facilities District No. 2018-2 of the Menifee Union School District Appraised Values and Value-to-Debt Ratios by Development

Projected Fiscal Year 2021-22 Assigned Percent of Assigned Development, Property Ownership, and Number of Value-to-Debt Annual Special Tax Levy Annual Special Tax Levy (1) (1) (2) (3) * * (5) (5) Development Classification Parcels Appraised Values Bonds Ratio (4) at Development Completion at Development Completion Agave Individual Homeowners 17 $7,763,625.00 $464,855.23 16.70:1 $28,854.70 6.29% Brookfield Completed Model Homes 3 $1,138,512.86 $82,303.19 13.83:1 $5,108.76 1.11% Over 95% Complete 11 4,174,547.14 309,425.87 13.49:1 19,206.82 4.19 Under Construction 12 2,040,000.00 324,624.24 6.28:1 20,150.22 4.39 Finished Lots 6 818,376.00 160,017.87 5.11:1 9,932.70 2.17 Subtotal, Agave 49 $15,935,061.00 $1,341,226.39 11.88:1 $83,253.20 18.15%

Santolina Individual Homeowners 22 $9,239,766.00 $510,213.84 18.11:1 $31,670.22 6.90% KB Completed Model Homes 3 $1,054,278.00 $74,163.02 14.22:1 $4,603.48 1.00% Over 95% Complete 3 1,054,278.00 80,971.52 13.02:1 5,026.10 1.10 Under Construction 16 2,272,974.00 397,705.30 5.72:1 24,686.54 5.38 Finished Lots 64 9,091,896.00 1,578,040.98 5.76:1 97,952.86 21.35 Subtotal, Santolina 108 $22,713,192.00 $2,641,094.66 8.60:1 $163,939.20 35.74%

Braeburn Individual Homeowners 17 $6,835,144.00 $387,890.00 17.62:1 $24,077.28 5.25% Pardee Homes Completed Model Homes 3 $936,108.00 $68,686.20 13.63:1 $4,263.52 0.93% Over 95% Complete 8 2,496,288.00 180,647.31 13.82:1 11,213.22 2.44 Under Construction 27 3,521,502.00 619,508.07 5.68:1 38,454.38 8.38 Finished Lots 27 3,521,502.00 616,252.20 5.71:1 38,252.28 8.34 Subtotal, Braeburn 82 $17,310,544.00 $1,872,983.77 9.24:1 $116,260.68 25.34%

Larkspur Individual Homeowners 14 $5,993,010.00 $316,393.54 18.94:1 $19,639.32 4.28% DR Horton Completed Model Homes 3 $1,038,426.75 $68,538.63 15.15:1 $4,254.36 0.93% Over 95% Complete 1 346,142.25 21,119.52 16.39:1 1,310.94 0.29 Under Construction 17 2,337,200.80 392,036.44 5.96:1 24,334.66 5.30 Finished Lots 33 4,536,919.20 736,607.05 6.16:1 45,723.00 9.97 Subtotal, Larkspur 68 $14,251,699.00 $1,534,695.17 9.29:1 $95,262.28 20.77%

TOTAL (6) 307 $70,210,496.00 $7,390,000.00 9.50:1 $458,715.36 100.00%

______(1) Ownership information and development classification is based on the Appraisal Report as of July 15, 2019. (2) Market value estimated by the Appraiser as of July 15, 2019. (3) Bond amounts are allocated based on each parcel’s proportionate share of the Special Taxes projected to be levied at development completion. (4) Average value-to-debt; actual value-to-debt ratio per Lot may vary. (5) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Community Facilities District for which building permits are expected to have been issued as of May 1, 2021, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units expected to be build and are not intended to represent the actual Special Tax levy. (6) Totals may not sum due to rounding. * Preliminary, subject to change. Source: Cooperative Strategies, LLC. 41

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The table below shows the approximate value-to-debt categories for the Taxable Property in the Community Facilities District based on the appraised values and the principal amount of the Bonds, which has been allocated based on the projected Special Tax levy at buildout. As noted in the Appraisal Report, houses which were under construction but under 95% complete were valued on the basis of a finished lot rather than attributing value to a partially complete improvement.

Table 5B Community Facilities District No. 2018-2 of the Menifee Union School District Appraised Values and Value-to-Debt Ratios by Categories

Projected Fiscal Year 2021-22 Assigned Annual Number Special Tax Levy at Percentage Value-to-Debt of Value-to-Debt Development Share of Category Parcels Appraised Values (1) Bonds (2) * Ratio (3) * Completion (4) Special Tax (4) 15:1 and Above 79 $33,062,762.61 $1,886,004.36 17.53:1 $117,068.90 25.52% 10:1 to 15:1 26 9,007,363.39 679,203.48 13.26:1 42,159.82 9.19 8:1 to 10:1 0 0.00 0.00 NA 0.00 0.00 5:1 to 8:1 (5) 183 25,458,208.00 4,274,478.07 5.96:1 265,327.30 57.84 5:1 and Below (5) 19 2,682,162.00 550,314.08 4.87:1 34,159.34 7.45 TOTAL (6) 307 $70,210,496.00 $7,390,000.00 9.50:1 $458,715.36 100.00%

______(1) Market value estimated by the Appraiser as of July 15, 2019. (2) Bond amounts are allocated based on each parcel’s proportionate share of the Special Taxes projected to be levied at development completion. (3) Average value-to-debt; actual value-to-debt ratio per Lot may vary. (4) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Community Facilities District for which building permits are expected to have been issued as of May 1, 2021, if developed at the building square footage sizes provided by the Developers at the time of issuance of the Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. (5) 202 lots have been valued as “Finished Lots” per the Appraisal Report as of July 15, 2019, resulting in a value-to-debt ratio below 8:1. (6) Totals may not sum due to rounding. * Preliminary, subject to change. Source: Cooperative Strategies, LLC.

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Direct and Overlapping Governmental Obligations

Certain local agencies provide public services and assess property taxes, assessments, special taxes and other charges on the property in the Community Facilities District. Many of these local agencies have outstanding debt.

The direct and overlapping obligations affecting the property in the Community Facilities District as of July 31, 2019, are shown in the following table. The table is sourced from California Tax Data, Inc. and is included for general information purposes only. The Community Facilities District has not reviewed this report for completeness or accuracy and makes no representation in connection therewith.

The Community Facilities District believes the information is current as of its date, but makes no representation as to its completeness or accuracy. Other public agencies, such as the County, may issue additional indebtedness at any time, without the consent or approval of the School District or the Community Facilities District.

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Table 6 Community Facilities District No. 2018-2 of the Menifee Union School District Direct and Overlapping Governmental Obligations (As of July 31, 2019)

I. Assessed Value 2018-19 Secured Roll Assessed Value $28,754,062

II. Secured Property Taxes Total % Description on Tax Bill Type Parcels Total Levy Applicable Parcels Levy Basic 1% Levy PROP13 921,064 $2,665,645,245.29 0.01079% 335 $287,540.62 County of Riverside CSA No. 103 (Street Lights) CSA 10,912 601,088.88 4.36783 332 26,254.56 County of Riverside CSA No. 152 (Street Sweeping) CSA 65,968 1,986,765.34 1.34754 332 26,772.48 County of Riverside Service Area No. 152C (Drainage Basin) CSA 3,895 636,483.12 4.37636 332 27,854.80 Menifee Union School District CFD No. 2018-2 CFD 22 33,852.08 100.00000 22 33,852.08 Menifee Union School District Debt Service GOB 40,000 6,293,536.80 0.28794 308 18,121.88 Metropolitan Water District of Southern California Debt Service GOB 249,712 2,635,145.37 0.03813 307 1,004.87 Metropolitan Water District of Southern California Standby Charge (East) STANDBY 248,194 2,813,525.78 0.08376 335 2,356.68 Mt. San Jacinto Community College District Debt Service GOB 323,152 11,490,371.56 0.03302 308 3,793.90 Perris Union High School District Debt Service GOB 69,547 8,432,049.61 0.17877 308 15,074.16 Valley Wide Park and Recreation District French Valley CFD CFDPAYG 1,624 999,097.18 2.23928 28 22,372.56 Valley Wide Park and Recreation District LMD No. 88-1 (Regional Facility) LMD 73,189 1,229,219.78 0.01262 28 155.12 2018-19 TOTAL PROPERTY TAX LIABILITY $465,153.71 TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2018-19 ASSESSED VALUATION 1.62%

III. Land Secured Bond Indebtedness % Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding Applicable Parcels Amount Menifee Union School District CFD No. 2018-2 CFD $0 $0 100.00000% 22 $0 TOTAL LAND SECURED BOND INDEBTEDNESS (1) $0 TOTAL OUTSTANDING LAND SECURED BOND INDEBTEDNESS (1) $0

IV. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Menifee Union School District GOB 2002 GOB $14,498,923 $11,834,720 0.28328% 307 $33,526 Menifee Union School District GOB 2008 GOB 31,460,000 29,185,000 0.28328 307 82,676 Menifee Union School District GOB 2016 GOB 23,395,000 20,720,000 0.28328 307 58,696 Metropolitan Water District of Southern California GOB 1966 GOB 850,000,000 50,105,000 0.01557 307 7,803 Perris Union High School District GOB 2004 GOB 45,997,378 29,777,387 0.17592 308 52,383 Perris Union High School District GOB 2012 GOB 75,413,024 68,508,024 0.17592 308 120,517 Perris Union High School District GOB 2018 GOB 148,000,000 148,000,000 0.17592 308 260,356 Mt. San Jacinto Community College District GOB 2014 GOB 190,000,000 172,650,000 0.03241 308 55,959 TOTAL GENERAL OBLIGATION BOND INDEBTEDNESS (1) $671,917 TOTAL OUTSTANDING GENERAL OBLIGATION BOND INDEBTEDNESS (1) $671,917

(1) Additional bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced fiscal year. Source: California Tax Data, Inc.

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Estimated Property Tax Rates and Tax Burden on Single-Family Home

The following table sets forth the estimated total property tax rates and tax burden on a single-family detached unit of 2,772 building square feet (representing a parcel with the median effective tax rate for a single- family detached home within the Community Facilities District), based on actual tax rates for Fiscal Year 2018- 19. Table 7 Community Facilities District No. 2018-2 of the Menifee Union School District Sample Property Tax Bill for Fiscal Year 2018-19

Sales Price and Taxable Value Estimated Base Sales Price (1) $437,990.00 Homeowner’s Exemption (7,000.00) Estimated Taxable Value (1) $430,990.00

Percent of

Ad Valorem Property Taxes (2) Total AV Amount General Purposes 1.00000% $4,309.90 Ad Valorem Tax Overrides Perris Union High School District Debt Service 0.05243% $225.97 Menifee Union School District Debt Service 0.06303 271.65 Mt. San Jacinto Community College District 0.01320 56.89 Metropolitan Water District Debt Service 0.00350 15.08 Total Ad Valorem Property Taxes 1.13216% $4,879.50

Assessments, Special Taxes and Parcel Charges (2) Riverside County Flood Control District $4.02 Valley Wide Recreation and Parks District LMD 88-1 5.54 Valley Wide Recreation and Parks District French Valley CFD Zone 11 799.03 MWD Standby Charge 694.00 EMWD Standby Charge 10.00 Perris Union High School CFD No. 92-1 298.58 County of Riverside CSA 152 159.72 County of Riverside CSA 103 79.08 Menifee Union School District Community Facilities District No. 2018-2 1,425.78 Total Assessments, Special Taxes and Parcel Charges $3,475.75

Total Property Taxes $8,355.25 Total Effective Tax Rate 1.91% ______(1) Estimated Base Sales Price and Estimated Taxable Value for a single-family detached unit containing 2,772 building square feet, selected to represent the median effective tax rate for a single-family detached unit within the Community Facilities District. Estimated Base Sales Price provided by the Developers at the time of issuance. (2) Tax rates and assessments shown are based on Fiscal Year 2018-19 rates and assessments of the Riverside County Tax Collector. The amounts shown are not intended to represent actual taxes for properties within the Community Facilities District and are included for demonstrative purposes only. Source: Cooperative Strategies, LLC.

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The following is a description of certain of the direct assessments mentioned in the preceding table, using the most recent information available.

Menifee Union School District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2002, 2008 and 2016 that were used to fund school facilities of the School District. This ad valorem tax is levied based on the property value.

Metropolitan Water District of Southern California General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2010 that were used to fund the acquisition and construction of improvements and works of the Metropolitan Water District of Southern California for supplying its inhabitants with water, including facilities relating thereto.

Perris Union High School District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2004, 2012 and 2018 that were used to fund school facilities of the Perris Union High School District. This ad valorem tax is levied based on the property value.

Mt. San Jacinto Community College District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2014 that were used to fund the acquisition, construction, modernization and renovation of Mt. Jacinto Community College District sites and facilities.

[Perris Union High School District No. 92-1. This special tax is used to pay debt service due on bonds issued in 2011 and 2015 that were used to fund school facilities of the Perris Union High School District. The special tax is levied based on the property classification of a parcel, such as attached, detached or multifamily. This district may impose a maximum special tax of $298.58 (for properties with building permits after 1993) per single-family residential unit for Fiscal Year 2018-19. This special tax increases at two percent (2%) each fiscal year.

Valley Wide Park and Recreation District French Valley CFD. This district provides funding for the maintenance and servicing of park, parkways, landscaping and appurtenant facilities within and/or adjacent to the community facilities district. The district may impose a maximum special tax of $799.02 per single-family residential unit for Fiscal Year 2018-19. This special tax increases at two percent (2%) each fiscal year.

Special Tax Collection History and Delinquencies

The Special Tax on Developed Property authorized for Fiscal Year 2018-19 in the Community Facilities District was $[______[16,924.04/33,848.08], which was levied against 22 lots. Fiscal Year 2018-19 is the first year Special Taxes were levied within the Community Facilities District. This amount represents the [first installment] [Fiscal Year 2018-19 levy and delinquencies as reported by the County Tax Collector as of [______], 2019, of which there were [no] delinquencies.

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PROPERTY OWNERSHIP AND DEVELOPMENT

Representatives of the Developers have provided the information in this section regarding the Developers and their development in the Community Facilities District. Neither the Underwriter, the School District nor the Community Facilities District has independently confirmed or verified the information in this section of the Official Statement nor does any such party make any representation as to accuracy or adequacy of this information. Further, there may be material adverse changes in this information after the date of this Official Statement.

The information in this section of the Official Statement regarding ownership of certain taxable property in the Community Facilities District has been included because it is considered relevant to an informed evaluation of the Bonds. The inclusion in this Official Statement of information related to the Developers should not be construed to suggest that the Bonds, or the Special Taxes that will be used to pay the Bonds, are recourse obligations of the Developers or any other property owner in the Community Facilities District. A property owner may sell or otherwise dispose of land within the Community Facilities District or a development or any interest therein at any time.

The Bonds and the Special Taxes are not personal obligations of the Developers or any other current or subsequent property owners and, in the event that the Developers or any other current or subsequent property owner defaults in the payment of the Special Taxes, the Community Facilities District may proceed with judicial foreclosure but has no direct recourse to the assets of the Developers or any other current or subsequent property owner. As a result, other than as provided in the Official Statement, no financial statements or information is, or will be, provided about the Developers or any other current or subsequent property owner. The Bonds are secured solely by the Net Special Taxes and other amounts pledged under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS” and “BOND OWNERS’ RISKS.”

[Remainder of Page Intentionally Left Blank.]

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Brookfield Homes/Riverside Mitland 03 LLC

Ownership Structure.

As previously defined in this Official Statement, “Brookfield Homes” is Brookfield Homes Southern California LLC, a Delaware limited liability company, which owned all of the property within the Agave at Spencer’s Crossing project (the “Agave project”). Brookfield Homes is an indirect wholly-owned subsidiary of Brookfield Residential Properties Inc. (“Brookfield Residential”), a wholly-owned subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset Management”). Brookfield Residential is a North American land developer and homebuilder with over 50 years of experience and has operations in Canada and the United States. All of the property within the Community Facilities District was previously owned by Sutter Mitland 03 LLC, Delaware limited liability company (“Riverside Mitland”). Riverside Mitland has subsequently conveyed land within the Community Facilities District to Brookfield Homes, and the other merchant builders.

Brookfield Residential entitles and develops land to create master-planned communities and builds and sells lots to third-party builders, as well as to its own homebuilding divisions. Brookfield Residential also participates in select strategic real estate opportunities, including infill projects, mixed-use developments, infrastructure projects and joint ventures. Brookfield Residential currently focuses on the following operating segments: Canada, California and Central and Eastern United States. Its Canadian operations are primarily in the Alberta and Ontario markets. Brookfield Residential has homebuilding operations in Austin, Calgary, Denver, Edmonton, Hawaii, Los Angeles, Phoenix, San Diego, San Francisco, Toronto, and Washington D.C. Brookfield Residential has been active in the Northern California market since 1997.

Brookfield Asset Management is a publicly traded company, listed on the New York Stock Exchange under the ticker symbol “BAM.” Brookfield Asset Management is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth certain data relative to the consolidated results of operations and financial position of Brookfield Asset Management and its subsidiaries. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of such internet web site is www.sec.gov. All documents subsequently filed by Brookfield Asset Management pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Brookfield Asset Management’s annual report, quarterly reports and current reports, including any amendments, are also available from Brookfield Asset Management’s website at www.brookfield.com. These Internet addresses are included for reference only, and the information on these sites is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these Internet sites.

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Brookfield Homes – Other Developments.

Other residential development projects currently under development by Brookfield Homes and its affiliates in Southern California include the following:

Estimated Estimated Average Number of Estimated Base Homes at Time Period of Site Name Location Selling Price (1) Description Completion Development

Delano at Eastwood Village Irvine $918,000 SFA 129 10/31/16 – 08/26/19 Beverly at Eastwood Village Irvine 1,566,000 SFD 80 03/20/17 – 03/28/20 Legado at Portola Springs Irvine 939,500 SFD 160 09/12/16 – 03/16/20 Marigold at New Haven Ontario 580,500 SFD 147 08/21/17 – 03/26/21 Holiday at Emerald Park Ontario 369,800 SFA - Cluster 91 11/27/18 – 10/06/20 Solstice at Emerald Park Ontario 388,660 SFA - Cluster 126 11/27/18 – 04/22/21 Candela at Rancho Tesoro San Marcos 867,000 SFD 56 01/30/17 – 07/01/19 Terracina at Rancho Tesoro San Marcos 680,300 SFA 117 02/02/17 – 02/24/20 Flora at Village of Escaya Chula Vista 427,200 SFD 76 08/31/17 – 05/08/20 Citrus & Palm at Rosedale Azusa 487,500 SFA 112 08/30/17 – 08/19/19 ______(1) As of July 15, 2019. Source: Brookfield Homes.

Brookfield Homes – Development Plan.

Agave at Spencer’s Crossing (Brookfield Homes). The Agave project is proposed for development of a total of 49 single-family homes. As of July 15, 2019, Brookfield Homes owned 32 lots proposed for development by Brookfield Homes as part of the Agave project in the Community Facilities District. Riverside Mitland, an entity related to Brookfield Homes, as the master developer, had owned the 49 lots for a period of time. There was a transfer of the 49 lots by Riverside Mitland to Brookfield Homes on December 21, 2017.

The Tract comprising the Agave project is located at the terminus of Nature Road and Plateau Pointe Place and is adjacent to Santolina by KB. The project in the aggregate encompasses approximately 11.9 gross acres. The City approved the subdivision of the property into 49 residential lots each with a minimum lot size of 6,000 square feet. Final Tract Map No. 37053-1 was recorded on October 16, 2017, encompassing the 49 lots. The homes range in size from 2,818 to 3,453 square feet. This development offers three product types with initial base prices ranging from $463,670 to $467,000. The following table summarizes the product types offered by Brookfield Homes. The base sale prices reflect pricing as of July 15, 2019.

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Table 8 Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Agave at Spencer’s Crossing by Brookfield Homes Development Status (As of July 15, 2019)

Near Finished Lots Completed Completed Est. Base Approx. Homes Units Sales Square Owned by (Not Units Under W/Bldg. WO/ Bldg. Plan Prices (1) Feet Individuals (2) Closed) (3) Construction Permits (4) Permits (5) Total 1 $463,670 2,818 6 3 5 0 3 17 2 467,000 3,410 6 5 4 0 1 16 3 466,000 3,453 5 6 3 0 2 16

17 14 12 0 6 49

(1) Base sales prices for the homes are subject to change at any time by Brookfield Homes. Base sales prices are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. (2) Since July 15, 2019, as of August 15, 2019, Brookfield Homes had closed the sale of 2 additional homes in Agave. (3) Includes 3 homes used as model homes and 11 homes over 95% complete. (4) Includes finished lots for which building permits have been issued but construction has not yet commenced. (5) Includes finished lots for which building permits have not been issued. Source: Brookfield Homes.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See “BOND OWNERS’ RISKS – Future Property Development” and “ – Property Values.”

Brookfield Homes – Infrastructure and Entitlements.

[Update/confirm:

All of the publicly owned infrastructure improvements serving the Agave property have been completed [except for the payment of impact fees with respect to the remaining homes] and the construction of sidewalks, which is anticipated to be complete by April, 2021. All discretionary entitlements are in place, and Brookfield Homes is not aware of any additional entitlements required to continue with development of its property in the Community Facilities District, other than building permits.

Brookfield Homes represents that, to the Actual Knowledge of Brookfield Homes (as defined below), none of the property in its development is within a 100-year flood plain or seismic fault setback zone. The “Agave” neighborhood is within Final Tract Map No. 37053-1.

Brookfield Homes represents that it is not aware of any federally or State classified hazardous materials or any species currently listed as endangered located on any of its property in the Community

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Facilities District. See the caption “BOND OWNERS’ RISKS – Property Values – Hazardous Substances.”

Utilities – Agave, Larkspur, Santolina and Braeburn.

It is expected that utility services for the taxable property in each of the four projects, Agave, Larkspur, Santolina and Braeburn, will be provided by the following:

Water: Eastern Municipal Water District Sanitary Sewer: Eastern Municipal Water District Stormwater Drainage: Riverside County Flood Control and Water Conservation District Electricity: Southern California Edison Gas: SoCal Gas Telephone: Frontier Cable: Frontier

Brookfield Homes – Home Sales and Projected Absorption.

Brookfield Homes expects that it will complete the construction of the homes on the finished lots and the sale of such homes and the three model homes within the Community Facilities District by the fourth quarter of 2021. As of July 15, 2019, Brookfield Homes had completed the construction or almost competed the construction of 31 of the 49 homes planned to be constructed by Brookfield Homes within the Community Facilities District, including 17 homes which had been conveyed to individual homeowners, and 14 completed or almost completed homes (including 3 three model homes and 8 homes in escrow) which were owned by Brookfield Homes as of such date, 12 homes under construction (8 in escrow) and 6 remaining finished lots. Sales contracts are subject to cancellation and, therefore, homes in escrow may not result in closed escrows with the prospective homebuyer. Since July 15, 2019, as of August 15, 2019, Brookfield Homes had closed the sale of 2 additional homes in Agave, and had not obtained building permits for any additional lots. The remaining homes are expected to close escrow by the end of the fourth quarter of 2021.

[Remainder of Page Intentionally Left Blank.]

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The construction and sales schedule is set forth below. No assurance can be given that future home construction will be carried out, or that Brookfield Homes’ construction and sale plans will not change after the date of this Official Statement.

Table 9 Community Facilities District No. 2018-2 of the Menifee Union School District Construction and Sales Schedule Agave at Spencer’s Crossing by Brookfield Homes (as of July 15, 2019)

Estimated Begin Home First Home Last Home Phase No. of Units Construction (1)* Closings* Sale Closings*

Models 3 1/31/18 1 6 6/5/18 10/9/18 12/10/18 2 7 6/13/18 11/12/18 1/15/19 3 7 2/28/19 7/18/19 9/6/19 4 8 4/8/19 8/13/19 10/18/19 5 6 7/1/19 11/15/19 1/21/20 6 6 5/30/19 8/13/19 10/17/19 Build-Out 6 1/15/21 9/2/21 11/6/21 Total 49 ______(1) Home construction does not necessarily commence immediately after issuance of a building permit. As of July 15, 2019, 43 building permits have been issued. One (1) lot for which a building permit has not yet been issued is currently being utilized as parking for the 3 model homes. * Estimated. Source: Brookfield Homes.

Brookfield Homes – Financing Plan.

As of July 15, 2019, within the Brookfield Homes properties within the Community Facilities District, Brookfield Homes expects to expend an aggregate of approximately $361,698 in additional site improvement costs and approximately $2,600,714 in additional home construction costs until full buildout of the homes proposed to be constructed therein.

To date, Brookfield Homes has financed land acquisition, site development and home construction costs related to its property in the Community Facilities District through internally generated funds. Brookfield Homes expects to use home sales revenue and internally generated funds to complete the development of its property within the Community Facilities District. Brookfield Homes believes that such funding sources will be sufficient to complete the proposed developments in the Community Facilities District as described in this Official Statement commensurate with the development timing described in this Official Statement.

No assurance can be given that amounts necessary to fund the remaining planned development of the 49 lots owned by Brookfield Homes in the Community Facilities District will be available when needed. Brookfield Homes and any other entity or person is not under any legal obligation of any kind to expend

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funds for the development of the property in the Community Facilities District. Any contributions by Brookfield Homes or any other entity or person to fund the costs of such development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development within the Community Facilities District, the remaining portions of such development may not be completed. See “SPECIAL RISK FACTORS – Failure to Complete the Development.”

Brookfield Homes – History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy.

In connection with the issuance of the Bonds, an officer or authorized representative of Brookfield Homes will execute a certificate containing the following representations (among others).

For purposes of these representations, the following terms have the following meanings:

 “Property” means the Taxable Property which Brookfield Homes holds title to in the Community Facilities District as of the date of issuance of the 2019 Bonds.

 “Actual Knowledge of Brookfield Homes” means, as of the date of signing, the knowledge of the authorized signatory or representative of Brookfield Homes (the “Brookfield Homes Officer”) signing the applicable certificate containing the following representations (the “Brookfield Homes Letter of Representations”) has as of the date of issuance of the 2019 Bonds has or has obtained through (i) interviews with such current officers and responsible employees of Brookfield Homes and its Relevant Entities as the Brookfield Homes Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Brookfield Homes Letter of Representations and/or (ii) review of documents that were reasonably available to the Brookfield Homes Officer and which the Brookfield Homes Officer has reasonably deemed necessary for the Brookfield Homes Officer to obtain the knowledge of the matters set forth in the Brookfield Homes Letter of Representations. The Brookfield Homes Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Brookfield Homes’ current business and operations. Brookfield Homes has not contacted individuals who are no longer with Brookfield Homes or its Relevant Entities.

 “Relevant Entity” means, with respect to Brookfield Homes, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Brookfield Homes, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Community Facilities District and the 2019 Bonds (i.e., such Person’s assets or funds would materially affect Brookfield Homes’ ability to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Brookfield Homes (to the extent the responsibility of Brookfield Homes) prior to delinquency). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes hereof, Riverside Mitland is a Relevant Entity of Brookfield Homes.

 “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

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Breaches of Agreements. To the Actual Knowledge of Brookfield Homes, (a) Brookfield Homes and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which Brookfield Homes or its Relevant Entities are a party or otherwise subject, which breach or default could reasonably be expected to materially and adversely affect the ability of Brookfield Homes to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Brookfield Homes (to the extent the responsibility of Brookfield Homes) prior to delinquency and (b) no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default under any Material Agreement which could reasonably be expected to materially and adversely affect the ability of Brookfield Homes to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Brookfield Homes (to the extent the responsibility of Brookfield Homes) prior to delinquency.

No Litigation. No action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Brookfield Homes (with proper service of process to Brookfield Homes having been accomplished), or, to the Actual Knowledge of Brookfield Homes, is pending against any current Relevant Entity of Brookfield Homes (with proper service of process to such Relevant Entity having been accomplished), or, to the Actual Knowledge of Brookfield Homes, is threatened in writing against Brookfield Homes or any such Relevant Entity:

(a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2019 Bonds (e.g., the Reserve Fund established under the Fiscal Agent Agreement),

(b) to restrain or enjoin the execution of and performance by Brookfield Homes of its obligations under the Mitigation Agreement,

(c) to restrain or enjoin the development of the Property as described in this Official Statement,

(d) in any way contesting or affecting the validity of the Special Taxes or the Mitigation Agreement, or

(e) which if successful, is reasonably likely to materially and adversely affect Brookfield Homes’ ability to complete the development and sale of the Property as described in this Official Statement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by Brookfield Homes (to the extent the responsibility of Brookfield Homes) prior to delinquency.

Special Tax and Assessment Delinquencies. Brookfield Homes has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that Brookfield Homes and some of its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of Brookfield Homes, neither Brookfield Homes nor any Relevant Entity has been delinquent in any material extent in the last five years in the payment of special assessments or special taxes on property in California owned by Brookfield Homes or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or an assessment district within California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district

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financing or (b) resulted in a foreclosure action being filed against the delinquent Brookfield Homes or Relevant Entity in a court of law.

No Bankruptcy. Brookfield Homes and, to the Actual Knowledge of Brookfield Homes, its Relevant Entities are able to pay their bills as they become due and no legal proceedings are pending against Brookfield Homes or any Relevant Entity of Brookfield Homes (with proper service of process to Brookfield Homes or the applicable Relevant Entity having been accomplished) or, to the Actual Knowledge of Brookfield Homes, threatened in writing in which Brookfield Homes or the Relevant Entities of Brookfield Homes may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debts or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.

[Remainder of Page Intentionally Left Blank.]

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DR Horton

Ownership Structure.

As previously defined in this Official Statement, “DR Horton,” is Western Pacific Housing, Inc., a Delaware corporation, which is doing business under the name DR Horton, America’s Builder. DR Horton is constructing homes on such lots in a project called Larkspur at Spencer’s Crossing. DR Horton is a subsidiary of D.R. Horton, Inc., a Delaware corporation (“D.R. Horton, Inc.”), a public company whose common stock is included in the S&P 500 Index and listed on the New York Stock Exchange under the ticker symbol “DHI.” Founded in 1978 and headquartered in Fort Worth, Texas, D.R. Horton, Inc. constructs and sells homes through its operating division in 84 markets in 29 states under the names of DR Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes.

D.R. Horton, Inc. is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information, including financial statements, with the SEC. Such filings, particularly, D.R. Horton, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as filed by D.R. Horton, Inc. with the SEC on November 7, 2018, and D.R. Horton, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, as filed by D.R. Horton, Inc. with the SEC on April 30, 2019, and D.R. Horton, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019, as filed by D.R. Horton, Inc. with the SEC on July 31, 2019, set forth certain data relative to the consolidated results of operations and financial position of D.R. Horton, Inc. and its subsidiaries, including DR Horton, as of such dates.

D.R. Horton, Inc./Forestar Merger. During fiscal 2018, D.R. Horton, Inc. announced the acquisition of approximately 75% of the then outstanding shares of Forestar Group, Inc. (NYSE: FOR) (“Forestar”). The transaction establishes a strategic relationship between Forestar and D.R. Horton, Inc. for the supply of developed lots, as an extension of D.R. Horton Inc.’s strategy to expand relationships with land developers and increase the optioned portion of its homebuilding land and lot position to enhance operational efficiency and returns.

The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including D.R. Horton, Inc. The address of such Internet website is www.sec.gov. In addition, the aforementioned material may also be inspected at the offices of the NYSE at 20 Broad Street, New York, NY 10005. All documents subsequently filed by D.R. Horton, Inc. pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.

Copies of D.R. Horton, Inc.’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from D.R. Horton, Inc.’s website at www.drhorton.com.

The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet websites and on file with the SEC is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such Internet websites. Investors should not rely on the information and financial statements contained on these websites in evaluating whether to buy, hold or sell the Bonds.

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DR Horton – Other Developments.

A sample of other development projects currently under development by DR Horton’s South Coast/Inland Empire Division of Southern California include the following:

Approx. Est. Average Est. No. of Time Period Base Homes at of (1) Site Name Location Selling Price Description Completion Development Laurel Pointe at Summerly Lake Elsinore $369,990 - $398,490 Single Family 58 11/26/18-6/14/20 Linden Pointe at Summerly Lake Elsinore $339,630 - $379,360 Single Family 95 6/19/17-4/25/19 McKenna Pointe San Jacinto $366,990 - $419,990 Single Family 81 8/30/19-4/24/19 Camden - Santa Rosa Highlands Murrieta $372,400 - $422,990 Single Family 65 8/1/18-9/1/20 Savanna Pointe - Santa Rosa Highlands Murrieta $348,990 - $381,975 Single Family 68 7/15/18-6/30/20 Sequoia at Santa Rosa Highlands Murrieta $424,420 - $450,000 Single Family 51 7/24/18-2/16/20 The Oaks at Santa Rosa Highlands Murrieta $457,900 - $541,405 Single Family 77 7/12/19-10/31/20 Sierra Ridge – Crescent Pointe Menifee $354,990 - $400,325 Single Family 87 8/6/18-8/19/20 Sierra Ridge – Paloma Menifee $378,000 - $450,810 Single Family 63 8/6/18-7/1/20 Tribute at Audie Murphy Ranch Menifee $412,990 - $514,735 Single Family 88 2/8/18-7/1/20

(1) As of July 15, 2019. Source: DR Horton.

DR Horton – Development Plan.

While the information in this Official Statement reflects DR Horton’s current development expectations, no assurances can be given that final home construction and conveyance to individual home buyers will be carried out on the schedule or according to the plans described in this Official Statement.

Larkspur at Spencer’s Crossing (DR Horton). As previously mentioned, DR Horton acquired 68 lots within the Community Facilities District from Riverside Mitland, on [June 28, 2018].

[UPDATE]The Tract comprising Larkspur at Spencer’s Crossing is [located on the southeast corner of Spencer’s Crossing Parkway and Silky Lupine Drive. The project in the aggregate encompasses approximately 13.9 gross acres. The City approved the subdivision of the property into 68 residential lots each with a minimum lot sizes of [5,500 square feet. Final Tract Map No. 37053-1 was recorded on [October 16, 2017. The homes range in size from approximately 2,319 to approximately 2,929 square feet. This development offers three product types with initial base prices ranging from approximately $431,990 to approximately $466,990. The following table summarizes the product types offered by DR Horton. The base sale prices reflect pricing as of July 15, 2019.

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Table 10 Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Larkspur at Spencer’s Crossing (DR Horton) Development Status (As of July 15, 2019)

Near Finished Lots Estimated Base Approx. Completed Completed Sales Square Homes Owned by Units Units Under W/Bldg. W/O Bldg. Plan Prices (1) Feet Individuals (2) (Not Closed) (3) Construction Permits (4) Permits (5) Total 1 $431,990 2,319 6 2 4 0 13 25 2 445,990 2,722 4 1 7 0 6 18 3 466,990 2,929 4 1 6 0 14 25 Total 14 4 17 0 33 68

(1) Base sales prices for the homes are subject to change at any time by DR Horton. Base sales prices are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. (2) Since July 15, 2019, as of August 15, 2019, DR Horton had closed the sale of 10 additional homes in Larkspur at Spencer’s Crossing. (3) Includes 3 homes used as model homes and 1 home over 95% complete. (4) Includes finished lots for which building permits have been issued but construction has not yet commenced. (5) Includes finished lots for which building permits have not been issued. Source: DR Horton.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See “BOND OWNERS’ RISKS – Future Property Development” and “ – Property Values.”

DR Horton – Infrastructure and Entitlements.

[Confirm/update:

All of the publicly owned infrastructure improvements serving the Larkspur property have been completed except for the payment of impact fees with respect to the remaining homes and the construction of sidewalks, which is anticipated to be complete by [September 1, 2020. All discretionary entitlements are in place, and DR Horton is not aware of any additional entitlements required to continue with development of its property in the Community Facilities District, other than building permits.

DR Horton represents that, to the Actual Knowledge of DR Horton (as defined below), none of the property in its development is within a 100-year flood plain or seismic fault setback zone. The “Larkspur” neighborhood is within Final Tract Map No. 37053-1 which recorded on October 16, 2017.

DR Horton represents that it is not aware of any federally or State classified hazardous materials or any species currently listed as endangered located on any of its property in the Community Facilities District. See the caption “BOND OWNERS’ RISKS – Property Values – Hazardous Substances.”

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DR Horton – Home Sales and Projected Absorption.

DR Horton expects that it will complete the construction of the homes on the finished lots and the sale of such homes and the [three model homes within the Community Facilities District by the third quarter of 2020 based on a calendar year. As of July 15, 2019, DR Horton had completed the construction or almost competed the construction of 18 of the 68 homes planned to be constructed by DR Horton within the Community Facilities District, including [14 homes which had been conveyed to individual homeowners, and [4 completed or almost completed homes (including 3 model homes and 1 production home) which were owned by DR Horton as of such date. In addition, there were 17 homes under construction (6 in escrow) and 33 remaining finished lots. Sales contracts are subject to cancellation and, therefore, homes in escrow may not result in closed escrows with the prospective homebuyer. Since July 15, 2019, as of August 15, 2019, DR Horton had not closed the sale of any additional homes in Larkspur at Spencer’s Crossing and the remaining homes are expected to close escrow by the end of the third quarter of 2020 based on a calendar year.

The construction and sales schedule is set forth below. No assurance can be given that future home construction will be carried out, or that DR Horton’s construction and sale plans will not change after the date of this Official Statement.

Table 11 Community Facilities District No. 2018-2 of the Menifee Union School District

Larkspur at Spencer’s Crossing (DR Horton) Construction and Sales Schedule (as of July 15, 2019)

Begin Home First Home Last Home Phase No. of Units Construction (1) Closings Sale Closings

Models 3 12/3/18 10/1/20* 12/1/20* 1 5 12/3/18 3/28/19 5/17/19 2 10 12/10/18 5/8/19 8/30/19* 3 10 5/1/19 9/17/19* 11/15/19* 4 7 6/17/19 10/24/19* 12/24/19* 5 9 8/19/19 12/22/19* 2/22/20* 6 9 11/1/19 3/2/20* 5/2/20* 7 8 1/2/20 5/4/20* 7/4/20* 8 5 3/1/20 7/1/20* 9/1/20* 9 2 5/1/20 9/1/20* 11/2/20* Total 68 ______(1) Home construction does not necessarily commence immediately after issuance of a building permit. As of July 15, 2019, 35 building permits have been issued. * Estimated. Source: DR Horton.

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DR Horton – Financing Plan.

The full development of the land within the Larkspur at Spencer’s Crossing project requires the expenditure of substantial amounts of capital. As of July 15, 2019, DR Horton has expended approximately $15,288,231 in land acquisition and various site development and home construction costs (exclusive of internal financing repayment, sales and marketing, corporate overhead and carry costs) related to its property in the Community Facilities District. DR Horton estimates that it will require an additional $7,879,960 to complete its development and sale and conveyance to individual homebuyers within the Larkspur at Spencer’s Crossing project within the Community Facilities District. To date, DR Horton has financed its land acquisition and various site development and home construction costs related to its property in the Community Facilities District through home sales and internally generated funds. DR Horton expects to use home sales and internal funding to complete its development within the Community Facilities District. However, home sales revenues for DR Horton’s project in the Community Facilities District are not segregated and set aside for completing its project in the Community Facilities District. Home sales revenue is swept daily from DR Horton’s divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other DR Horton needs at the discretion of DR Horton’s management. Notwithstanding the foregoing, DR Horton believes that it will have sufficient funds available to complete its proposed development in the Community Facilities District, commensurate with the development timing described in this Official Statement.

There can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available from DR Horton or any other source when needed. Neither DR Horton, nor its parent, D.R. Horton, Inc., nor any of its related entities are under any legal obligation of any kind to expend funds for the remaining development of and construction of homes on its property in the Community Facilities District. Any contributions by DR Horton or any other entity to fund the costs of such development and home construction are entirely voluntary.

If and to the extent that the aforementioned sources, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by DR Horton within the Larkspur at Spencer’s Crossing project and other financing by DR Horton is not put into place, there could be a shortfall in the funds required to complete the proposed development by DR Horton in the Larkspur at Spencer’s Crossing project and the remaining portions of the Larkspur at Spencer’s Crossing project may not be developed.

Neither DR Horton nor its parent has a legal obligation to Bond owners to make any such funds available to fund the remaining development costs or to pay ad valorem property taxes or Special Taxes related to DR Horton’s property in the Community Facilities District. Many factors beyond DR Horton’s control, or a decision by DR Horton to alter its current plans, may cause the actual sources and uses to differ from the projections. See “BOND OWNERS’ RISKS” herein.

DR Horton – History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy.

In connection with the issuance of the Bonds, an officer or authorized representative of DR Horton will execute a certificate containing the following representations (among others).

For purposes of these representations, the following terms have the following meanings:

 “Property” means the Taxable Property which DR Horton holds title to in the Community Facilities District as of the date of issuance of the 2019 Bonds.

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 “Actual Knowledge of DR Horton” means, as of the date of signing, the knowledge of the authorized signatory or representative of DR Horton (the “DR Horton Officer”) signing the applicable certificate containing the following representations (the “DR Horton Letter of Representations”) has as of the dates of issuance of the 2019 Bonds or has obtained through (i) interviews with such current officers and responsible employees of DR Horton and its Relevant Entities as the DR Horton Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the DR Horton Letter of Representations and/or (ii) review of documents that were reasonably available to the DR Horton Officer and which the DR Horton Officer has reasonably deemed necessary for the DR Horton Officer to obtain the knowledge of the matters set forth in the DR Horton Letter of Representations. The DR Horton Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of DR Horton’s current business and operations. DR Horton has not contacted individuals who are no longer employees of DR Horton or its Relevant Entities.

 “Relevant Entity” means, with respect to DR Horton, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with DR Horton, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Community Facilities District and the 2019 Bonds (i.e., such Person’s assets or funds would materially affect DR Horton’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by DR Horton (to the extent the responsibility of DR Horton) prior to delinquency). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

Breaches of Agreements. To the Actual Knowledge of DR Horton, (a) DR Horton and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which DR Horton or its Relevant Entities are a party or otherwise subject, which breach or default could reasonably be expected to materially and adversely affect the ability of DR Horton to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by DR Horton (to the extent the responsibility of DR Horton) prior to delinquency and (b) no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default under any Material Agreement which could reasonably be expected to materially and adversely affect the ability of DR Horton to develop the Property as described in this Official Statement, or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by DR Horton (to the extent the responsibility of DR Horton) prior to delinquency.

No Litigation. No action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against DR Horton (with proper service of process to DR Horton having been accomplished), or, to the Actual Knowledge of DR Horton, is pending against any current Relevant Entity of DR Horton (with proper service of process to such Relevant Entity having been accomplished), or, to the Actual Knowledge of DR Horton, is threatened in writing against DR Horton or any such Relevant Entity:

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(a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2019 Bonds (e.g., the Reserve Fund established under the Fiscal Agent Agreement),

(b) to restrain or enjoin the execution of and performance by DR Horton of its obligations under the Mitigation Agreement,

(c) to restrain or enjoin the development of the Property as described in this Official Statement,

(d) in any way contesting or affecting the validity of the Special Taxes or the Mitigation Agreement, or

(e) which if successful, is reasonably likely to materially and adversely affect DR Horton’s ability to complete the development and sale of the Property as described in this Official Statement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by DR Horton (to the extent the responsibility of DR Horton) prior to delinquency.

Special Tax and Assessment Delinquencies. DR Horton has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that DR Horton and some of its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of DR Horton, neither DR Horton nor any Relevant Entity has been delinquent in any material extent in the last five years in the payment of special assessments or special taxes on property in California owned by DR Horton or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or an assessment district within California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed against the delinquent DR Horton or Relevant Entity in a court of law.

No Bankruptcy. DR Horton and, to the Actual Knowledge of DR Horton, its Relevant Entities are able to pay their bills as they become due and no legal proceedings are pending against DR Horton or any Relevant Entity of DR Horton (with proper service of process to DR Horton or the applicable Relevant Entity having been accomplished) or, to the Actual Knowledge of DR Horton, threatened in writing in which DR Horton or the Relevant Entities of DR Horton may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debts or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.

[Remainder of Page Intentionally Left Blank.]

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KB

Ownership Structure.

As previously defined in this Official Statement, “KB” is KB HOME Coastal Inc., a California corporation, which is developing the property within the Community Facilities District. KB is a wholly-owned subsidiary of KB Home, a Delaware corporation (“KB Home”), whose principal executive offices are located in Los Angeles, California. KB Home is a publicly traded company listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “KBH.” KB Home files annual, quarterly and current reports, proxy statements and other information with the SEC. KB Home’s SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov, and at KB Home’s website at www.kbhome.com. These websites are provided for convenience only; the information on these websites may be incomplete or inaccurate and has not been reviewed by the Community Facilities District, the School District or the Underwriter. Nothing on such websites is a part of this Official Statement or incorporated into this Official Statement by reference.

Founded in 1957, KB Home constructs and sells homes through its operating divisions under the name KB Home. KB Home’s ongoing principal operations are in ten states, including California, Arizona, Nevada, Colorado, New Mexico, Texas, Florida, Maryland, North Carolina, and Virginia. within 40 major markets. KB Home first developed homes in California in 1963. KB Home’s homebuilding operations offer a variety of homes designed primarily for first-time, move-up and active adult homebuyers, including attached and detached single- family homes, townhomes and condominiums.

KB Home is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information, including financial statements, with the SEC. Such filings, particularly, KB Home’s Annual Report on Form 10-K for the fiscal year ended [November 31, 2018, as filed by KB Home with the SEC on [January 24, 2019, and KB Home’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2019, as filed by KB Home with the SEC on [April 5], 2019, and KB Home’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2019, as filed by KB Home with the SEC on [July 9], 2019, set forth certain data relative to the consolidated results of operations and financial position of KB Home and its subsidiaries, including KB, as of such dates.

The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including KB Home. The address of such Internet website is www.sec.gov. In addition, the aforementioned material may also be inspected at the offices of the NYSE at 20 Broad Street, New York, NY 10005. All documents subsequently filed by KB Home pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.

Copies of KB Home’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from KB Home’s website at www.kbhome.com.

The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet websites and on file with the SEC is not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such Internet websites. Investors should not rely on the information and financial statements contained on these websites in evaluating whether to buy, hold or sell the Bonds.

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KB – Other Developments.

A sample of other development projects currently under development by KB include the following:

Approx. Average Est. No. of Est. Time Base Homes at Period of (1) Site Name Location Selling Price Description Completion Development

Bella Cortina Moreno Valley $385,590 SFD, 69 Closed 159 Q2 2017 to Q4 2020 The Cottages on 4th Ontario 528,547 Det. Condos, 43 Closed 55 Q1 2018 to Q4 2019 Monterey at Spring Mountain Ranch Riverside County 456,996 SFD, 139 Closed 156 Q1 2017 to Q4 2019 Stonecrest at the Cove (Tract 30035 San Jacinto 306,490 SFD, 19 Closed 82 Q2 2018 to Q3 2020 only) Willowmore at Park Place Ontario Ranch 474,213 SFD, 15 Closed 60 Q3 2018 to Q4 2021 Autumn Winds Riverside County 345,132 SFD, 21 Closed 141 Q2 2018 to Q2 2021 Springtime at Harvest Upland 546,880 SFD, 123 Closed 125 Q2 2016 to Q3 2019 Terramor (Tracts 36593, 36593-1) Riverside County 472,490 SFD, 82 Closed 170 Q2 2017 to Q4 2020 Daybreak Moreno Valley 433,418 SFD, 50 Closed 114 Q2 2017 to Q3 2020

(1) As of August 9, 2019. Source: KB.

KB – Development Plan.

While the information in this Official Statement reflects KB’s current development expectations, no assurances can be given that final home construction and conveyance to individual home buyers will be carried out on the schedule or according to the plans described in this Official Statement.

Santolina at Spencer’s Crossing (KB). As previously mentioned, KB acquired 108 lots within the Community Facilities District from Riverside Mitland in December 2017.

The Tract comprising Santolina at Spencer’s Crossing is [located on the northwest corner of Leon Road and Silky Lupine Drive. The project in the aggregate encompasses approximately 21.8 gross acres. The City approved the subdivision of the property into 108 residential lots each with a minimum lot sizes of 5,500 square feet. Final Tract Map No. 37053-1 was recorded on [October 16, 2017. The homes range in size from approximately 2,319 to approximately 2,929 square feet. This development offers seven product types with initial base prices ranging from approximately $415,990 to approximately $468,990. The following table summarizes the product types offered by KB. The base sale prices reflect pricing as of July 15, 2019.

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Table 12 Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Santolina at Spencer’s Crossing (KB) Development Status (As of July 15, 2019)

Near Finished Lots Estimated Base Approx. Completed Completed Sales Square Homes Owned by Units Units Under W/Bldg. W/O Bldg. Plan Prices (1) Feet Individuals (2) (Not Closed) (3) Construction Permits (4) Permits (5) Total 1 $415,990 2,358 6 1 3 0 3 13 2 422,990 2541 3 0 0 0 10 13 3 428,990 2,571 2 1 0 0 9 12 4 441,990 2,708 6 1 3 0 10 20 5 437,990 2,772 3 0 2 0 11 16 6 445,990 2,992 1 0 4 0 9 14 7 468,990 3,368 1 3 4 0 12 20 Total 22 6 16 0 64 108

(6) Base sales prices for the homes are subject to change at any time by KB. Base sales prices are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. (7) Since July 15, 2019, as of August 15, 2019, KB had closed the sale of 1 additional home in Santolina at Spencer’s Crossing. (8) Includes 3 homes used as model homes and 3 homes over 95% complete. (9) Includes finished lots for which building permits have been issued but construction has not yet commenced. (10) Includes finished lots for which building permits have not been issued. Source: KB.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See “BOND OWNERS’ RISKS – Future Property Development” and “ – Property Values.”

KB – Infrastructure and Entitlements.

[Confirm/update:

All of the publicly owned infrastructure improvements serving the Santolina property have been completed except for the payment of impact fees with respect to the remaining homes and the construction of sidewalks, which is anticipated to be complete by August 31, 2021. All discretionary entitlements are in place, and KB is not aware of any additional entitlements required to continue with development of its property in the Community Facilities District, other than building permits.

KB represents that, to the Actual Knowledge of KB (as defined below), none of the property in its development is within a 100-year flood plain or seismic fault setback zone. The “Santolina” neighborhood is within Final Tract Map No. 37053-1 which recorded on October 16, 2017.

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KB represents that it is not aware of any federally or State classified hazardous materials or any species currently listed as endangered located on any of its property in the Community Facilities District. See the caption “BOND OWNERS’ RISKS – Property Values – Hazardous Substances.”

KB – Home Sales and Projected Absorption.

KB expects that it will complete the construction of the homes on the finished lots and the sale of such homes and the [three model homes within the Community Facilities District by the third quarter of 2021. As of July 15, 2019, KB had completed the construction or almost competed the construction of [28 of the [108 homes planned to be constructed by KB within the Community Facilities District, including [22 homes which had been conveyed to individual homeowners, and [6 completed or almost completed homes (including [3 model homes and [3 production homes (1 in escrow) which were owned by KB as of such date, and 64 remaining finished lots. Sales contracts are subject to cancellation and, therefore, homes in escrow may not result in closed escrows with the prospective homebuyer. Since July 15, 2019, as of August 15, 2019, KB had closed the sale of 1 additional home in Santolina at Spencer’s Crossing and the remaining homes are expected to close escrow by the end of the third quarter of 2021.

[Remainder of Page Intentionally Left Blank]

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The construction and sales schedule is set forth below. No assurance can be given that future home construction will be carried out, or that KB’s construction and sale plans will not change after the date of this Official Statement.

Table 13 Community Facilities District No. 2018-2 of the Menifee Union School District

Santolina at Spencer’s Crossing (KB) Construction and Sales Schedule (as of July 15, 2019)

Begin Home First Home Last Home Sale Phase No. of Units Construction (1) Closings Closings Models 3 3/30/2018 TBD TBD 1 3 7/17/2018 11/26/2018 5/20/2019 2 4 7/18/2018 1/8/2019 TBD 3 2 7/20/2018 10/31/20188 11/6/2018 4 4 10/16/2018 2/8/2019 5/17/2019 5 1 10/12/2018 8/7/2019 8/7/2019* 6 2 11/05/2018 2/25/2019 TBD 7 1 12/12/2018 2/28/2019 2/28/2019 8 1 1/18/2019 5/13/2019 5/13/2019 9 1 1/18/2019 5/14/2019 5/14/2019 10 3 2/19/2019 5/29/2019 6/14/2019 11 1 7/12/2019 11/4/2019* 11/4/2019* 12 2 2/24/2019 5/28/2019 5/30/2019 13 1 3/28/2019 7/9/2019 7/9/2019 14 3 5/17/2019 9/19/2019* TBD 15 5 7/12/2019 10/31/2019* 11/6/2019* 16 3 6/5/2019 10/1/2019* TBD 17 2 7/17/2019 10/31/2019* 12/25/2019* 18 2 7/18/2019 10/31/2019* TBD 19 2 8/6/2019 2/5/2020* 2/5/2020* 20 1 8/6/2019 TBD TBD 21 1 8/16/2019 TBD TBD Total 48 ______(1) Home construction does not necessarily commence immediately after issuance of a building permit. As of July 15, 2019, 54 building permits have been issued. * Projected. Source: KB.

KB – Financing Plan.

As of July 15, 2019, KB had expended approximately $24.5 million in land acquisition and various site development and home construction costs, excluding marketing and sales costs, internal financing repayment, corporate overhead allocation and other carry costs related to its property in the Community Facilities District. KB estimates that it will require an additional $10.2 million to complete its land development and home construction within the Community Facilities District. To date, KB has financed its land acquisition, various site development costs, and home construction costs related to its property in the Community Facilities District through home sales and internally generated funds. KB expects to use home sales and internal funding to

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complete its development within the Community Facilities District. However, many factors beyond KB’s control, or a decision by KB to alter its current plans, may cause the actual sources and uses of funds to differ from the projections described in this Official Statement. Notwithstanding the foregoing, KB believes that it will have sufficient funds available to complete its proposed development in the Community Facilities District, commensurate with the development timing described in this Official Statement.

Although KB expects to have sufficient funds available to complete its development in the Community Facilities District, commensurate with the development timing described in this Official Statement, there can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available from KB or any other source when needed. Neither KB, nor its parent, KB Home, nor any of its related entities are under any legal obligation of any kind to expend funds for the remaining development of and construction of homes on its property in the Community Facilities District. Any contributions by KB or KB Home to fund the costs of such development and home construction are entirely voluntary.

If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by KB within the Community Facilities District and other financing by KB is not put into place, there could be a shortfall in the funds required to complete the proposed development by KB in the Community Facilities District and the remaining portions of the project in the Community Facilities District may not be developed.

Neither KB nor its parent has a legal obligation to Owners or Beneficial Owners of the Bonds to make any such funds available to fund the remaining development costs. Many factors beyond KB’s control, or a decision by KB to alter its current plans, may cause the actual sources and uses to differ from the projections.

KB – History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy; Continuing Disclosure Compliance.

In connection with the issuance of the Bonds, an officer or authorized representative of KB will execute a certificate containing the following representations (among others).

For purposes of these representations, the following terms have the following meanings:

 “Property” means the Taxable Property which KB holds title to in the Community Facilities District as of the date of issuance of the 2019 Bonds.

 “Actual Knowledge of KB” means, as of the date of signing, the knowledge of the authorized signatory or representative of KB (the “KB Officer”) signing the applicable certificate containing the following representations (the “KB Letter of Representations”) has as of the date of issuance of the 2019 Bonds or has obtained through (i) interviews with such current officers and responsible employees of KB and its Relevant Entities as the KB Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the KB Letter of Representations and/or (ii) review of documents that were reasonably available to the KB Officer and which the KB Officer has reasonably deemed necessary for the KB Officer to obtain the knowledge of the matters set forth in the KB Letter of Representations. The KB Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of KB’s current business and operations. KB has not contacted individuals who are no longer employees of KB or its Relevant Entities.

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 “Relevant Entity” means, with respect to KB, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with KB, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Community Facilities District and the 2019 Bonds (i.e., such Person’s assets or funds would materially affect KB’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by KB (to the extent the responsibility of KB) prior to delinquency). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

Breaches of Agreements. To the Actual Knowledge of KB, (a) KB and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which KB or its Relevant Entities are a party or otherwise subject, which breach or default could reasonably be expected to materially and adversely affect the ability of KB to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by KB (to the extent the responsibility of KB) prior to delinquency and (b) no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default under any Material Agreement which could reasonably be expected to materially and adversely affect the ability of KB to perform its obligations under the Continuing Disclosure Certificate, to develop the Property as described in this Official Statement, or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by KB (to the extent the responsibility of KB) prior to delinquency.

No Litigation. No action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against KB (with proper service of process to KB having been accomplished), or to the Actual Knowledge of KB is pending against any current Relevant Entity of KB (with proper service of process to such Relevant Entity having been accomplished) or, to the Actual Knowledge of KB, is threatened in writing against KB or any such Relevant Entity: (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2019 Bonds (e.g., the Reserve Fund established under the Fiscal Agent Agreement),

(b) to restrain or enjoin the execution of and performance by KB of its obligations under the Mitigation Agreement and the Continuing Disclosure Certificate,

(c) to restrain or enjoin the development of the Property as described in this Official Statement,

(d) in any way contesting or affecting the validity of the Special Taxes, the Mitigation Agreement, or the Continuing Disclosure Certificate, or

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(e) which if successful, is reasonably likely to materially and adversely affect KB’s ability to complete the development and sale of the Property as described in this Official Statement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by KB (to the extent the responsibility of KB) prior to delinquency.

Special Tax and Assessment Delinquencies. KB has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that KB and some of its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of KB, neither KB nor any Relevant Entity has been delinquent in any material extent in the last five years in the payment of special assessments or special taxes on property in California owned by KB or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or an assessment district within California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed against the delinquent KB or Relevant Entity in a court of law.

No Bankruptcy. KB and, to the Actual Knowledge of KB, its Relevant Entities are able to pay their bills as they become due and no legal proceedings are pending against KB or any Relevant Entity of KB (with proper service of process to KB or the applicable Relevant Entity having been accomplished) or, to the Actual Knowledge of KB, threatened in writing in which KB or the Relevant Entities of KB may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debts or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.

[Remainder of Page Intentionally Left Blank]

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Pardee Homes

Ownership Structure.

As previously defined in this Official Statement, “Pardee Homes” is Pardee Homes, a California corporation, which is an indirect, wholly-owned subsidiary of TRI Pointe Group, Inc., a Delaware corporation (“TRI Pointe Group”), a publicly traded company whose common stock is listed on the New York Stock Exchange under the ticker symbol “TPH.” TRI Pointe Group is engaged in the design, construction and sale of single-family homes through its portfolio of six quality brands across nine states, including Maracay Homes in Arizona, Pardee Homes in California and Nevada, Quadrant Homes in Washington, Trendmaker Homes in Texas, TRI Pointe Homes in California, Colorado and North Carolina, and Winchester Homes in Maryland and Virginia.

TRI Pointe Group is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly TRI Pointe Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on February 26, 2019, set forth, Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, as filed with the SEC on April 25, 2019, and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019, as filed with the SEC on July 25, 2019, among other things, certain data relative to the consolidated results of operations and financial position of TRI Pointe Group and its subsidiaries, including Pardee Homes, as of such dates.

The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including TRI Pointe Group. The address of such Internet web site is www.sec.gov. All documents subsequently filed by TRI Pointe Group pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of TRI Pointe Group’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from TRI Pointe Group’s website at www.tripointegroup.com. The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC is not a part of this Official Statement and is not incorporated by reference into this Official Statement.

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Pardee Homes – Other Developments.

Other residential development projects currently under development by Pardee Homes include the following:

Estimated Est. No. of Estimated Average Base Homes at Time Period of Site Name Location Selling Price (1) Description Completion Development

Centennial Menifee Unincorporated $433,000 SFD 359 42 months Tamarack Riverside County Unincorporated 495,500 SFD 84 30 months Avena Riverside County 456,500 SFD 84 42 months ______(1) As of August 21, 2019. Source: Pardee Homes.

Pardee Homes Development Plan.

Braeburn at Spencer’s Crossing (Pardee Homes). The Braeburn project is proposed for development of a total of 82 single-family homes. As of July 15, 2019, Pardee Homes owned 65 lots proposed for development by Pardee Homes as part of the Braeburn project in the Community Facilities District. Pardee Homes acquired 82 lots within the Community Facilities District from Riverside Mitland in November 2017.

The Tract comprising the Braeburn project is located at the northwest corner of Leon Road and Silky Lupine Road. The project in the aggregate encompasses approximately [15.3 gross acres. The City approved the subdivision of the property into 82 residential lots each with a minimum lot size of 5,000 square feet. Final Tract Map No. 37053-1 was recorded on October 16, 2017, encompassing the 82 lots. The homes range in size from 2,010 to 2,884 square feet. This development offers 4 product types with initial base prices ranging from $404,000 to $433,000. The following table summarizes the product types offered by Pardee Homes. The base sale prices reflect pricing as of July 15, 2019.

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Table 14 Community Facilities District No. 2018-2 of the Menifee Union School District

Braeburn at Spencer’s Crossing by Pardee Homes Development Status (As of July 15, 2019)

Near Finished Lots Estimated Completed Base Approx. Completed Units Sales Square Homes Owned (Not Closed) Units Under W/Bldg. WO/ Bldg. Plan Prices (1) Feet by Individuals (2) (3) Construction Permits (4) Permits (5) Total 1 $404,000 2,010 2 1 3 0 4 10 2 418,000 2,383 4 3 5 0 5 17 3 413,000 2,516 5 4 8 0 8 25 4 433,000 2,884 6 3 11 0 10 30

17 11 27 0 27 82

(1) Base sales prices for the homes are subject to change at any time by Pardee Homes. Base sales prices are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. (2) Since July 15, 2019, as of August 15, 2019, Pardee Homes had not closed the sale of any additional homes in Braeburn. (3) Includes 3 homes used as model homes and 8 homes over 95% complete. (4) Includes finished lots for which building permits have been issued but construction has not yet commenced. (5) Includes finished lots for which building permits have not been issued. Source: Pardee Homes.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See “BOND OWNERS’ RISKS – Future Property Development” and “ – Property Values.”

Pardee Homes – Infrastructure and Entitlements.

All of the publicly owned infrastructure improvements serving the Braeburn property have been completed except for the construction of sidewalks, which is anticipated to be complete by August 2020. All discretionary entitlements are in place, and Pardee Homes is not aware of any additional entitlements required to continue with development of its property in the Community Facilities District, other than building permits.

Pardee Homes represents that, to the Actual Knowledge of Pardee Homes (as defined below), none of the property in its development is within a 100-year flood plain or seismic fault setback zone. The “Braeburn” neighborhood is within Final Tract Map No. 37053-1.

Pardee Homes represents that it is not aware of any federally or State classified hazardous materials or any species currently listed as endangered located on any of its property in the Community Facilities District. See the caption “BOND OWNERS’ RISKS – Property Values – Hazardous Substances.”

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Pardee Homes – Home Sales and Projected Absorption.

Pardee Homes expects that it will complete the construction of the homes on the finished lots and the sale of such homes and the three model homes within the Community Facilities District by the third quarter of 2020. As of July 15, 2019, Pardee Homes had completed the construction or almost competed the construction of 28 of the 82 homes planned to be constructed by Pardee Homes within the Community Facilities District, including 17 homes which had been conveyed to individual homeowners, and 11 completed or almost completed homes (including 3 three model homes and 8 homes (8 in escrow) which were owned by Pardee Homes as of such date, 27 homes under construction (19 in escrow) and 27 remaining finished lots. Sales contracts are subject to cancellation and, therefore, homes in escrow may not result in closed escrows with the prospective homebuyer. Since July 15, 2019, as of August 15, 2019, Pardee Homes had not closed the sale of any additional homes in Braeburn and the remaining homes are expected to close escrow by the end of the third quarter of 2020.

The construction and sales schedule is set forth below. No assurance can be given that future home construction will be carried out, or that Pardee Homes’ construction and sale plans will not change after the date of this Official Statement.

Table 15 Community Facilities District No. 2018-2 of the Menifee Union School District

Braeburn at Spencer’s Crossing by Pardee Homes Construction and Sales Schedule (as of July 15, 2019) Est. Last Begin Home First Home Home Sale Phase No. of Units Construction (1) Closings Closings Models 3 5/27/20* 7/31/20* 1 8 11/15/18 5/2/19 2 9 12/21/18 5/1/19 3 8 8/16/19* 8/29/19 4 9 10/15/19* 12/30/19* 5 9 12/13/19* 12/30/19* 6 9 9/19/19 2/14/20* 2/29/19* 7 6 6/6/19 10/31/19 3/31/20* 8 7 10/24/19 3/20/20* 6/30/20* 9 7 11/28/19 4/23/20* 7/31/20* Build-Out 7 1/2/20 5/27/20* 7/31/20* Total 82 ______(1) Home construction does not necessarily commence immediately after issuance of a building permit. As of July 15, 2019, 55 building permits have been issued. 27 lots for which a building permit has not yet been issued is currently being utilized as parking for the model homes. * Estimated closing date. Source: Pardee Homes.

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Pardee Homes Financing Plan.

Pardee Homes’ total site improvement, home construction, marketing and other carrying and soft costs for the Braeburn development within the Community Facilities District are estimated to be approximately $19,027,000. As of July 15, 2019, Pardee Homes expects its remaining home construction costs and other development, marketing and sales costs within Braeburn, to be approximately $12,226,200.

Pardee Homes finances its land acquisition and home construction costs related to its activities in the Community Facilities District through internal sources, including funding from its parent, TRI Pointe Group. Pardee Homes intends to use this source of funds to finance its remaining home construction costs and carrying costs for its activities in the Community Facilities District (including the payment of property taxes and the Special Taxes) until full sell-out of all of its planned homes in the Community Facilities District. Home sales revenues from Pardee Homes’ activities in the Community Facilities District are swept daily from Pardee Homes for use in corporate operations, to pay down debt and for other corporate purposes and might get diverted to other Pardee Homes and TRI Pointe Group needs at the discretion of management. Notwithstanding the foregoing, Pardee Homes believes that it will have sufficient funds to complete its construction of homes in the Community Facilities District.

As of June 30, 2019, TRI Pointe Group was a party to a Second Amended and Restated Credit Agreement with U.S. Bank and other lenders, dated as of March 29, 2019, which consists of a $600 million unsecured revolving credit facility (the “TRI Pointe Group Revolving Facility”) and a $250 million term loan facility (the “TRI Pointe Group Term Facility” and together with the TRI Pointe Group Revolving Facility, the “TRI Pointe Group Credit Facility”), each of which matures on March 29, 2023. The TRI Pointe Group Term Facility includes a 90-day delayed draw provision. The TRI Pointe Group Revolving Facility contains a sublimit of $75 million for letters of credit. TRI Pointe Group may increase the TRI Pointe Group Credit Facility to not more than $1 billion in the aggregate, at its request, upon satisfaction of specified conditions. TRI Pointe Group may borrow under the TRI Pointe Group Credit Facility in the ordinary course of business to repay senior notes and fund its operations, including its land acquisition, development and homebuilding activities. The TRI Pointe Group Credit Facility contains a borrowing base and certain covenants which may limit the amount TRI Pointe Group may borrow or have outstanding at any time. As of June 30, 2019, TRI Pointe Group had $150 million outstanding debt under the TRI Pointe Group Revolving Facility and $250 million outstanding debt under the TRI Pointe Group Term Facility. As of June 30, 2019, TRI Pointe Group had outstanding letters of credit of $31.1 million. TRI Pointe Group’s ability to renew the TRI Pointe Group Credit Facility in the future is dependent upon a number of factors, including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and TRI Pointe Group’s financial condition and strength.

Although Pardee Homes expects to have sufficient funds available to complete its planned construction of homes in the Community Facilities District, no assurance can be given that the sources of financing available to Pardee Homes will be sufficient to complete the home construction as currently anticipated. While TRI Pointe Group has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Pardee Homes nor any affiliate thereof has any legal obligation of any kind to make any such funds available or to obtain loans. If and to the extent that internal financing is inadequate to pay the costs to complete Pardee Homes’ planned home construction within the Community Facilities District and other financing by Pardee Homes is not put into place, there could be a shortfall in the funds required to complete the proposed home construction by Pardee Homes.

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Pardee Homes – History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy.

In connection with the issuance of the Bonds, an officer or authorized representative of Pardee Homes will execute a certificate containing the following representations (among others).

For purposes of these representations, the following terms have the following meanings:

 “Property” means the Taxable Property which Pardee Homes holds title to in the Community Facilities District as of the date of issuance of the 2019 Bonds.

 “Actual Knowledge of Pardee Homes” means, as of the date of signing, the knowledge that the authorized signatory or representative of Pardee Homes (the “Pardee Homes Officer”) signing the applicable certificate containing the following representations (the “Pardee Homes Letter of Representations”) has as of the date of issuance of the Bonds or has obtained through (i) interviews with such current officers and responsible employees of Pardee Homes and its Relevant Entities as the Pardee Homes Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Pardee Homes Letter of Representations and/or (ii) review of documents that were reasonably available to the Pardee Homes Officer and which the Pardee Homes Officer has reasonably deemed necessary for the Pardee Homes Officer to obtain knowledge of the matters set forth in the Pardee Homes Letter of Representations. The Pardee Homes Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Pardee Homes’ current business and operations. Pardee Homes has not contacted individuals who are no longer with Pardee Homes or its Relevant Entities.

 “Relevant Entity” means, with respect to Pardee Homes, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Pardee Homes, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Community Facilities District and the 2019 Bonds (i.e., such Person’s assets or funds would materially affect Pardee Homes’ ability to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Pardee Homes (to the extent the responsibility of Pardee Homes) prior to delinquency). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

Breaches of Agreements. To the Actual Knowledge of Pardee Homes, (a) Pardee Homes and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which Pardee Homes or its Relevant Entities are a party or otherwise subject, which breach or default could reasonably be expected to materially and adversely affect the ability of Pardee Homes to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Pardee Homes (to the extent the responsibility of Pardee Homes) prior to delinquency and (b) no event has occurred and is continuing that with the passage of time or giving of

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notice, or both, would constitute such a breach or default under any Material Agreement which could reasonably be expected to materially and adversely affect the ability of Pardee Homes to develop the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by Pardee Homes (to the extent the responsibility of Pardee Homes) prior to delinquency.

No Litigation. No action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Pardee Homes (with proper service of process to Pardee Homes having been accomplished), or, to the Actual Knowledge of Pardee Homes, is pending against any current Relevant Entity of Pardee Homes (with proper service of process to such Relevant Entity having been accomplished), or, to the Actual Knowledge of Pardee Homes, is threatened in writing against Pardee Homes or any such Relevant Entity:

(a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2019 Bonds (e.g., the Reserve Fund established under the Fiscal Agent Agreement),

(b) to restrain or enjoin the execution of and performance by Pardee Homes of its obligations under the Mitigation Agreement,

(c) to restrain or enjoin the development of the Property as described in this Official Statement,

(d) in any way contesting or affecting the validity of the Special Taxes or the Mitigation Agreement, or

(e) which if successful, is reasonably likely to materially and adversely affect Pardee Homes’ ability to complete the development and sale of the Property as described in this Official Statement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by Pardee Homes (to the extent the responsibility of Pardee Homes) prior to delinquency.

Special Tax and Assessment Delinquencies. Pardee Homes has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Pardee Homes and some of its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of Pardee Homes, neither Pardee Homes nor any Relevant Entity has been delinquent in any material extent in the last five years in the payment of special assessments or special taxes on property in California owned by Pardee Homes or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or an assessment district within California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed against the delinquent Pardee Homes or Relevant Entity in a court of law.

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No Bankruptcy. Pardee Homes and, to the Actual Knowledge of Pardee Homes, its Relevant Entities are able to pay their bills as they become due and no legal proceedings are pending against Pardee Homes or any Relevant Entity of Pardee Homes (with proper service of process to Pardee Homes or the applicable Relevant Entity having been accomplished) or, to the Actual Knowledge of Pardee Homes, threatened in writing in which Pardee Homes or the Relevant Entities of Pardee Homes may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debts or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.

[Remainder of Page Intentionally Left Blank]

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BOND OWNERS’ RISKS

The purchase of the Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds.

Risks of Real Estate Secured Investments Generally

The Bond owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the Community Facilities District, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, landslides, wildfires, floods and droughts), which may result in uninsured losses.

Limited Obligation of the Community Facilities District to Pay Debt Service

The Community Facilities District has no obligation to pay principal of and interest on the Bonds if Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. Neither the School District nor the Community Facilities District is obligated to advance funds to pay debt service on the Bonds.

Future Property Development

Continuing development of the undeveloped parcels in the Community Facilities District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of each Developer, water or electricity shortages, discovery on the undeveloped property of any plants or animals in their habitat that have been listed as endangered species, and other similar factors. Development in the Community Facilities District may also be affected by development in surrounding areas, which may compete with Community Facilities District.

In addition, partially developed land is less valuable than developed land and provides less security for the Bonds (and therefore to the owners of the Bonds) should it be necessary for the Community Facilities District to foreclose on undeveloped property due to the nonpayment of Special Taxes. Moreover, failure to complete future development on a timely basis could adversely affect the land values of those parcels which have been completed. Lower land values result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of Special Taxes.

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Extraordinary Redemption From Prepaid Special Taxes

The Bonds are subject to mandatory call and redemption prior to maturity, as a whole or in part on any Interest Payment Date from amounts in the Special Tax Prepayments Account available to redeem Bonds under the Fiscal Agent Agreement. Prepayments could be made by any of the owners of any of the property within the Community Facilities District including any of the Developers, or any individual owner; and they could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. The resulting redemption of Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such Bonds. See “THE BONDS – Redemption – Mandatory Redemption from Special Tax Prepayments.”

Concentration of Ownership

[Review: Based on the ownership status of the property within the Community Facilities District as of [July 15], 2019, and if no additional building permits are issued and no additional home closings occur prior to May 1, 2021, approximately [____ [22.66] % of the projected Fiscal Year 2020-21 Special Tax levy will be payable by individual homeowners and [_____ [77.34] of the projected Fiscal Year 2020-21 Special Tax levy will be payable by the Developers, respectively, with the Developers’ portions ranging from [_____ [11.82% to [_____ [28.75]%. See Table 4D in “THE COMMUNITY FACILITIES DISTRICT – Special Tax Levy.”

Until the construction and sale of the remaining homes on the undeveloped property to individual homeowners, the receipt of the Special Taxes is dependent in part on the willingness and the ability of each Developer to pay its respective Special Taxes when due. Failure of a Developer, or any successor(s), to pay its annual Special Taxes when due could result in a draw on the Reserve Fund, and potentially a default in payments of the principal of, and interest on, the Bonds, when due. No assurance can be given that a Developer, or its successors, will complete the remaining intended construction and development of its property in the Community Facilities District.

No assurance can be given that a Developer, or its successors, will pay Special Taxes for which it is responsible in the future or that it will be able to pay such Special Taxes on a timely basis. See “ – Bankruptcy Delays” for a discussion of certain limitations on the Community Facilities District’s ability to pursue judicial proceedings with respect to delinquent parcels. See “SECURITY FOR THE BONDS – Special Taxes” and “PROPERTY OWNERSHIP AND DEVELOPMENT.”

Levy and Collection of the Special Tax

General. The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the Community Facilities District.

Limitation on Maximum Special Tax Rate. The annual levy of the Special Tax is subject to the maximum annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds. Generally, the Community Facilities District levies Special Taxes at the Assigned Annual Special Tax rate on Developed Property in the Community Facilities District. In the event that delinquencies occur in the receipt of Special Taxes within the Community Facilities District in any fiscal year, the Community Facilities District may increase the Special Tax levy up to the maximum rates as permitted in the Rate and Method in the following fiscal years if determined necessary to cure any delinquencies on the Bonds. There may be little or no difference between the Assigned Annual Special Tax rate and the maximum rates where the property within the Community Facilities District is all categorized as Developed Property.

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If owners are delinquent in the payment of Special Taxes, the Community Facilities District may not increase Special Tax levies to make up for delinquencies for prior Fiscal Years above the Maximum Special Tax rates specified for each category of property within the Community Facilities District. See “SECURITY FOR THE BONDS – Rate and Method.” In addition, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the Bonds.

No Relationship Between Property Value and Special Tax Levy. Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.

Factors That Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:

Transfers to Governmental Entities. The number of parcels of Taxable Property could be reduced through the acquisition of an interest in Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof or sponsored thereby, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. Such entities and agencies include the FDIC, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Drug Enforcement Agency, the Internal Revenue Service (the “IRS”) or other similar federal governmental agencies. The FDIC could obtain such an interest by taking over a financial institution which has made a loan which is secured by property within the Community Facilities District, and Fannie Mae or Freddie Mac could obtain such an interest by acquiring a mortgage secured by property within the Community Facilities District. See ” – Exempt Properties – Property Owned by FDIC” below.

Property Tax Delinquencies. Failure of the owners of Taxable Property to pay the Special Tax, or delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Special Taxes. For a summary of Special Tax collections in the Community Facilities District for the prior Fiscal Year, see “THE COMMUNITY FACILITIES DISTRICT – Special Tax Collection History and Delinquencies.” Sustained or increased delinquencies in the payment of the Special Taxes could cause a draw on the Reserve Fund established for the Bonds and perhaps, ultimately, a default in the payment on the Bonds.

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

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Delays Following Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE BONDS – Covenant to Foreclose” and in the Act, and is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.

If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Community Facilities District of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE BONDS – Covenant to Foreclose.”

Risks Related to Declines in Home Values

Declines in home values in the Community Facilities District could result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies could occur. Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes.

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

An owner of Taxable Property is not personally obligated to pay the Special Taxes. Rather, the Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Special Tax and a foreclosure sale by the Community Facilities District, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the Community Facilities District has no recourse against the owner.

Appraised Values

The Appraisal Report summarized in APPENDIX C estimates the market value of the Taxable Property within the Community Facilities District. This market value is merely the opinion of the Appraiser as of the date of value set forth in the Appraisal Report, and is subject to the assumptions and limiting conditions stated in the Appraisal Report. The Community Facilities District has not sought an updated opinion of value by the Appraiser subsequent to the date of value of the Appraisal Report, or an opinion of the value of the Taxable Property by any other appraiser. A different opinion of value might be rendered by a different appraiser.

The opinion of value assumes a sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.

In addition, the opinion is based upon the facts and circumstances at the date of value of the Appraisal Report. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from such date of value.

No assurance can be given that any of the Taxable Property in the Community Facilities District could be sold for the estimated market value contained in the Appraisal Report if that property should become delinquent in the payment of Special Taxes and be foreclosed upon.

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Property Values

The value of Taxable Property within the Community Facilities District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the Community Facilities District’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic and other factors beyond the Community Facilities District’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, drought, landslides, wildfires, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.

The following is a discussion of specific risk factors that could affect the value of property in the Community Facilities District.

Risks Related to Availability of Mortgage Loans. In past years, events in the United States and world- wide capital markets have adversely affected the availability of mortgage loans to homeowners, including potential buyers of homes within the Community Facilities District. Any such unavailability could hinder the ability of the current homeowners to resell their homes, or the sale of newly completed homes in the future.

Natural Disasters. The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The areas in and surrounding the Community Facilities District, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes and landslides.

Other natural disasters could include, without limitation, floods, droughts, wildfires or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear.

Drought Conditions. With respect to droughts specifically, the State in recent years experienced a 5-year drought throughout much of the State, though from October 1, 2016 through the spring of 2017, most of the State experienced above average rainfall. On April 7, 2017, then Governor Brown issued an executive order which lifted the drought emergency in all State counties, except Fresno, Kings, Tulare and Tuolumne, where emergency drinking water projects will continue to help address diminished groundwater supplies. In a related action, State agencies on April 7, 2017, issued a plan to continue to make conservation a way of life in the State, as directed by then Governor Brown in May 2016. The framework requires new legislation to establish long-term water conservation measures and improved planning for more frequent and severe droughts. As of April 1, 2019, most areas of the State have experienced above normal levels of rainfall, with a number of areas having experienced through April 1, 2019, aggregate rainfall totals which are above the full season normal rainfall levels. The State’s five-year drought underscored the need for permanent improvements in long-term efficient water use and drought preparedness, as called for in a previous executive order made by then Governor Brown. On May 31, 2018, then Governor Brown signed Assembly Bill 1668 and Senate Bill 606, which impose new and expanded requirements on state water agencies and local water suppliers, including provisions for the establishment by the State Water Resources Control Board of long term urban water use efficiency standards by June 30, 2022, and starting in 2027, authorization of fines for failure to comply with the State Water Resources Control Board’s adopted long term standards. These actions are intended to help to ensure all communities have sufficient water supplies and are conserving water regardless of the conditions of any one year. The Community Facilities District cannot

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predict if and when the State will experience drought conditions again in the future, what effect such conditions may have on property values or whether or to what extent any water reduction requirements may affect homeowners within the Community Facilities District or their ability or willingness to pay Special Taxes.

Wildfires. In recent years, portions of California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildfires. Such areas affected by wildfires are more prone to flooding and mudslides that can lead to the destruction of homes. While the Community Facilities District is not aware of any particular risk of wildfire within the Community Facilities District, there can be no assurances that wildfires won’t occur within the Community Facilities District. Property damage due to wildfire could result in a significant decrease in the market value of property in the Community Facilities District and in the ability or willingness of property owners to pay Special Taxes when due.

Legal Requirements. Other events that may affect the value of Taxable Property include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures.

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

The appraised values and assessed values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the Community Facilities District is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the Community Facilities District is not aware of them.

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

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Other Possible Claims Upon the Value of Taxable Property

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

The table in the section entitled “THE COMMUNITY FACILITIES DISTRICT – Direct and Overlapping Governmental Obligations” shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. The table also states the additional amount of general obligation bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property.

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

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

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

The assessed values summarized hereto estimates the fee simple interest assessed value of the property within the Community Facilities District. This value is merely the amount of the assessed value in the records maintained by the County Assessor. The assessed value relates to sale by a willing seller to a willing buyer at a point in time, as adjusted by State law. Consequently, the assessed value is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.

No assurance can be given that if any of the Taxable Property in the Community Facilities District should become delinquent in the payment of Special Taxes, and be foreclosed upon, that such property could be sold for the assessed values.

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Value-to-Debt Ratios

Value-to-debt ratios have traditionally been used in land-secured bond issues as a measure of the “collateral” supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value-to-debt ratio is mathematically a fraction, the numerator of which is the value of the property (usually either the assessed value or a market value as determined by an appraiser) and the denominator of which is the “debt” of the assessments or special taxes. A value-to-debt ratio should not, however, be viewed as a guarantee of credit-worthiness. Land values are especially sensitive to economic cycles. A downturn of the economy may depress land values and hence the value-to-debt ratios. Further, the value-to-debt ratio cited for a bond issue is an average. Individual parcels in a community facilities district may fall above or below the average, sometimes even below a 1:1 ratio. (With a 1:1 ratio, the land is worth less than the debt on it.) Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years to complete, and the bankruptcy courts may impede the foreclosure action. Finally, local agencies may form overlapping community facilities districts or assessment districts. They typically do not coordinate their bond issuances. Debt issuance by another entity can dilute value-to-debt ratios. See “THE COMMUNITY FACILITIES DISTRICT – Direct and Overlapping Governmental Obligations.”

Exempt Properties

Exemptions Under Rate and Method and the Act. Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the Community Facilities District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See “SECURITY FOR THE BONDS – Rate and Method.”

In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.

Property Owned by FDIC. The ability of the Community Facilities District to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax installment may be limited in certain respects with regard to property in which the FDIC has or obtains an interest. The FDIC has asserted a sovereign immunity defense to the payment of special taxes and assessments. The Community Facilities District is unable to predict what effect this assertion would have in the event of a delinquency on a parcel within the Community Facilities District in which the FDIC has or obtains an interest.

In addition, although the FDIC does not claim immunity from ad valorem property taxation, it requires a foreclosing entity to obtain FDIC’s consent to foreclosure proceedings. Prohibiting a foreclosure on property owned by the FDIC could reduce the amount available to pay the principal of and interest on the Bonds. Either outcome would cause a draw on the Reserve Fund established for the Bonds and perhaps, ultimately, a default in the payment on the Bonds.

Property Owned by Fannie Mae or Freddie Mac. If a parcel of taxable property is owned by a federal government entity or federal government-sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government-

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sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited.

Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the Community Facilities District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest.

No investigation has been made as to whether any governmental entity or government-sponsored entity currently owns or has an interest in any property in the Community Facilities District.

Depletion of Reserve Fund

The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. See “SECURITY FOR THE BONDS – Reserve Fund.” The Reserve Fund will be used to pay principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within the Community Facilities District. If the Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the Bond owners under the Fiscal Agent Agreement. However, because the Special Tax levy is limited to the maximum annual Special Tax rates, it is possible that no replenishment would be possible if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes.

Bankruptcy Delays

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

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds.

In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be

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treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent Special Taxes not being paid in full.

Disclosure to Future Purchasers

The Community Facilities District has recorded a notice of the Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in the Community Facilities District or the lending of money secured by property in the Community Facilities District. The Act and the Goals and Policies require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Limitations on Remedies

Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. See “– Levy and Collection of the Special Tax” above and “ – No Acceleration Provisions” below.

No Acceleration Provisions

The Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Under the Fiscal Agent Agreement, a Bond owner is given the right for the equal benefit and protection of all Bond owners similarly situated to pursue certain remedies. See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent Agreement.” So long as the Bonds are in book-entry form, DTC will be the sole Bond owner and will be entitled to exercise all rights and remedies of Bond owners.

Tax Cuts and Jobs Act of 2017

Recent changes enacted by federal tax legislation (the Public Law No. 115-97, also referred to as the “Tax Cuts and Jobs Act of 2017”) was enacted into law on December 22, 2017. The Tax Cuts and Jobs Act of 2017 made significant changes to many aspects of the Internal Revenue Code of 1986, as amended (the “Tax Code”). For example, the Tax Cuts and Jobs Act of 2017 reduced the amount of mortgage interest deduction to the first $750,000 of a home loan on new purchases (existing loans are grandfathered in), increased the standard deduction, and put a limit of $10,000 on deductions for state and local income tax, sales tax and property tax expenses that individuals may deduct from their gross income for federal income tax purposes. The changes made by the Tax Cuts and Jobs Act of 2017 could increase the cost of home ownership within the Community Facilities District.

None of the School District or the Community Facilities Districts can predict the effect that the Tax Cuts and Jobs Act of 2017 may have on the cost of home ownership or the price of homes in the Community Facilities District, the rate at which homes in the Community Facilities Districts are sold to end users by the Developers or the ability or willingness of homeowners to pay Special Taxes or property taxes.

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Loss of Tax Exemption

As discussed under the caption “LEGAL MATTERS – Tax Exemption,” interest on the Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the Community Facilities District in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the Bonds were to become includable in gross income for purposes of federal income taxation, the Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Taxes. See “THE BONDS – Redemption.”

Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Fiscal Agent Agreement.

IRS Audit of Tax-Exempt Bond Issues

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

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

Recent legislation, future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond owners from realizing the full current benefit of the tax status of such interest. See, for example, “ –Tax Cuts and Jobs Act of 2017” above.

The Tax Cuts and Jobs Act of 2017, the introduction or enactment of any such or future legislative proposals, clarification of the Code or court decisions may also affect the market price for, liquidity of, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation.

Backup Withholding

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

Voter Initiatives and State Constitutional Provisions

Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.

Proposition 218. Proposition 218 – Voter Approval for Local Government Taxes – Limitation on Fees, Assessments, and Charges – Initiative Constitutional Amendment, added Articles XIIIC and XIIID

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to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. Among other things, Section 3 of Article XIIIC states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless the legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt.

Proposition 26. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature.

Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote. The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the landowners within the Community Facilities District who constituted the qualified electors at the time of such voted authorization, and the statute of limitations period for any challenges to the formation of the Community Facilities District and the levy of the Special Taxes has expired. The Community Facilities District believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.

Like their antecedents, Proposition 218 and Proposition 26 have undergone, are likely to undergo, both judicial and legislative scrutiny.

For example, in August 2014, in City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City of San Diego to authorize the levying of special taxes on hotels City-wide pursuant to a City charter ordinance creating a convention center facilities district which specifically defined the electorate to consist solely of (1) the owners of real property in the City on which a hotel is located, and (2) the lessees of real property owned by a governmental entity on which a hotel is located. The court held that such landowners and lessees are neither “qualified electors” of the City for purposes of Articles XIII A, Section 4 of the California Constitution, nor a proper “electorate” under Article XIIIC, Section 2(d) of the California Constitution. The court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) of the Act (which was the nature of the voter approval through which the Community Facilities District was formed) violates the California Constitution in districts that lack sufficient registered voters to conduct an election among registered voters. Accordingly, this case should have no effect on the levy of the Special Taxes by the Community Facilities District.

The School District and the Community Facilities District cannot predict the ultimate outcome or effect of any such judicial scrutiny, legislative actions, or future initiatives. These initiatives, and any future initiatives, may affect the collection of fees, taxes and other types of revenue by local agencies such as the Community Facilities District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Bonds.

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Limited Secondary Market for Bonds

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

No assurance can be given that the market price for the Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Tax Code), or changes in interpretation of the Tax Code, or any action of the IRS, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the Bonds for audit or examination, or the course or result of any IRS audit or examination of the Bonds or obligations that present similar tax issues as the Bonds.

Cyber Security

The School District, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other electronic sensitive information, the School District is potentially subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the School District’s systems for the purposes of misappropriating assets or information or causing operational disruption or damage. The School District has never had a major cyber breach that resulted in a financial loss. The School District maintains insurance coverage for cyber security losses should a successful breach ever occur.

No assurance can be given that the School District’s efforts to manage cyber threats and attacks will, in all cases, be successful or that any such attack will not materially impact the operations or finances of the School District or the Community Facilities District. The School District is also reliant on other entities and service providers, such as the County Treasurer for the levy and collection of Special Taxes securing payment of the Bonds or such as the Fiscal Agent in its role as paying agent and the Dissemination Agent in connection with compliance with its disclosure undertakings. No assurance can be given that the School District or the Community Facilities District may not be affected by cyber threats and attacks against other entities or service providers in a manner which may affect the Bond owners , e.g., systems related to the timeliness of payments to Bond owners or compliance with disclosure filings pursuant to the Continuing Disclosure Certificate.

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LEGAL MATTERS

Legal Opinion

The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX H. A copy of the legal opinion will be attached to each Bond. Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement.

James F. Anderson Law Firm, A Professional Corporation, Laguna Hills, California, will pass upon certain legal matters for the Community Facilities District as disclosure counsel. Certain matters will be passed upon for the Community Facilities District by Fagan, Friedman & Fulfrost LLP, Carlsbad, California, as the School District’s general counsel. Kutak Rock LLP, Irvine, California, is serving as counsel to the Underwriter.

Tax Exemption

Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.

The opinions set forth in the preceding paragraph are subject to the condition that the Community Facilities District comply with all requirements of the Tax Code that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Community Facilities District has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds.

Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium are disregarded.

Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

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Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond’s maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds.

California Tax Status. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes.

Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.

The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the Bonds, or as to the consequences of owning or receiving interest on the Bonds, as of any future date. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the Bonds, the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.

No Litigation

At the time of delivery of the Bonds, the Community Facilities District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District has been served with process or threatened:

• which in any way questions the powers of the Board, the School District, or the Community Facilities District, or

• which in any way questions the validity of any proceeding taken by the Board in connection with the issuance of the Bonds, or

• wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the purchase agreement with respect to the Bonds, or

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• which, in any way, could adversely affect the validity or enforceability of the resolutions of the Board adopted in connection with the formation of the Community Facilities District or the issuance of the Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate or the purchase agreement with respect to the Bonds, or

• which to the knowledge of the Community Facilities District, in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes, or

• which in any other way questions the status of the Bonds under State tax laws or regulations.

CONTINUING DISCLOSURE

Community Facilities District

The Community Facilities District will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the Bonds by not later than six months after the end of the Community Facilities District’s fiscal year, or December 31 each year based on the Community Facilities District’s current fiscal year end of June 30 (the “Annual Report”), commencing with the Annual Report for the fiscal year ending on June 30, 2019 (which report is due no later than December 31, 2019), and to provide notices of the occurrence of certain listed events as required by Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).

These covenants have been made in order to assist the Underwriter in complying with the Rule. The specific nature of the information to be contained in the Annual Report or the notices of listed events by the Community Facilities District is set forth in APPENDIX F. These filings are required to be posted on the electronic filing system (“EMMA”) maintained by the Municipal Securities Rulemaking Board, which has been designated by the SEC as the sole repository of disclosure information for purposes of the Rule.

Prior Compliance by the Community Facilities District, the School District, the Menifee Union School District Public Financing Authority and Other Community Facilities Districts formed by the School District. A review of previous disclosure filings since September 1, 2014, with respect to financings by the School District, the Menifee Union School District Public Financing Authority (the “Authority”) and the other community facilities districts formed by the School District indicates that the School District, the Authority or such other community facilities districts did not comply in all respects with prior undertakings. Identification of the below described instances of non-compliance does not constitute a representation by the Community Facilities District, the School District, the Authority or the other community facilities districts formed by the School District that any such instances were material.

Prior Undertaking by the Community Facilities District. The Community Facilities District has no prior disclosure undertaking.

Prior Compliance by the School District:

• With respect to continuing disclosure undertakings made in connection with its outstanding general obligation bonds, the School District’s annual disclosure reports omitted certain required information and when submitting annual disclosure report filings for Fiscal Years 2013-14, and CUSIPS relating to three maturities of capital appreciation bonds were not included within the list of CUSIPS to

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which such reports related, resulting in EMMA not linking the reports to the CUSIPS for those three maturities.

Prior Compliance by the Authority.

• With respect to certain outstanding revenue bonds of the Authority, the Authority did not timely file enumerated event notices for changes in the ratings of bond insurers.

Prior Compliance by Community Facilities Districts formed by the School District:

• With respect to certain outstanding community facilities district bonds of community facilities districts formed by the School District, certain fiscal year annual disclosure reports were filed after their respective due dates without a notice of late filing, in one instance, were filed lacking all required information, and in another instance, an annual disclosure report does not show as having been timely posted on the EMMA system, though the School District’s records indicate that an annual disclosure report had been prepared in a timely manner.

The School District, the Authority or the corresponding community facilities district, as applicable, has made remedial filings to correct all known instances of non-compliance during the last five years. The School District believes it has established processes to ensure that the School District, the Authority and the applicable community facilities districts will make required filings on a timely basis in the future, which include appointing its Municipal Advisor, Cooperative Strategies, LLC, as an outside dissemination agent to assist in preparing the continuing disclosure filings of the Community Facilities District, the School District, the Authority and the other community facilities districts, as applicable.

KB

KB will covenant in a continuing disclosure certificate, the form of which is set forth in APPENDIX G – “Form of Continuing Disclosure Certificate (KB)” (the “Continuing Disclosure Certificate (KB)”), for the benefit of holders and beneficial owners of the Bonds, to provide certain information relating to KB and the parcels it owns within the Community Facilities District on a semi-annual basis, and to provide notices of the occurrence of certain enumerated events. The initial Dissemination Agent under the Continuing Disclosure Certificate (KB) will be Zions Bancorporation, National Association.

KB’s obligations under the Continuing Disclosure Certificate (KB) will terminate on the earlier of (i) legal defeasance, prior redemption or payment in full of all the Bonds, (ii) the date on which KB’s property in the Community Facilities District is no longer responsible for Special Taxes with respect to [62] or more parcels, or (iii) the date on which KB prepays in full all of the Special Taxes attributable to its property in the Community Facilities District.

A default under the Continuing Disclosure Certificate (KB) will not, in itself, constitute an Event of Default under the Fiscal Agent Agreement, and the sole remedy under the Continuing Disclosure Certificate (KB) in the event of any failure of KB or the Dissemination Agent to comply will be an action to compel specific performance.

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KB Prior Disclosure Compliance. [Except as disclosed below], to the Actual Knowledge of KB (as defined in “PROPERTY OWNERSHIP AND DEVELOPMENT – KB – KB History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy – Continuing Disclosure Compliance”), KB has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities districts or assessment districts in California within the past five years.

[Describe prior compliance]

NO RATINGS

The Community Facilities District has not made, and does not contemplate making, any application to a rating agency for a rating on the Bonds. No such rating should be assumed from any credit rating that the School District or the Community Facilities District may obtain for other purposes. Prospective purchasers of the Bonds are required to make independent determinations as to the credit quality of the Bonds and their appropriateness as an investment.

UNDERWRITING

The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated at a purchase price of $______(which represents the principal amount thereof ($______, [plus/less a net original issue premium/discount] of $______and less the Underwriter’s discount of $______).

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

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

While the Underwriter does not believe that the following represent a potential or actual material conflict of interest, the Underwriter notes that:

On March 22, 2019, the Underwriter sponsored the Menifee Valley Community Cupboard 14th Annual Celebrity Karaoke and over the last four years, the Underwriter sponsored the Menifee Union School District’s Annual Evening of Excellence event.

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FINANCIAL INTERESTS

In connection with the issuance of the Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the Bonds. Those professionals include:

• the Underwriter, • Jones Hall, A Professional Law Corporation, as Bond Counsel, • James F. Anderson Law Firm, A Professional Corporation, as Disclosure Counsel, • Kutak Rock LLP, as Underwriter’s Counsel, • A portion of the fees of Cooperative Strategies, LLC, as Municipal Advisor and Special Tax Consultant; and • Zions Bancorporation, National Association, as the Fiscal Agent, are contingent upon the issuance of the Bonds.

From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds. Disclosure Counsel has in the past worked as, and is currently working as, counsel to the Underwriter on matters unrelated to the Bonds.

[Remainder of Page Intentionally Left Blank.]

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EXECUTION

The execution and delivery of the Official Statement by the Community Facilities District have been duly authorized by the Governing Board of the Menifee Union School District, acting as the legislative body of the Community Facilities District.

COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT

By: Dr. Steve Kennedy, Superintendent, Menifee Union School District, on behalf of Community Facilities District No. 2018-2 of the Menifee Union School District

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APPENDIX A

GENERAL INFORMATION ABOUT THE CITY OF MURRIETA AND RIVERSIDE COUNTY

The Bonds are not a debt of the Menifee Union School District (the “School District”) or the County of Riverside (the “County”). The County, including its Board of Supervisors, officers, officials, agents and other employees, are required, only to the extent required by law, to: (i) levy and collect Special Taxes for payment of the Bonds in accordance with the law; and (ii) transmit the proceeds of such taxes to the paying agent for the payment of the principal of and interest on Bonds at the time such payment is due.

The property within the Community Facilities District is located in an unincorporated area of the County, just east of the City of Murrieta (the “City”), in the southwestern portion of the County, north of Winchester Road (Highway 79), generally west of Leon Road. The following information is included only for the purpose of supplying general information regarding the City and the County. This information is provided only for general informational purposes, and provides prospective investors limited information about the City, the County and their economic base. The Bonds are not a debt of the County, the State or any of its political subdivisions, and none of the School District, the City, the County, the State or any of its political subdivisions is liable therefor.

General

The School District is located in the southwestern portion of the County, partially in the City. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged as a single school district. The School District currently operates two preschools, ten elementary schools and three middle schools, serving approximately 11,949 students. Two additional elementary schools and one middle school are being planned.

City of Murrieta

The City was incorporated on July 1, 1991 and is located at the junction of the I-15 and I-215 Freeways in southwestern Riverside County, north of Temecula, east of Cleveland National Forest and south of Lake Elsinore. The City spans nearly 34 square miles and has a population estimated at approximately 118,125.

History and Location of Riverside County

The County, which encompasses 7,177 square miles, was organized in 1893 from territory in San Bernardino and San Diego Counties. Located in the southeastern portion of California, the County is bordered on the north by San Bernardino County, on the east by the State of Arizona, on the south by San Diego and Imperial Counties and on the west by Orange and Los Angeles Counties. There are 28 incorporated cities in Riverside County.

The County’s varying topology includes desert, valley and mountain areas as well as gently rolling terrain. Three distinct geographical areas characterize the County: the western valley area, the higher elevations of the mountains and the deserts. The western valley, the San Jacinto mountains and the Cleveland National Forest experience the mild climate typical of Southern California. The eastern desert areas experience warmer and dryer weather conditions. The County is the site for famous resorts, such as Palm Springs, as well as a leading area for inland water recreation. Nearly 20 lakes in the County are

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open to the public. The dry summers and moderate to cool winters make it possible to enjoy these and other recreational and cultural facilities on a year-round basis.

County Population

According to the State Department of Finance, Demographic Research Unit, the County’s population was estimated at 2,440,124 as of January 1, 2019. The largest cities in the County are the cities of Riverside, Moreno Valley, Corona, Murrieta, Temecula, Jurupa Valley, Menifee, Indio, Hemet and Perris. The areas of most rapid population growth continue to be those more populated and industrialized cities in the western and central regions of the County and the southwestern unincorporated region of the County between Sun City and Temecula.

The following table sets forth annual population figures as of January 1, 2019, for cities located within the County for each of the years listed:

COUNTY OF RIVERSIDE Population Estimates

2015 2016 2017 2018 2019 Banning 30,456 30,497 30,914 30,950 31,044 Beaumont 42,937 44,746 45,167 46,545 48,401 Blythe 18,889 19,338 19,356 19,651 19,428 Calimesa 8,421 8,487 8,805 9,080 9,159 Canyon Lake 10,953 11,021 11,138 11,213 11,285 Cathedral City 53,158 53,448 53,946 54,466 54,907 Coachella 44,291 44,836 45,537 45,777 46,351 Corona 161,299 162,819 165,427 167,013 168,101 Desert Hot Springs 28,315 28,564 28,645 29,102 29,251 Eastvale 60,833 62,912 64,683 65,725 66,078 Hemet 82,161 82,503 83,802 84,423 84,754 Indian Wells 5,228 5,307 5,342 5,389 5,445 Indio 84,539 85,583 87,033 88,194 89,406 Jurupa Valley 99,067 100,683 102,392 104,661 106,318 Lake Elsinore 58,768 60,760 61,433 62,241 62,949 La Quinta 40,105 40,269 41,029 41,753 42,098 Menifee 86,018 87,943 89,113 90,775 93,452 Moreno Valley 201,346 203,216 203,934 206,046 208,297 Murrieta 111,029 113,087 116,527 116,970 118,125 Norco 26,049 26,560 26,527 26,464 26,386 Palm Desert 51,675 51,768 52,705 53,298 53,625 Palm Springs 46,806 47,103 47,885 48,390 48,733 Perris 73,360 75,113 75,659 76,260 76,971 Rancho Mirage 17,999 18,221 18,223 18,297 18,489 Riverside 318,914 321,723 323,934 326,270 328,101 San Jacinto 46,199 46,778 47,053 47,607 48,878 Temecula 109,393 110,474 112,170 113,248 113,826 Wildomar 34,416 34,948 35,261 35,635 36,066 Balance of County 369,213 372,285 381,020 387,093 394,200 County Total 2,321,837 2,350,992 2,384,660 2,412,536 2,440,124

Source: State Department of Finance Estimates (as of January 1, 2019).

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County Employment

The following table shows the average annual estimated numbers of wage and salary workers by industry in the County for which data is available. The data does not include proprietors, the self- employed, unpaid volunteers or family workers, domestic workers in households and persons in labor management disputes.

RIVERSIDE COUNTY Civilian Labor Force, Employment and Unemployment (Annual Averages)

2014 2015 2016 2017 2018 Civilian Labor Force (1) 1,011,100 1,034,200 1,052,400 1,073,400 1,092,400 Employment 928,300 965,000 988,100 1,017,100 1,044,600 Unemployment 82,900 69,300 64,300 56,300 47,800 Unemployment Rate 8.9% 7.2% 6.5% 5.5% 4.6% Wage and Salary Employment (2) Agriculture 11,900 12,600 12,800 12,300 12,500 Mining and Logging 300 300 300 400 400 Construction 47,500 52,900 58,600 62,200 67,300 Manufacturing 40,100 41,300 42,700 42,900 44,400 Wholesale Trade 23,100 23,300 23,800 23,900 24,900 Retail Trade 85,500 88,700 91,600 92,700 92,700 Transportation, Warehousing and Utilities 27,800 34,100 37,400 42,400 46,000 Information 6,300 6,400 6,300 6,100 6,300 Finance and Insurance 11,500 11,600 11,700 11,900 11,800 Real Estate and Rental and Leasing 8,900 9,400 9,700 9,900 10,300 Professional and Business Services 60,900 62,600 65,200 66,600 70,500 Educational and Health Services 89,500 95,200 100,200 107,000 115,000 Leisure and Hospitality 80,500 83,400 88,200 91,200 93,500 Other Services 21,600 21,700 22,300 22,600 22,600 Federal Government 6,800 6,900 7,100 7,100 7,200 State Government 15,900 16,300 17,000 17,500 17,700 Local Government 89,900 91,400 93,600 101,800 105,500 Total All Industries 628,100 657,900 688,400 718,400 748,400

(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. Source: State of California Employment Development Department, March 2018 Benchmark.

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Largest Employers

The following table lists the largest employers within the City of Murrieta:

CITY OF MURRIETA Major Employers as of June 2018

% of City Employer Name Industry Employees Employment Murrieta Valley Unified School District Education 2,267 4.13% Southwest Healthcare System Health Care 1,612 2.94 Loma Linda Univ. Medical Center Health Care 1,011 1.84 County of Riverside Government 847 1.54 Target Corporation Retail 433 0.79 Oak Grove Institute Residential Treatment 325 0.59 Walmart Retail 309 0.56 Murrieta Health & Rehab Center Skilled Nursing 300 0.55 City of Murrieta Government 295 0.54 Sam’s Club Retail 209 0.38

Source: City of Murrieta Comprehensive Annual Financial Report (CAFR), fiscal year ended June 30, 2018.

The following table show the largest employers located in the County as of Fiscal Year ending June 30, 2018.

COUNTY OF RIVERSIDE Largest Employers as of June 30, 2018

% of County Rank Name of Business Type of Business Employees Employment 1. County of Riverside County Government 22,038 2.15% 2. March Air Reserve Base Military Reserve Base 9,000 0.88 3. University of California, Riverside University 8,829 0.86 4. Kaiser Permanente Riverside Med. Center Medical Center 5,500 0.54 5. Corona-Norco Unified School District School District 5,478 0.53 6. Pechanga Resort Casino Casino 4,750 0.46 7. Riverside Unified School District School District 4,200 0.41 8. Hemet Unified School District School District 4,058 0.40 9. Riverside University Health Systems Medical Center 3,975 0.39 10. Morongo Casino, Resort & Spa Casino/Resort 3,800 0.37

Source: County of Riverside ‘Comprehensive Annual Financial Report’ for the year ending June 30, 2018.

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Construction Trends

Provided below are the building permits and valuations for the City of Murrieta for calendar years 2014 through 2018.

CITY OF MURRIETA Building Permit Valuation 2014-2018 (Valuation in Thousands of Dollars)

2014 2015 2016 2017 2018 Permit Valuation New Single-family $5,125.4 $65,285.9 $58,375.1 $76,887.0 $117,276.3 New Multi-family 28,746.2 26,890.1 15,192.4 16,609.7 25,175.0 Res. Alterations/Additions 5,012.1 1,463.7 945.7 1,249.4 1,277.5 Total Residential $38,883.6 $93,639.7 $74,513.2 $94,746.1 $143,728.8

New Commercial $6,260.5 $2,643.6 $20,679.7 $25,720.4 $18,114.5 New Industrial 0.0 98.3 0.0 3,500.0 2,320.0 New Other 5,351.6 366.7 9,448.3 8,168.1 9,514.8 Com. Alterations/Additions 3,699.3 2,277.0 5,776.7 13,489.5 6,067.8 Total Nonresidential $15,311.4 $5,385.6 $35,904.7 $50,878.0 $36,017.1

New Dwelling Units Single-family 20 174 144 204 341 Multiple Family 248 271 139 155 120 TOTAL 268 445 283 359 461

Note: Totals may not add to sums because of rounding. Source: California Homebuilding Foundation/Construction Industry Research Board.

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Provided below are the building permits and valuations for the County for calendar years 2014 through 2018.

COUNTY OF RIVERSIDE Building Permit Valuation 2014-2018 (Valuation in Thousands of Dollars)

2014 2015 2016 2017 2018 Permit Valuation New Single-family $1,296,552.8 $1,313,084.2 $1,526,767.8 $1,670,541.6 $2,200,020.7 New Multi-family 178,116.7 110,458.4 106,291.8 109,309.0 232,706.8 Res. Alterations/Additions 147,081.2 113,199.9 126,474.9 123,566.7 125,353.5 Total Residential $1,621,750.8 $1,536,742.5 $1,759,534.5 $1,903,417.3 $2,558,081.0

New Commercial $184,137.5 $36,541.2 $605,176.8 $529,284.9 $727,517.4 New Industrial 161,321.1 18,886.7 59,439.2 410,275.3 529,326.4 New Other 142,204.3 10,124.1 310,187.3 130,419.0 387,065.6 Com. Alterations/Additions 327,327.1 18,905.8 371,216.4 363,711.3 315,771.0 Total Nonresidential $814,990.0 $84,457.9 $1,346,019.7 $1,433,690.5 $1,959,680.4

New Dwelling Units Single-family 5,007 5,007 5,662 6,265 7,540 Multiple Family 1,931 1,189 1,039 1,070 1,628 TOTAL 6,938 6,196 6,701 7,335 9,168

Note: Totals may not add to sums because of rounding. Source: California Homebuilding Foundation/Construction Industry Research Board.

Riverside County Commercial Activity

Commercial activity is an important factor in the County’s economy. Much of the County’s commercial activity is concentrated in central business districts or small neighborhood commercial centers in cities. There are eight regional shopping malls in the County: Riverside Plaza, Galleria at Tyler (Riverside), Palm Springs Mall, Desert Fashion Mall, Indio Fashion Mall, Hemet Valley Mall, Palm Desert Town Center and Moreno Valley Mall at Towngate. There are also three factory outlet malls (Cabazon Outlets, Desert Hills Factory Stores and Lake Elsinore Outlet Center) and over 200 area centers in the County.

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Taxable Retail Sales

Provided below are the taxable retail transactions for the City and the County for calendar years 2009 through 2017.

CITY OF MURRIETA Taxable Retail Sales 2009-2017 (1) Number of Permits and Valuation of Taxable Transactions

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2009 1,276 $747,358 1,893 $874,619 2010 1,355 782,940 2,014 903,640 2011 1,394 843,900 2,060 965,758 2012 1,422 914,765 2,095 1,035,828 2013 1,405 987,019 2,064 1,147,563 2014 1,490 1,039,978 2,151 1,243,186 2015 1,517 1,089,765 2,517 1,281,529 2016 1,541 1,137,130 2,582 1,340,131 2017 1,623 1,302,470 2,782 1,522,525

(1) 2018 information is anticipated to be available approximately March 2020. Source: “Taxable Sales in California (Sales & Use Tax),” California State Board of Equalization.

COUNTY OF RIVERSIDE Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in thousands) 2009-2017 (1)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2009 29,829 $16,057,488 42,765 $22,227,877 2010 32,534 16,919,500 45,688 23,152,780 2011 33,398 18,576,285 46,886 25,641,497 2012 34,683 20,016,668 48,316 28,096,009 2013 33,391 21,306,774 46,805 30,065,467 2014 34,910 22,646,343 48,453 32,035,687 2015 18,662 23,281,724 56,846 32,910,910 2016 38,445 24,022,136 57,771 34,231,144 2017 38,967 25,581,948 58,969 36,132,184

(1) 2018 information is anticipated to be available approximately March 2020. Source: “Taxable Sales in California (Sales & Use Tax),” California State Board of Equalization.

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County Agriculture

Agriculture remains a leading source of income in the County. Principal agricultural products are nursery, milk, table grapes, lemons, bell peppers, alfalfa, eggs, dates, avocados and carrots. Four areas in the County account for the major portion of agricultural activity: the Riverside/Corona and San Jacinto/Temecula Valley Districts in the western portion of the County, the Coachella Valley in the central portion and the Palo Verde Valley near the County’s eastern border.

County Transportation

Easy access to job opportunities in the County and nearby Los Angeles, Orange and San Diego Counties is important to the County’s employment picture. Several major freeways and highways provide access between the County and all parts of Southern California. The Riverside Freeway (State Route 91) extends southwest through Corona and connects with the Orange County freeway network in Fullerton. Interstate 10 traverses the width of the County, the western-most portion of which links up with major cities and freeways in the eastern part of Los Angeles County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U.S. 60) provides an alternate (to Interstate 10) east-west link to Los Angeles County.

Currently, Metrolink provides commuter rail service to Los Angeles and Orange Counties from several stations in the County. Transcontinental passenger rail service is provided by Amtrak with a stop in Indio. Freight service to major west coast and national markets is provided by two transcontinental railroads – Burlington Northern/Santa Fe and Union Pacific. Truck service is provided by several common carriers, making available overnight delivery service to major California cities.

Transcontinental bus service is provided by Greyhound Lines. Intercounty, intercity and local bus service is provided by the Riverside Transit Agency to western County cities and communities. The SunLine Transit Agency provides local bus service throughout the Coachella Valley, including the cities of Palm Springs and Indio. The City of Banning also operates a local bus system.

The County seat, located in the City of Riverside, is within 20 miles of the Ontario International Airport in neighboring San Bernardino County. This airport is operated by the Los Angeles Department of Airports. Four major airlines schedule commercial flight service at Palm Springs Regional Airport. County-operated general aviation airports include those in Thermal, Hemet, Blythe and French Valley. The cities of Riverside, Corona and Banning also operate general aviation airports. There is a military base at March Air Reserve Base, which converted from an active duty base to a reserve-only base on April 1, 1996. Plans for joint military and civilian use of the base thereafter are presently being formulated by the March AFB Joint Powers Authority, comprised of the County and the Cities of Riverside, Moreno Valley and Perris.

County Environmental Control Services

Water Supply. The County obtains a large part of its water supply from groundwater sources, with certain areas of the County, such as the City of Riverside, relying almost entirely on groundwater. As in most areas of Southern California, this groundwater source is not sufficient to meet countywide demand and the County’s water supply is supplemented by imported water. At the present time, imported water is provided by the Colorado River Aqueduct and the State Water Project.

At the regional and local level, there are several water districts that were formed for the primary purpose of supplying supplemental water to the cities and agencies within their areas. The Rancho

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California Water District, the Coachella Valley Water District, the Western Municipal Water District and the Eastern Municipal Water District are the largest of these water districts in terms of area served. The County is also served by the San Gorgonio Pass Water Agency, Desert Water Agency and Palo Verde Irrigation District.

Flood Control. Primary responsibility for planning and construction of flood control and drainage systems within the County is provided by the Riverside County Flood Control and Water Conservation District and the Coachella Valley Storm Water Unit.

Sewage. There are 18 wastewater treatment agencies in the County’s Santa Ana River region and nine in the County’s Colorado River Basin region. Most residents in the rural unsewered areas of the County rely upon septic tanks and leach fields as an environmentally acceptable method of sewage disposal.

County Education

There are four elementary school districts, one high school district, eighteen unified (K-12) school districts and four community college districts in the County. Ninety-five percent of all K-12 students attend schools in the unified school districts. The three largest unified districts are Riverside Unified School District, Moreno Valley Unified School District and Corona-Norco Unified School District.

There are nine two-year community college campuses located in the communities of Riverside, Moreno Valley, Norco, San Jacinto, Menifee, Coachella Valley and Palo Verde Valley. There are also two universities and a four-year college located in the City of Riverside – the University of California, Riverside, La Sierra University and California Baptist College.

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APPENDIX B

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES OF COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT

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RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES OF COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT

A Special Tax (as defined herein) shall be levied on and collected from all Assessor's Parcels in Community Facilities District No. 2018-2 of the Menifee Union School District ("School District") each Fiscal Year commencing in Fiscal Year 2018/2019, in an amount determined by the Board through the application of the Rate and Method of Apportionment of Special Taxes ("RMA") described below. All of the real property within the District (as defined below), unless exempted by law or by provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

SECTION A DEFINITIONS

For purposes of this RMA, the terms hereinafter set forth have the following meanings:

"Acre" or "Acreage" means the number of acres of land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the Administrator may rely on the land area shown on the applicable Final Map.

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

"Administrative Expenses" means any ordinary and necessary expense incurred by the School District on behalf of the District related to the determination of the amount of the levy of Special Taxes, the collection of Special Taxes, including, but not limited to, the reasonable expenses of collecting delinquencies, the administration of Bonds, the proportionate payment of salaries and benefits of any School District employee whose duties are directly related to the administration of the District, and reasonable costs otherwise incurred in order to carry out the authorized purposes of the District including a proportionate amount of School District general administrative overhead related thereto.

"Administrator" means an official of the School District or designee thereof, responsible for determining the levy and collection of the Special Taxes.

"Annual Special Tax" means the Special Tax actually levied in any Fiscal Year on any Assessor's Parcel.

"Approved Property" means all Assessor's Parcels of Taxable Property that (i) are associated with a Lot in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) have not been issued a building permit prior to the May 1st preceding the Fiscal Year in which the Special Tax is being levied.

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"Assessor's Parcel" means a parcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number within the boundaries of the District.

"Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel Number.

"Assessor's Parcel Number" means that number assigned to an Assessor's Parcel by the County for purposes of identification.

"Assigned Annual Special Tax" means the Special Tax of that name described in Section D hereof.

"Backup Annual Special Tax" means the Special Tax of that name described in Section E hereof.

"Board" means the Governing Board of the School District, or its trustees, acting as the Legislative Body of the District.

"Bond Index" means the national Bond Buyer Revenue Index, commonly referenced as the 25-Bond Revenue Index. In the event the Bond Index ceases to be published, the index used shall be based on a comparable index for revenue bonds maturing in 30 years with an average rating equivalent to Moody's Al and/or Standard & Poor's A+, as determined by the Board.

"Bond Yield" means the yield of the last series of Bonds issued, for purposes of this calculation the yield of the Bonds shall be the yield calculated at the time such Bonds are issued, pursuant to Section 148 of the Internal Revenue Code of 1986, as amended, for the purpose of the Non-Arbitrage (Tax) Certificate or other similar bond issuance document.

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

"Building Square Footage" or "BSF" means the square footage of assessable internal living space of a Unit, exclusive of any carports, walkways, garages, overhangs, patios, enclosed patios, detached accessory structure, other structures not used as living space, or any other square footage excluded under Government Code Section 65995 as determined by reference to the building permit(s) for such Unit.

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

"County" means the County of Riverside.

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"Developed Property" means all Assessor's Parcels of Taxable Property for which building permit(s) were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor's Parcels were created on or before January 1 of the prior Fiscal Year, as determined reasonably by the Administrator.

"District" means Community Facilities District No. 2018-2 of the School District.

"Exempt Property" means all Assessor's Parcels designated as being exempt from Special Taxes pursuant to Section K hereof.

"Final Map" means a final tract map, parcel map, condominium plan, lot line adjustment, or functionally equivalent map or instrument that creates individual Lots, recorded in the Office of the County Recorder.

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

"Land Use Class or Classes" means the tax class classifications depicted in Table 1 for all Assessor's Parcels of Developed Property based on the Building Square Footage of such Assessor's Parcel.

"Lot" means an individual legal lot created by a Final Map for which a building permit for residential construction has been or could be issued. Notwithstanding the foregoing, in the case of an individual legal lot created by such a Final Map upon which condominium units are entitled to be developed but for which a condominium plan or equivalent instrument has not been recorded, the number of Lots allocable to such legal lot for purposes of calculating the Backup Annual Special Tax applicable to such Final Map shall equal the number of Units which are approved to be constructed on such legal lot as reasonably determined by the Administrator.

"Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C, which can be levied by the District in any Fiscal Year on any Assessor's Parcel.

"Mitigation Agreement" means the "School Facilities Mitigation Agreement", dated as of April 10, 2018, by and among the School District; Riverside Mitland 03 LLC; Brookfield Homes Southern California LLC; Pardee Homes; and KB Home Coastal Inc.

"Net Taxable Acreage" means the total Acreage of Developed Property expected to exist in the District after all Final Maps are recorded.

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

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include among other things the cost of computing the Prepayment Amount, redeeming Bonds, and recording any notices to evidence the prepayment and redemption of Bonds.

"Prepayment Amount" means the amount required to prepay the Special Tax obligation in full for an Assessor's Parcel as described in Section G hereof.

"Present Value of Taxes" means for any Assessor's Parcel the present value of (i) the unpaid portion, if any, of the Special Tax applicable to such Assessor's Parcel in the current Fiscal Year and (ii) the Annual Special Taxes expected to be levied on such Assessor's Parcel in each remaining Fiscal Year, as determined by the Administrator, until the termination date specified in Section J, but in no event longer than 33 Fiscal Years. The discount rate used for this calculation shall be equal to (a) the Bond Yield after Bond issuance or (b) the most recently published Bond Index prior to Bond issuance.

"Proportionately" means that the ratio of the Annual Special Tax to the applicable Assigned Annual Special Tax is equal for all applicable Assessor's Parcels. In the case of Developed Property subject to apportionment of the Special Tax under Step Four of Section F, "Proportionately" shall mean that the quotient of (i) the Annual Special Tax less the Assigned Annual Special Tax divided by (ii) the Backup Annual Special Tax less the Assigned Annual Special Tax is equal for all applicable Assessor's Parcels.

"Provisional Undeveloped Property" means all Assessor's Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuant to Section K, but cannot be classified as Exempt Property because to do so would reduce the Net Taxable Acreage below the required minimum Acreage set forth in Section K, as applicable.

"Reserve Fund Credit" means an amount equal to the lesser of (i) the reduction in the applicable reserve fund requirement(s) resulting from the redemption of Bonds with the Prepayment Amount or (ii) ten percent (10%) of the amount of Bonds which will be redeemed. In the event that a surety bond or other credit instrument satisfies the reserve requirement or the reserve requirement is underfunded at the time of the prepayment, no Reserve Fund Credit shall be given.

"School District" means the Menifee Union School District, a public school district organized and operating pursuant to the Constitution and laws of the State of California.

"Special Tax" means any of the special taxes authorized to be levied by the District pursuant to the Act and this RMA.

"Special Tax Requirement" means the amount required in any Fiscal Year to pay (i) the debt service or the periodic costs on all outstanding Bonds, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account(s) established in association with the Bonds, (iv) any amount required to establish or replenish any reserve funds (or accounts thereof) established in association with the Bonds, and (v) the collection or accumulation of funds for the acquisition or construction of school facilities and certain costs associated with the maintenance and operations of school facilities authorized by the District provided that the inclusion of such amount does not cause an RMA_ROI Page 4 of 14 April 24, 2018

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increase in the levy of Special Tax on Approved Property, Undeveloped Property, or Provisional Undeveloped Property as set forth in Steps Two through Four of Section F, less (vi) any amount(s) available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, trust agreement, or equivalent agreement or document. In arriving at the Special Tax Requirement the Administrator shall take into account the reasonably anticipated delinquent Special Taxes, provided that the amount included cannot cause the Annual Special Tax of an Assessor Parcel of Developed Property to increase by greater than ten percent (10%) of what would have otherwise been levied.

"Taxable Property" means all Assessor's Parcels which are not Exempt Property.

"Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property, or Provisional Undeveloped Property.

"Unit" means each separate residential dwelling unit, including but not limited to a single family attached or detached unit, condominium, an apartment unit, mobile home, or otherwise, excluding hotel and motels.

SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS

Each Fiscal Year, commencing with Fiscal Year 2018/2019, all Assessor's Parcels within the District shall be classified as either Taxable Property or Exempt Property. In addition, each Assessor's Parcel of Taxable Property shall be classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property. Developed Property shall be further assigned to a Land Use Class, according to Table 1 below, based on the Building Square Footage of each Unit.

Table 1 Land Use Classification Building Land Use Class Square Footage 1 < 2,350 sq. ft. 2 2,350 — 2,550 sq. ft. 3 2,551 — 2,750 sq. ft. 4 2,751 — 2,950 sq. ft. 5 2,951 — 3,150 sq. ft. 6 3,151 — 3,350 sq. ft. 7 > 3,350 sq. ft.

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SECTION C MAXIMUM SPECIAL TAX RATE

Prior to the issuance of Bonds, the Maximum Special Tax, Assigned Annual Special Tax, and Backup Annual Special Tax for Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property may be reduced in accordance with and subject to the conditions set forth in this Section C without the need for any proceedings to make changes as permitted under the Act. If it is reasonably determined by the Administrator that the maximum tax burden in the District exceeds the School District's maximum tax burden objective set forth in the its Local Goals and Policies for Community Facilities Districts adopted in August 2002, the Maximum Special Tax and Assigned Annual Special Tax on Developed Property for a Land Use Class may be reduced. The Maximum Special Tax and Assigned Annual Special Tax may be reduced to the amount necessary to equal such maximum tax burden level with the written consent of the Administrator and without the need for any additional Board proceedings.

Furthermore, reductions in the Maximum Special Tax, Assigned Annual Special Tax and Backup Annual Special Tax for Developed Property for one or more Land Use Classes and the Maximum Special Tax and Assigned Annual Special Tax for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall also be implemented in accordance with Section 3.B of the Mitigation Agreement without the need for any additional Board proceedings.

The Maximum Special Tax and Assigned Annual Special Tax for Approved Property, Undeveloped Property and Provisional Undeveloped Property may also be reduced in accordance with the Maximum Special Tax reductions for Developed Property, if the Administrator reasonably determines that such reductions are necessary. Each Maximum Special Tax, Assigned Annual Special Tax, and Backup Annual Special Tax reduction for a Land Use Class shall be calculated separately, as reasonably determined by the Administrator, and it shall not be required that such reduction be proportionate among Land Use Classes. The reductions permitted pursuant to this Section C shall be reflected in an amended notice of Special Tax lien which the School District shall cause to be recorded by executing a certificate in substantially the form attached herein as Exhibit A.

1. Developed Property

The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of the amount derived by the application of the (a) Assigned Annual Special Tax or (b) Backup Annual Special Tax.

2. Approved Property

The Maximum Special Tax for each Assessor's Parcel classified as Approved Property shall be derived by the application of the Assigned Annual Special Tax.

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3. Undeveloped Property

The Maximum Special Tax for each Assessor's Parcel classified as Undeveloped Property or Provisional Undeveloped Property shall be derived by the application of the Assigned Annual Special Tax. SECTION D ASSIGNED ANNUAL SPECIAL TAXES

1. Developed Property

The Assigned Annual Special Tax for all Assessor's Parcels classified as Developed Property shall be determined in accordance with Table 2 below according to the Land Use Class of the Unit, subject to increases as described below.

Table 2 Fiscal Year 2018/2019 Assigned Annual Special Tax for Developed Property Land Use Building Square Assigned Annual Class Footage Special Tax Rate

1 < 2,350 sq. ft. $1,235.33 per Unit 2 2,350 — 2,550 sq. $1,295.93 per Unit 3 2,551ft . — 2,750 sq. $1,347.88 per Unit 4 2,751ft . — 2,950 sq. $1,425.79 per Unit 5 2,951 — 3,150 sq. $1,550.95 per Unit 6 3,151 — 3,350 sq. $1,676.11 per Unit 7 > 3,350 sq. ft. $1,694.18 per Unit

2. Approved Property, Undeveloped Property and Provisional Undeveloped Property

The Assigned Annual Special Tax for each Assessor's Parcel of Approved Property, Undeveloped Property, or Provisional Undeveloped Property shall be $10,842.87 per acre of Acreage, subject to increases as described below.

3. Increases in the Assigned Annual Special Tax

a. Developed Property

On each July 1, commencing July 1, 2019, the Assigned Annual Special Tax rate applicable to Developed Property shall be increased by two percent (2.00%) of the amount in effect the prior Fiscal Year.

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b. Approved Property, Undeveloped Property and Provisional Undeveloped Property

On each July 1, commencing July 1, 2019, the Assigned Annual Special Tax rate per acre of Acreage for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect the prior Fiscal Year.

SECTION E BACKUP ANNUAL SPECIAL TAX

Each Fiscal Year, each Assessor's Parcel of Developed Property shall be subject to a Backup Annual Special Tax.

1. Calculation of the Backup Annual Special Tax Rate

The Backup Annual Special Tax rate for an Assessor's Parcel of Developed Property within a Final Map shall be the rate per Lot calculated in accordance with the following formula in Fiscal Year 2018/2019 or such later Fiscal Year in which such Final Map is recorded, subject to increases as described below:

B = (U x A) / L

The terms above have the following meanings:

B = Backup Annual Special Tax per Lot for the applicable Fiscal Year

U = Assigned Annual Special Tax per Acre for Undeveloped Property in the Fiscal Year the calculation is performed

A = Acreage of Taxable Property expected to exist in such Final Map at the time of calculation, as determined by the Administrator

L = Number of Lots in the applicable Final Map at the time of calculation.

2. Changes to a Final Map

If the Final Map(s) described in the preceding paragraph are subsequently changed or modified, then the Backup Annual Special Tax for each Assessor's Parcel of Developed Property changed or modified in each such Final Map shall be a rate per square foot of Acreage calculated as follows:

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a. Determine the total Backup Annual Special Tax revenue anticipated to apply to the changed or modified Assessor's Parcels prior to the change or modification.

b. The result of paragraph (a) above shall be divided by the Acreage of Taxable Property of the modified Assessor's Parcels, as reasonably determined by the Administrator.

c. The result of paragraph (b) above shall be divided by 43,560. The result is the Backup Annual Special Tax per square foot of Acreage that shall be applicable to the modified Assessor's Parcels, subject to increases as described below.

Each July 1, commencing the July 1 first following the initial calculation of the Backup Annual Special Tax rate for an Assessor's Parcel of Developed Property within a Final map, the Backup Annual Special Tax for each Lot within such Final Map shall be increased by two percent (2.00%) of the amount in effect the prior Fiscal Year.

SECTION F METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX

Commencing Fiscal Year 2018/2019 and for each subsequent Fiscal Year, the Board shall levy Annual Special Taxes on all Taxable Property in accordance with the following steps:

Step One: The Annual Special Tax shall be levied on each Assessor's Parcel of Developed Property in an amount equal to the Assigned Annual Special Tax applicable to each such Assessor's Parcel.

Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor's Parcel of Approved Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement.

Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the second step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement.

Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the third step has been completed, the Annual Special Tax on each Assessor's Parcel of Developed Property, whose Maximum Special Tax is the Backup Annual Special Tax, shall be increased Proportionately from the Assigned Annual Special Tax up to 100% of the Backup Annual Special Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement.

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Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the fourth step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor's Parcel of Provisional Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement.

SECTION G PREPAYMENT OF SPECIAL TAXES

1. Special Tax Prepayment Times and Conditions

The Special Tax obligation of an Assessor's Parcel of Taxable Property may be prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the School District with written notice of intent to prepay. Within thirty (30) days of receipt of such written notice, the Administrator shall determine the Prepayment Amount for such Assessor's Parcel and shall notify such owner of such Prepayment Amount.

2. Special Tax Prepayment Calculation

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

P = PVT – RFC + PAF

The terms above have the following meanings:

P = Prepayment Amount

PVT = Present Value of Taxes

RFC = Reserve Fund Credit

PAF = Prepayment Administrative Fees

3. Special Tax Prepayment Procedures and Limitations

The amount representing the Present Value of Taxes attributable to the prepayment less the Reserve Fund Credit attributable to the prepayment shall, prior to the issuance of Bonds, be deposited into a separate account held with the School District and disbursed in accordance with the Mitigation Agreement and after the issuance of Bonds be deposited into the applicable account or fund established under RMA_ROI Page 10 of 14 April 24, 2018

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the trust agreement or indenture agreement or fiscal agent agreement and used to pay debt service or redeem Bonds. The amount representing the Prepayment Administrative Fees attributable to the prepayment shall be retained and deposited into the applicable account by the District.

With respect to any Assessor's Parcel for which the Special Tax obligation is prepaid, the Board shall indicate in the records of the District that there has been a prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act to indicate the prepayment of the Special Tax obligation and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such Special Tax shall cease.

Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Assigned Annual Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such prepayment net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination shall include identifying all Assessor's Parcels that are expected to be classified as Exempt Property.

Notwithstanding the above, the ability to prepay the Special Tax obligation of an Assessor's Parcel may be suspended, by the Administrator, acting in his or her absolution and sole discretion for and on behalf of the District, without notice to the owners of property within the District for a period of time, not to exceed sixty (60) days, prior to the scheduled issuance of Bonds by the District to assist in the efficient preparation of the required bond market disclosure.

SECTION H PARTIAL PREPAYMENT OF SPECIAL TAXES

1. Partial Prepayment Times and Conditions

The Special Tax obligation of Assessor's Parcels of Taxable Property may be partially prepaid in increments of ten (10) or more units, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcels at the time the Special Tax obligation would be partially prepaid. An owner of an Assessor's Parcel(s) intending to partially prepay the Special Tax obligation shall provide the District with written notice of their intent to partially prepay. Within thirty (30) days of receipt of such written notice, the Administrator shall determine the Partial Prepayment Amount of such Assessor's Parcel and shall notify such owner of such Partial Prepayment Amount.

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2. Partial Prepayment Calculation

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

PP = PVT x F -- RFC + PAF

The terms above have the following meanings:

PP = the Partial Prepayment Amount

PVT = Present Value of Taxes

F = the percent by which the owner of the Assessor's Parcel is partially prepaying the Special Tax obligation

RFC = Reserve Fund Credit

PAF = Prepayment Administrative Fees

3. Partial Prepayment Procedures and Limitations

The amount representing the Present Value of Taxes attributable to the prepayment less the Reserve Fund Credit attributable to the prepayment shall, prior to the issuance of Bonds, be deposited into a separate account held with the School District and disbursed in accordance with the Mitigation Agreement and after the issuance of Bonds be deposited into the applicable account or fund established under the trust agreement, indenture agreement or fiscal agent agreement and used to pay debt service or redeem Bonds. The amount representing the Prepayment Administrative Fees attributable to the prepayment shall be retained and deposited into the applicable account by the District.

With respect to any Assessor's Parcel for which the Special Tax obligation is partially prepaid, the Board shall indicate in the records of the District that there has been a partial prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act to indicate the partial prepayment of the Special Tax obligation and the partial release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such prepaid portion of the Special Tax shall cease. Additionally, the notice shall indicate that the Assigned Annual Special Tax and the Backup Annual Special Tax if applicable for the Assessor's Parcel has been reduced by an amount equal to the percentage which was partially prepaid.

Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds RMA_ROI Page 12 of 14 April 24, 2018

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in each future Fiscal Year and such partial prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination shall include identifying all Assessor's Parcels that are expected to be classified as Exempt Property.

Notwithstanding the above, the ability to partially prepay the Special Tax obligation of an Assessor's Parcel may be suspended, by the Administrator, acting in his or her absolution and sole discretion for and on behalf of the District, without notice to the owners of property within the District for a period of time, not to exceed sixty (60) days, prior to the scheduled issuance of Bonds by the District to assist in the efficient preparation of the required bond market disclosure.

SECTION I ANNUAL SPECIAL TAX REMAINDER

In any Fiscal Year which the Annual Special Taxes collected from Developed Property exceeds the amount needed to make regularly scheduled annual interest and principal payments on outstanding Bonds and pay Administrative Expenses, the School District may use such amount for acquisition, construction or financing of school facilities and certain costs associated with the maintenance and operations of school facilities in accordance with the Act, District proceedings and other applicable laws as determined by the Board.

SECTION J TERMINATION OF SPECIAL TAX

The Annual Special Tax shall be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds, provided that the Annual Special Tax shall not be levied later than Fiscal Year 2061/2062. However, the Special Tax may cease to be levied in an earlier Fiscal Year if the Board has determined (i) that all required interest and principal payments on the Bonds have been paid, (ii) all authorized facilities of the District have been acquired and all reimbursements have been paid, and (iii) all other obligations of the District have been satisfied.

SECTION K EXEMPTIONS

The Administrator shall classify Assessor's Parcels as Exempt Property in the chronological order in which each Assessor Parcel becomes (i) owned by the State of California, federal or other local governments, (ii) used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) owned by a homeowners' association, (iv) burdened with a public or utility easements making impractical their utilization for other than the purposes set forth in the easement, or (v) any other Assessor's Parcels at the reasonable discretion of the Board, provided that no such classification would reduce the Net Taxable Acreage to less than 39.9194 ("Minimum Taxable Acreage").

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Notwithstanding the above, the Administrator or Board shall not classify an Assessor's Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than the Minimum Taxable Acreage. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the Minimum Taxable Acreage will be classified as Provisional Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

SECTION L APPEALS

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Administrator to be received by the Administrator not later than six (6) months after having paid the first installment of the Special Tax that is disputed. The reissuance or cancellation of a building permit is not an eligible reason for appeal. In order to be considered sufficient, any notice of appeal must (i) specifically identify the property by address and Assessor's Parcel Number, (ii) state the amount in dispute and whether it is the whole amount or only a portion of the Annual Special Tax, (iii) state all grounds on which the property owner is disputing the amount or application of the Annual Special Tax, including a reasonably detailed explanation as to why the amount or application of such Special Tax is incorrect, (iv) include all documentation, if any, in support of the claim, and (v) be verified under penalty of perjury by the person who paid the Special Tax or his or her guardian, executor or administrator. The Administrator 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 Administrator'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) as the Administrator's decision shall indicate.

SECTION M MANNER OF COLLECTION

The Annual Special Tax shall be collected in the same mariner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the District may directly bill all or a portion of the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and if so collected, a delinquent penalty of ten percent (10%) of the Special Tax will attach at 5:00 p.m. on the date the Special Tax becomes delinquent and interest at 1.5% per month of the Special Tax will attach on the July 1 after the delinquency date and the first of each month thereafter until such Special Taxes are paid.

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EXHIBIT A

CERTIFICATE TO ADJUST SPECIAL TAX

DISTRICT CERTIFICATE

1. Pursuant to Section C of the Rate and Method of Apportionment ("RMA"), Community Facilities District No. 2018-2 of the Menifee Union School District ("District") hereby approves a reduction in the Assigned Annual Special Tax for Developed Property, Approved Property, Undeveloped Property, and Provisional Undeveloped Property within the District.

a. The information in Table 2 relating to the Fiscal Year 2018/2019 Assigned Annual Special Tax for Developed Property within the District shall be modified as follows:

Table 2 Assigned Annual Special Taxes for Developed Property

Land Use Building Square Assigned Annual Class Footage Special Tax Rate 1 < 2,350 sq. ft. $ , . per Unit 2 2,350 — 2,550 sq. ft. $_, . per Unit 3 2,551 — 2,750 sq. ft. $_, . per Unit 4 2,751 — 2,950 sq. ft. $_, . per Unit 5 2,951 — 3,150 sq. ft. $ , . per Unit 6 3,151 — 3,350 sq. ft. $_, . per Unit 7 > 3,350 sq. ft. $_, . per Unit

b. The Fiscal Year 2018/2019 Assigned Annual Special Tax for each Assessor's Parcel of Approved Property, Undeveloped Property, and Provisional Undeveloped Property, as adjusted annually, pursuant to Section D.2 of the RMA shall be $[______] per Acre. The Backup Annual Special Tax for Developed Property shall be recalculated pursuant to Section E of the RMA based on the foregoing adjusted Assigned Annual Special Tax per Acre for Undeveloped Property.

Date: ______, 20 By: ______Administrator

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APPENDIX C

APPRAISAL REPORT

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APPENDIX D

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

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APPENDIX E

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of DTC (defined herein), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the School District nor the Fiscal Agent take any responsibility for the information contained in this Section.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (in this Appendix, the “Bonds”). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a

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Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

6. Redemption notices will be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to School District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from School District or Fiscal Agent on payable date in accordance with their respective

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holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, Fiscal Agent, or School District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of School District or Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to School District or Fiscal Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered.

10. The School District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that School District believes to be reliable, but School District takes no responsibility for the accuracy thereof.

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APPENDIX F

FORM OF CONTINUING DISCLOSURE CERTIFICATE (COMMUNITY FACILITIES DISTRICT)

$[PRINCIPAL AMOUNT] COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT 2019 SPECIAL TAX BONDS

This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”) in connection with the issuance of the bonds captioned above (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of October 1, 2019 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). The Community Facilities District hereby covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Community Facilities District for the benefit of the owners and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

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

“Annual Report” means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Annual Report Date” means the date that is six months after the end of the Community Facilities District’s fiscal year (currently December 31 based on the Community Facilities District’s fiscal year end of June 30).

“Disclosure Representative” means the Assistant Superintendent, Business Services of the School District, acting on behalf of the Community Facilities District, or his or her designee(s), or such other officer(s) or employee(s) as the Community Facilities District shall designate in writing to the Fiscal Agent from time to time.

“Dissemination Agent” means Cooperative Strategies, LLC or any successor Dissemination Agent designated in writing by the Community Facilities District and which has filed with the Community Facilities District a written acceptance of such designation.

“EMMA System” means the Electronic Municipal Market Access System of the MSRB (as defined below) or such other electronic system designated by the MSRB or the Securities and Exchange Commission for compliance with the Rule.

“Financial Obligation” means a: (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of a clause (i) debt obligation or of a clause (ii) a derivative instrument described above;

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provided, however, that the term “Financial Obligation” shall not include “municipal securities” (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a “final official statement” (as such term is defined in the Rule) has been provided to the MSRB consistent with the Rule.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule and any successor entity designated by the Securities and Exchange Commission as the repository for filings made pursuant to the Rule.

“Obligated Person” means any person, including an issuer of municipal securities, who is either generally or thorough an enterprise, fund, or account of such person committed by contract or other arrangement (e.g., the Community Facilities District as to the Bonds) to support payment of all, or part of the obligations of the municipal securities to be sold (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities.

“Official Statement” means the final official statement dated [Pricing Date], 2019, executed by the Community Facilities District in connection with the issuance of the Bonds.

“Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

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

“School District” means Menifee Union School District, Menifee, California.

Section 3. Provision of Annual Reports.

(a) The Community Facilities District shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing December 31, 2019, with the report for the 2018-19 fiscal year, provide to the MSRB through the EMMA System, in an electronic format and accompanied by identifying information as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 business days prior to the Annual Report Date, the Community Facilities District shall provide the Annual Report to the Dissemination Agent (if other than the Community Facilities District). If by the Annual Report Date the Dissemination Agent (if other than the Community Facilities District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the Community Facilities District to determine if the Community Facilities District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that audited financial statements (if any are prepared) of the Community Facilities District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date; provided that as set forth in Section 4(a)(1), unaudited financial statements shall be submitted once available in connection with filing the Annual Report prior to the Annual Report Date. For purposes of this section and Section 4(a), the financial statements of the School District shall not be deemed to be the financial statements of the Community Facilities District, unless such audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances. If the Community Facilities District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

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(b) If the Community Facilities District does not provide, or cause the Dissemination Agent to provide to the MSRB through the EMMA System, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent (or the Community Facilities District if there is no Dissemination Agent), in a timely manner, shall provide to the MSRB, in an electronic format as prescribed by the MSRB and in a timely manner, a notice in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic filing requirements and format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the Community Facilities District, file a report with the Community Facilities District and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System.

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

(a) The Community Facilities District does not currently prepare audited financial statements and it is not anticipated that the Community Facilities District will prepare audited financial statements in the future. If the Community Facilities District does prepare audited financial statements, the Community Facilities District’s Annual Report shall contain or incorporate by reference such audited financial statements, if any, for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If audited financial statements of the Community Facilities District are to be prepared, but are not available at the time required for filing, unaudited financial statements of the Community Facilities District shall be submitted with the Annual Report and the audited financial statements shall be submitted once available. As stated in Section 3(a), the financial statements of the School District shall not be deemed to be the financial statements of the Community Facilities District, unless such audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances. If the School District’s audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances, the Community Facilities District’s Annual Report shall contain or incorporate by reference such School District’s audited financial statements and in such event, the School District’s audited financial statements may be accompanied by a statement substantially to the following effect:

THE SCHOOL DISTRICT’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE SCHOOL DISTRICT OR THE COMMUNITY FACILITIES DISTRICT OTHER THAN NET SPECIAL TAXES ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND NEITHER THE COMMUNITY FACILITIES DISTRICT NOR THE SCHOOL DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE SCHOOL DISTRICT IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS.

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(b) To the extent audited financial statements are not provided or to the extent not included in audited financial statements provided, the following information as of the Annual Report Date (except as otherwise noted below):

(i) The principal amount of the Bonds and any other outstanding bonds issued under the Fiscal Agent Agreement (including refunding bonds).

(ii) The balances in the funds and accounts established under the Fiscal Agent Agreement.

(iii) The current debt service schedule for the Bonds.

(iv) A statement of the current Reserve Requirement, whether or not the amount on deposit in the Reserve Fund is equal to the Reserve Requirement and, if not, the amount of the delinquency or surplus, as applicable.

(v) If any moneys are still on deposit in the Improvement Fund, the estimated date of completion of the improvements being financed with the Bond proceeds.

(vi) A statement showing the following for the prior Fiscal Year: the actual Special Taxes levied; the amount of Special Taxes levied on Developed Property and Approved Property; the amount of such Special Taxes actually collected by the Community Facilities District with respect to Developed Property and Approved Property; and the delinquency rate of such Special Taxes.

(vii) A table showing the total dollar amount of delinquencies and number of delinquent parcels, if any, in the Community Facilities District as of June 30.

(viii) If the total delinquencies within the Community Facilities District as of June 30 in the prior calendar year exceed 5% of the Special Tax for the previous Fiscal Year, information for each parcel delinquent in the payment of 5 or more installments of the Special Tax, including amounts of delinquencies, length of delinquency, status of any foreclosure or enforcement actions regarding each such parcel and summary of results of foreclosure sales, if any.

(ix) An update to Table 5B in the Official Statement entitled “Appraised Values and Value-to-Debt Ratios by Property Categories” which update may be based on assessed values rather than an appraisal.

(x) The number of parcels which prepaid and the amount of prepayments of the Special Tax for the prior Fiscal Year.

(xi) If one or more single taxpayers are responsible for 5% or more of the annual Special Tax, a listing of such taxpayers responsible for 5% or more of the annual Special Tax and the amount of Special Tax levied on property owned by each such taxpayer the then-current Fiscal Year.

(xii) Any changes to the Rate and Method of Apportionment of Special Tax for the Community Facilities District.

(xiii) A copy of the most recent annual information required to be filed by the Community Facilities District with the California Debt and Investment Advisory Commission

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pursuant to the Act and relating generally to outstanding Community Facilities District bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information with respect to the Community Facilities District.

(c) In addition to any of the information expressly required to be provided under paragraph (b) above, the Community Facilities District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading for purposes of applicable federal securities laws.

(d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Community Facilities District or related public entities, which are available to the public on the MSRB’s EMMA System or filed with the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Community Facilities District shall clearly identify each such other document so included by reference.

Section 5. Reporting of Listed Events.

(a) The Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:

(1) Principal and interest payment delinquencies.

(2) Non-payment related defaults, if material.

(3) Unscheduled draws on debt service reserves reflecting financial difficulties.

(4) Unscheduled draws on credit enhancements reflecting financial difficulties.

(5) Substitution of credit or liquidity providers, or their failure to perform.

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

(7) Modifications to rights of security holders, if material.

(8) Bond calls, if material, and tender offers.

(9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities, if material.

(11) Rating changes.

(12) Bankruptcy, insolvency, receivership or similar event of the Community Facilities District or other Obligated Person.

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(13) The consummation of a merger, consolidation, or acquisition involving the Community Facilities District or an Obligated Person, or the sale of all or substantially all of the assets of the Community Facilities District or an Obligated Person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

(14) Appointment of a successor or additional Fiscal Agent or the change of name of the Fiscal Agent, if material.

(15) Incurrence of a Financial Obligation of the Obligated Person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the Obligated Person, any of which affect security holders, if material.

(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the Obligated Person, any of which reflect financial difficulties.

(b) If a Listed Event occurs, the Community Facilities District shall, or shall cause the Dissemination Agent (if not the Community Facilities District) to, file a notice of such occurrence with the MSRB through the EMMA System, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events regarding bond calls described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement.

(c) The Community Facilities District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14), and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The Community Facilities District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the Community Facilities District determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the Community Facilities District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the Community Facilities District will cause a notice to be filed as set forth in paragraph (b) above.

For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Community Facilities District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Community Facilities District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Community Facilities District.

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Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The Community Facilities District’s obligations under this Disclosure Certificate shall terminate upon the earliest to occur of (i) the legal defeasance of the Bonds, (ii) prior redemption of the Bonds, (iii) payment in full of all of the Bonds or (iv) upon delivery to the Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. If such termination occurs prior to the final maturity of the Bonds, the Community Facilities District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing at least thirty days prior written notice to the School District. The initial Dissemination Agent will be Cooperative Strategies, LLC. If at any time there is no designated Dissemination Agent appointed by the Community Facilities District, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the Community Facilities District agrees to provide written notice to the Fiscal Agent requesting the Fiscal Agent to act as Dissemination Agent, and if the Community Facilities District and the Fiscal Agent agree upon the fees for services as Dissemination Agent and the Fiscal Agent accepts appointment as Dissemination Agent, the Fiscal Agent will act as Dissemination Agent under this Disclosure Certificate. If the Fiscal Agent does not agree to perform the duties of Dissemination Agent hereunder, the Community Facilities District shall be the Dissemination Agent and undertake or assume the obligations of the Dissemination Agent hereunder until such time as a separate Dissemination Agent undertakes or assumes such obligations.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Community Facilities District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an Obligated Person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by owners of the Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the

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reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Community Facilities District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed with the MSRB through the EMMA System in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Community Facilities District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Community Facilities District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Community Facilities District to comply with any provision of this Disclosure Certificate, the Participating Underwriter, any owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Community Facilities District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Community Facilities District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Community Facilities District, the Property Owner, the Fiscal Agent, the Bond owners or any other party. The obligations of the Community Facilities District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Community Facilities District, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

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Section 14. Notices. Any notice or communications to or among any of the parties to this Disclosure Certificate may be given as follows:

To the Issuer: Community Facilities District No. 2018-2 of the Menifee Union School District 29775 Haun Road Menifee, CA 92586 Attention: Assistant Superintendent, Business

To the Dissemination Agent: Cooperative Strategies, LLC 8955 Research Drive Irvine, CA 92618

To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, CA 90071 Attention: Public Finance

Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent.

[Remainder of Page Intentionally Left Blank.]

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Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: [Closing Date], 2019 COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE MENIFEE UNION SCHOOL DISTRICT

By: Dr. Steve Kennedy, Superintendent, Menifee Union School District, on behalf of Community Facilities District No. 2018-2 of the Menifee Union School District

AGREED AND ACCEPTED: Cooperative Strategies, LLC, as Dissemination Agent

By: Name: Title:

[EXECUTION PAGE OF CONTINUING DISCLOSURE CERTIFICATE]

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”)

Name of Bond Issue: Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Date of Issuance: [Closing Date], 2019

NOTICE IS HEREBY GIVEN that the Community Facilities District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated [Closing Date], 2019, executed by the Community Facilities District and countersigned by Cooperative Strategies LLC, as dissemination agent. The Community Facilities District anticipates that the Annual Report will be filed by ______.

Dated:

DISSEMINATION AGENT:

Cooperative Strategies, LLC

By: Its:

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(THIS PAGE INTENTIONALLY LEFT BLANK)

Board Meeting Date: 09-10-2019 Page 153 of 164 APPENDIX G

FORM OF CONTINUING DISCLOSURE CERTIFICATE (KB)

This Continuing Disclosure Certificate of KB HOME Coastal Inc. (the “Continuing Disclosure Certificate (KB)”), dated as of October 1, 2019, is executed and delivered by KB HOME Coastal Inc., a California corporation (“KB”), and Zions Bancorporation, National Association, as dissemination agent (the “Dissemination Agent”), in connection with the execution and delivery by Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”) of $[Principal Amount] of its 2019 Special Tax Bonds (the “Bonds”). The Bonds are being issued pursuant to a resolution adopted on September 10, 2019, by the Board of Education of the Menifee Union School District (the “School District”), acting as the legislative body of the School District, and the Fiscal Agent Agreement, dated as of October 1, 2019, by and between the Community Facilities District and Zions Bancorporation, National Association, as Fiscal Agent. KB covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by KB to assist the Underwriter in the marketing of the Bonds.

SECTION 2. Definitions. Unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Affiliate” shall mean, with respect to KB, (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as an agent, guardian or other fiduciary, twenty-five percent (25%) or more of any class of Equity Securities of KB, or (b) each Person that controls, is controlled by or is under common control with KB or any Affiliate of KB; provided, however, that in no case shall the District be deemed to be an Affiliate of KB for purposes of this Disclosure Certificate. For the purpose of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of the Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).

“Community Facilities District” shall mean Community Facilities District No. 2018-2 of the Menifee Union School District.

“Dissemination Agent” shall mean initially Zions Bancorporation, National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by KB and which has filed with KB and the District a written acceptance of such designation.

“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.

“Equity Securities” of any Person shall mean (a) all common stock, preferred stock, participations, shares, general partnership interests or other equity interests in and of such person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing.

“Fiscal Year” shall mean the period beginning on January 1 of each year and ending on the next succeeding December 31.

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Board Meeting Date: 09-10-2019 Page 154 of 164 “Government Authority” shall mean any national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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

“MSRB” shall mean the Municipal Securities Rulemaking Board.

“Official Statement” shall mean the Official Statement, dated [Pricing Date] 2019, relating to the Bonds.

“Person” shall mean any natural person, corporation, partnership, firm, association, Government Authority or any other Person whether acting in an individual fiduciary, or other capacity.

“Property” shall mean the property within the Community Facilities District owned by KB.

“Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission (“SEC”) to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

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

“Semiannual Report” shall mean any report to be provided by KB on or prior to December 15 and June 15 of each year, commencing December 15, [2019, pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“State” shall mean the State of California.

“Underwriter” shall mean the original underwriter of the Bonds, which is Piper Jaffray & Co.

SECTION 3. Provision of Semiannual Report.

(a) Until such time as KB’s reporting requirements terminate pursuant to Section 6 below, KB shall, or upon receipt of the Semiannual Report from KB the Dissemination Agent shall, not later than December 15 and June 15 of each year, commencing December 15, [2019, provide to the Repository a Semiannual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If, in any year, June 15 or December 15 falls on a Saturday, Sunday or a holiday, such deadline shall be extended to the next following day that is not a Saturday, Sunday, or holiday. The Semiannual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate.

(b) Not later than fifteen (15) calendar days prior to the date specified in subsection (a) for providing the Semiannual Report to the Repository, KB (i) shall provide the Semiannual Report to the Dissemination Agent or (ii) shall provide notification to the Dissemination Agent that KB is preparing, or causing to be prepared, the Semiannual Report and the date which the Semiannual Report is expected to be filed. If by such date, the Dissemination Agent has not received a copy of the Semiannual Report or notification as described in the preceding sentence, the Dissemination Agent shall notify KB of such failure to receive the report.

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Board Meeting Date: 09-10-2019 Page 155 of 164 (c) If the Dissemination Agent is unable to provide a Semiannual Report to the Repository by the applicable June 15th or December 15th or to verify that a Semiannual Report has been provided to the Repository by KB by the applicable June 15th or December 15th, the Dissemination Agent shall send a timely notice to the Repository in the form required by the Repository.

(d) The Dissemination Agent shall promptly after receipt of the Semiannual Report file a report with KB and the District certifying that the Semiannual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to the Repository.

(e) Notwithstanding any other provision of this Disclosure Certificate, any of the required filings hereunder shall be made in accordance with the MSRB’s EMMA system.

SECTION 4. Content of Semiannual Report.

(a) KB’s Semiannual Report shall contain or include by reference the information which is updated through a date which shall not be more than 60 days prior to the date of the filing of the Semiannual Report relating to the following:

1. An update (if any) to the information relating to KB and its Affiliates under the captions in the Official Statement entitled “OWNERSHIP AND DEVELOPMENT OF THE DISTRICT.”

2. Any significant amendments to land use entitlements that are known to KB with respect to the Property.

3. Status of Special Tax payments with respect to the Property.

4. An update of the number of homes for which building permits were issued within the Property and the number of homes within the Property conveyed to individual homeowners.

(b) Any and all of the items listed above may be included by specific reference to other documents, including official statements of debt issues which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. KB shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, KB shall give, or cause to be given, notice of the occurrence of any of the following events, if material under clauses (b) and (c) as soon as practicable after KB obtains knowledge of any of the following events:

1. Failure to pay any real property taxes, special taxes or assessments levied within the Property by KB or any Affiliate;

2. Material default by KB or any Affiliate on any loan with respect to the construction or permanent financing for the development of the Property for which KB or any Affiliate has been provided a notice of default;

3. Payment default by KB or any Affiliate on any loan of KB or any Affiliate (whether or not such loan is secured by property within the District) which is beyond any applicable cure period in such loan and, in the reasonable judgment of KB, such payment default G-3

Board Meeting Date: 09-10-2019 Page 156 of 164 will adversely affect the completion of the development of the Property or would materially adversely affect the financial condition of KB or its Affiliates and their respective ability to complete development of the Property;

5. The filing of any proceedings with respect to KB in which KB may be adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of its debts;

6. The filing of any proceedings with respect to an Affiliate in which the Affiliate may be adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment of its debts, if such adjudication will adversely affect the completion of the development of parcels within the Property, or would materially adversely affect the financial condition of KB or its Affiliates and their respective ability to complete development of the Property; and

7. The filing of any lawsuit against KB or any of its Affiliates (for which KB has actual notice, as through receipt of service of process) which, in the reasonable judgment of KB, will materially adversely affect the completion of the development of the Property, or litigation which if decided against KB, or any of its Affiliates, in the reasonable judgment of KB, would materially adversely affect the financial condition of KB or its Affiliates and their respective ability to complete development of the Property.

(b) Whenever KB obtains knowledge of the occurrence of a Listed Event, KB shall as soon as possible determine if such event would be material under applicable federal securities laws. The Dissemination Agent shall have no responsibility to determine the materiality of any of the Listed Events.

(c) If KB determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, KB shall promptly (i) file a notice of such occurrence with the Dissemination Agent which shall then distribute such notice to the Repository, with a copy to the District, or (ii) file a notice of such occurrence with the Repository, with a copy to the Dissemination Agent and the District.

SECTION 6. Termination of Reporting Obligation. KB’s obligations under this Disclosure Certificate shall terminate upon the earlier to occur of the following events:

(a) the legal defeasance, prior redemption or payment in full of all of the Bonds, or

(b) at such time as KB and its Affiliates, in the aggregate, are no longer responsible for special taxes with respect to [62] or more parcels in the District.

If such termination occurs prior to the final maturity of the Bonds, KB shall give notice of such termination in the same manner as for a Listed Event hereunder.

SECTION 7. Dissemination Agent. KB may from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not KB, the Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by KB pursuant to this Disclosure Certificate. The Dissemination Agent may resign by providing (i) thirty days written notice to KB and the Dissemination Agent and (ii) upon appointment of a new Dissemination Agent hereunder.

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Board Meeting Date: 09-10-2019 Page 157 of 164 SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, KB may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements or a change in law; (b) The amendment or waiver either (i) is approved by the owners of the Bonds in the same manner as provided in the Fiscal Agent with the consent of owners of the Bonds, or (ii) does not, in the written opinion of nationally recognized bond counsel addressed to the District and the Dissemination Agent, materially impair the interests of the owners or Beneficial Owners of the Bonds; and (c) KB, or the Dissemination Agent, shall have delivered copies of the amendment and any opinions delivered under (b) above to the District and the Fiscal Agent.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, KB shall describe such amendment in the next Semiannual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent KB from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If KB chooses to include any information in any Semiannual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, KB shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semiannual Report or notice of occurrence of a Listed Event.

KB acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to KB, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of KB under such laws.

SECTION 10. Default. In the event of a failure of KB or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Underwriter or any owner or Beneficial Owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause KB or the Dissemination Agent to comply with its obligations under this Disclosure Certificate. Notwithstanding the foregoing sentence, the sole remedy under this Disclosure Certificate in the event of any failure of KB or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for KB, the Underwriter, owners of the Bonds or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon a direction from KB or an opinion of nationally recognized bond counsel. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent may conclusively rely upon the Semiannual Report provided to it by KB as constituting the Semiannual Report required of KB in accordance with this Disclosure Certificate and shall have no duty or obligation to review such Semiannual Report. The Dissemination Agent shall have no duty to prepare the Semiannual Report nor shall the Dissemination Agent be responsible for filing any Semiannual Report not provided to it by KB in a timely manner in a form G-5

Board Meeting Date: 09-10-2019 Page 158 of 164 suitable for filing with the Repositories. Any company succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act.

SECTION 12. KB as Independent Contractor. In performing under this Disclosure Certificate, it is understood that KB is an independent contractor and not an agent of the District.

SECTION 13. Notices. Notices should be sent in writing by electronic mail, regular mail or overnight mail to the following addresses. The following information may be conclusively relied upon until changed in writing. KB: KB HOME Coastal Inc. Inland Empire Division 36310 Inland Valley Drive Wildomar, California 92595 Attention: Director Forward Planning

With a copy to:

KB Home 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Legal Department

Dissemination Agent: Zions Bancorporation, National Association 550 South Hope Street Suite 2875 Los Angeles, CA 90071 Telephone: (213) 593-31[__ Facsimile: (866) 870-0209 Attention: [______

Underwriter: Piper Jaffray & Co. 2321 Rosecrans Avenue El Segundo, California 90245 Telephone: (310) 297-6013 Facsimile: (310) 297-6001 Attn: Richard Calabro

SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of KB, the District, the Dissemination Agent, the Underwriter and owners of the Bonds and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 15. California Law. The validity, interpretation and performance of this Disclosure Certificate shall be governed by the laws of the State of California.

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Board Meeting Date: 09-10-2019 Page 159 of 164 SECTION 16. Counterparts. This Disclosure Certificate 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.

KB HOME COASTAL INC.

By: ______Name: Title:

ZIONS BANCORPORATION, NATIONAL ASSOCIATION, as Dissemination Agent

By: ______Authorized Representative

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APPENDIX H

FORM OF OPINION OF BOND COUNSEL

[Closing Date], 2019

Governing Board Menifee Union School District 29775 Haun Road Menifee, CA 92586

OPINION: $______Community Facilities District No. 2018-2 of the Menifee Union School District 2019 Special Tax Bonds

Members of the Board:

We have acted as bond counsel to Menifee Union School District (the “School District”), the Governing Board of which (the “Board”) acts as the legislative body of Community Facilities District No. 2018-2 of the Menifee Union School District (the “Community Facilities District”), in connection with the issuance by the Community Facilities District of the special tax bonds captioned above, dated the date hereof (the “Bonds”). In such capacity, we have examined such law and such certified proceedings, certifications and other documents as we have deemed necessary to render this opinion.

The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being sections 53311 et seq. of the California Government Code (the “Act”), a resolution of the Board adopted on September 10, 2019 (the “Resolution”), and a Fiscal Agent Agreement dated as of October 1, 2019 (the “Fiscal Agent Agreement”), between the Community Facilities District and Zions Bancorporation, National Association, as Fiscal Agent (the “Fiscal Agent”). Under the Fiscal Agent Agreement, the Community Facilities District has pledged certain revenues (“Net Special Taxes”) for the payment of principal, premium (if any) and interest on the Bonds when due.

Regarding questions of fact material to our opinion, we have relied on representations of the School District and the Community Facilities District contained in the Fiscal Agent Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The Community Facilities District is a community facilities district duly created and validly existing under the Constitution and the laws of the State of California with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein, and issue the Bonds.

2. The Fiscal Agent Agreement has been duly authorized, executed and delivered by the Community Facilities District, and constitutes a valid and binding obligation of the Community Facilities District, enforceable against the Community Facilities District.

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3. The Fiscal Agent Agreement creates a valid lien on the Net Special Taxes and other funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with other bonds (if any) to be issued under the Fiscal Agent Agreement.

4. The Bonds have been duly authorized and executed by the Community Facilities District, and are valid and binding limited obligations of the Community Facilities District, payable solely from the Net Special Taxes and other funds provided therefor in the Fiscal Agent Agreement.

5. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax. The opinions set forth in the preceding sentence are subject to the condition that the Community Facilities District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Community Facilities District has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds.

6. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.

We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Fiscal Agent Agreement are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date hereof.

Respectfully submitted,

A Professional Law Corporation

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APPENDIX I

COMMUNITY FACILITIES DISTRICT BOUNDARY MAP

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