NEW ISSUE-BOOK ENTRY ONLY NOT RATED (See "CONCLUDING INFORMATION - No Ratings on the Bonds" herein). In the opinion of Aleshire & Wynder, LLP, Bond Counsel, based on existing statutes, regulations, rulings and court decisions and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes and is exemptfrom State of Californiapersonal income taxes. In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federalindividual or corporate alternative minimum taxes, although Bond Counsel observes that it is included in acijusted current earnings in calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding other federal or State tax consequences relating to the ownership or disposition of, or the accrual or receiptof interest on, the Bonds. See "LEGAL MATTERS- TaxExemption" herein. COUNTY OF RIVERSIDE STATE OF CALIFORNIA

$3,060,000 COMMUNITY FACILITIES DISTRICT NO. 2003-1 (CHAPARRAL RIDGE) OF THE CITY OF PERRIS SPECIAL TAX REVENUE BONDS, 2003 SERIES A

Dated: Date of Delivery Due: September 1, as shown below The cover page contains certain informationfor 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. See "BONDOWNERS' RISKS" herein for a discussion of special risk factorsthat should be considered in evaluating the investment quality of the Bonds. Interest on the Bonds is payable on March 1, 2004, and semiannually thereafter on September 1 and March 1 of each year until maturity or earlier redemption (see "THE BONDS - General Provisions" and "THE BONDS - Redemption" herein).

The informationcontained within this OfficialStatement was prepared under the direction of the District by the following firmserving as Financing Consultant to the District. Rod Gunn Associates, Inc.

MATURITYSCHEDULE

$180,000 5.250% Term Bond due September 1, 2014, Price 100.000% $2,880,000 6.250% Term Bond due September 1, 2033, Price 98.327%

The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California). Repayment of the Bonds will be from the Special Taxes (as definedherein) to be levied within the Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris, as described herein (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). It is anticipated that the Bonds, in book-entry form, will be available fordelivery through the facilities of The Depository Trust Company on or about July 24, 2003 (see "THE BONDS - General Provisions - Book-Entry Only System" herein). The date of the OfficialStatement is July 15, 2003. COMMUNITY FACILITIES DISTRICT NO. 2003-1 (CHAPARRAL RIDGE) OF THE CITY OF PERRIS PERRIS,CITY CALIFORNIA COUNCIL Daryl Busch, Mayor John Motte, Mayor Pro Tern Al Landers, Council Member Rita Rogers, Council Member Raul (Mark) Yarbrough, Council Member

CITY STAFF Hector Apodaca, CityManager Connie Rogers-Elmore, Finance Director Olivia Guiterrez, Planning Director Habib Motlagh, CityEngineer Eric Dunn, CityAttorney Margaret Rey, CityClerk

PROFESSIONAL SERVICES Bond Counsel and City Attorney Aleshire & Wynder LLP Irvine, California Disclosure Counsel Fulbright & Jaworski L.L.P. Los Angeles, California Financing Consultant Rod GunnAssoci ates, Inc. Huntington Beach, California Special Tax Consultant MuniFinancial Temecula, California Appraiser Steve White, MAI Fullerton, California Fiscal Agent Wells Fargo Bank, National Association Los Angeles, California Underwriter 0' Connor Southwest Securities Newport Beach, California Underwriter's Counsel Jones Hall A Professional Law Corporation San Francisco, California

FOR ADDITIONAL INFORMATION Hector Apodaca, City of Perris, California (909) 943-6100 Rod GunnAssociates, Inc. (714) 841-3993 O'Connor Southwest Securities (949) 717-2000

ii TABLE OF CONTENTS INTRODUCTORYSTATEMENT ...... 1 SUMMARYOF THELEGAL DOCUMENTS...... 36 The District ...... 1 THE FISCALAGENT AGREEMENT...... 36 Security and Sources of Repayment ...... 2 Funds and Accounts; Flow of Funds ...... 36 Purpose...... 2 Certain Covenants of the District ...... 40 The Bonds ...... 2 Investments;Disposition of Investment Legal Matters ...... 3 Proceeds ...... 43 Professional Services ...... 3 Events of Defaultand Remedies of Bond Offeringof the Bonds ...... 4 Owners...... 43 Forward Looking Statements ...... 4 The Fiscal Agent ...... 44 Information Concerningthis Official Statement ...... 5 Modificationor Amendment of the Fiscal Agent SELECTED ESSENTIALFACTS ...... 7 Agreement ...... 44 Miscellaneous ...... 45 THEBONDS ...... 8 General Provisions ...... 8 FINANCIALINFORMATION ...... 47 Authorization...... 11 DistrictAccounting Records and Financial Estimated Sources and Uses of Funds ...... 11 Statements ...... 4 7 Investmentof Funds ...... 12 Budgetary Process and Ad.ministration...... 47 Redemption ...... 12 Rate and Method of Apportionment ...... 48 Delinquencies andForeclosure Actions ...... 51 SOURCES OF PAYMENTFOR THEBONDS ..... 15 Repayment of the Bonds ...... 15 LEGALMATTERS ...... 52 Enforceability of Remedies ...... 52 BONDOWNERS' RISKS...... 17 Approval of Legal Proceedings ...... 52 General...... 17 TaxExemption ...... 52 The Bonds ...... 17 Absence of Litigation ...... 53 THECITY ...... 27 CONCLUDING INFORMATION...... 54 Government Organization ...... 27 No Ratings on the Bonds ...... 54 THEDISTRICT ...... 28 Unden.vriting...... 54 Boundariesof the CommunityFaci lities District..... 28 Experts ...... 54 The Developer ...... 28 TheFinancing Consultant ...... 54 GeneralDescription ...... 30 Additional Information...... 5 5 The Development Plan ...... 30 References ...... 55 The Financing Plan...... 31 Execution ...... 55 Facilities Cost Estimates ...... 32 DEFINITIONSOF CERTAINTERMS ...... A-1 The Appraisal...... 32 CITYOF PERRIS INFORMATION DEBT STRUCTURE...... 33 STATEMENT...... B-1 Outstanding Indebtedness...... 3 3 No Additional Obligations ...... 3 3 APPRAISALREPORT ...... C-1 Directand Overlapping Debt ...... 34 RATEAND MEfflODOF Scheduled Debt Serviceon the Bonds ...... 35 APPORTIONMENT...... 0-1 FORMOF CONTINUINGDISCLOSURE AGREEMENTS...... E-1 FORM OF BOND COUNSEL OPINION...... F-1

iii Perris Vicinity Map

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To San Diego

06101 OFF ICIAL STATEMENT $3,060,000 COMMUNITY FACILITIESDISTRICT NO. 2003-1 (CHAPARRALRI DGE) OF THE CITY OF PERRIS SPECIAL TAX REVENUE BONDS, 2003 SERIESA

This Official Statement which includes the cover page and appendices (the "Official Statement") is provided to furnish certain information concerning thesale of Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris Special Tax Revenue Bonds, 2003 Series A (the "Bonds"), in the aggregate principal amount of $3,060,000. INTRODUCTORY STATEMENT

This Introductory Statement contains only a brief description of this issue and does not purport to be complete. The Introductory Statement is subject in all respects to more complete information in the entire OfficialStatement and the offeringof the Bonds to potential investors is made only by means of the entire OfficialStatement and the documents summarized herein. Investment in the Bonds involves risks. Potential investors mustread the entire OfficialStatement to obtain information essential to the making Theof an District informed investment decision with respect to the Bonds (see "BONDOWNERS'RISKS" herein). The Mello-Roos Community FacilitiesAct of 1982, as amended, constituting Sections 53311 et seq. of the Government Code of the State of California (the "Act"), was enacted by the California Legislature to provide an alternativemethod offinancing certainpublic facilities, improvements and services. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of such district. Subject to approval by at least a two-thirds vote of the qualified electors within such district and compliance with the provisions of theAct, the legislative body may issue bonds for such communityfacilities district established by it andmay levy and collect a specialtax (the "Special Tax") within such districtto repaysuch bonds.

On June 24, 2003, the City of Perris (the "City") formed Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris (the "District") by the adoption of Resolution No. 3132 (the "Resolution of Formation"). On June 24, 2003, at an election held pursuantto theAct, thesingle elector at that time within the boundaries of the District voted in favor of the ballot proposition (see "SELECTED ESSENTIAL FACTS"and "FINANCIALINFORMATION· Rate and Method of Apportionment" herein). The Districtis generallylocated west of Goetz Road and south of Ethanac Road. Property in the District comprises the westerly 112 lots of the 312 lots subdivision known as Chaparral Ridge being developed by Richmond AmericanHomes of California,Inc., a Colorado corporation ("Richmond American Homes" or the "Developer"), which acquired all the 112 lots in the District on May 8, 2003 ( see "THEDISTRICT" herein).

1 Security and Sources of Repayment The Bonds are secured under a Fiscal Agent Agreement between the District and We lls Fargo Bank, National Association, Los Angeles, California, as the Fiscal Agent (the "Fiscal Agent") dated as of July 1, 2003 (the "Fiscal Agent Agreement") (see "SUMMARY OF THE LEGAL DOCUMENTS" herein). The District has covenanted in the Fiscal Agent Agreement to levy in each Fiscal Year the Special Taxes on parcels of land subj ect to the Special Taxes within the District in an amount sufficient to pay Annual Debt Service on the Bonds and Administrative Expenses, subj ect to the limitation on the Maximum Special Tax that may be levied on such land within the District pursuant to the Rate and Method of Special Tax Apportionment for the District (see "FINANCI AL INFORMATION - Rate and Method of Apportionment" for a description of the Special Tax, "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein).

The Bonds are special obligations of the District. The Bonds do not constitute a debt or liability of the City of Perris, the State of California or of any political subdivision thereof, other than the District. The District shall only be obligated to pay the principal of the Bonds, or the interest thereon, from Special Tax Revenues and certain fu nds and accounts established under the Fiscal Agent Agreement and described herein, and neither the faith and credit nor the taxing power of the City of Perris, the State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. The District has no ad valorem taxing power (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). Purpose The Bonds are being issuedto provide the District with funds to finance certain capital improvements, to fund interest on the Bonds until September 1, 2004, to make a deposit to the Reserve Account, and to pay the expenses of the District in connection with the issuance of the Bonds. The amount of Bond proceeds initially deposited into the ReserveAccou nt will be in an amount equal to $308,1 25.00, maximum annual debt service on the Bonds (see '�APPENDIX A - DEFINITIONS OF CERTAIN TERMS" and "THE BONDS - Sources and Uses of Funds" herein).

The Bonds Redemption. The Bonds are subject to mandatory redemption, without premium, prior to their maturity date, in part by lot on September 1 in each year commencing September 1, 2007 inthe case of the Bonds maturing September 1, 2014 and September 1, 2015 in the case of theBonds maturing September 1, 2033 from sinking account payments under the Fiscal Agent Agreement (see "THE BONDS - Redemption - MandatorySinking Payment Redemption" herein).

The Bonds are subject to optional redemption prior to maturity, in whole or in part, in a manner determined by the District, on September 1, 2013, and on any date thereafterat a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THEBON DS - Redemption - Optional Redemption" herein). The Bonds are subject to mandatory redemption, in part, on any date from amounts constituting prepayments of the Special Taxes at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THE BONDS - Redemption - Special MandatoryRedem ption from Prepayment of Special Taxes" herein).

The Bonds are subject to special mandatory redemption in whole or in part, on any date withoutpremium under certain other circumstances as described herein ( see "THE BONDS - Redemption - Special Mandatory Redemption" herein).

2 Denominations. TheBonds will be issued inthe minimum denomination of $5,000 each or anyintegral multiple thereof (see "THE BONDS - General Provisions" herein). Registration, Transfer and Exchange. The Bonds will be issued in fully registered form without coupons. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement (see "THEBONDS - General Provisions - Transfer or Exchange of Bonds" herein). When delivered, the Bonds will be registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee. DTC will act as securities depository for the Bonds. Individual purchases of Bonds will be made in book-entry form only in the principal amount of $5,000 each or any integral thereof. Purchasers of the Bonds will not receive certificates representing their Bonds purchased (see "THE BONDS - General Provisions - Book-EntryOnly System" herein). Payment. Principal ofthe Bonds and any premium upon redemption will be payable in each of theyears and in the amounts set forth on the cover page hereof upon surrender at the corporate trust office of the Fiscal Agent in Los Angeles, California. Interest on the Bonds will be paid by check of the Fiscal Agent mailed by first class mail on the Interest Payment Date to theperson entitled thereto (except as otherwise described herein for interest paid to an account in the continental United States of America by wire transferas requested in writing no later thanthe applicable Record Date by owners of $1,000,000 or more in aggregate principal amount of Bonds) (see "THEBONDS - General Provisions" herein). Initially, interest on and principal and premium, if any, of theBonds will be payable when due by wire of the Fiscal Agent to DTC which will in turn remit such interest, principal and premium, if any, to DTC Participants ( as defined herein), which will in turn remit such interest, principal and premium, if any, to Beneficial Owners (as defined herein) of the Bonds (see "THE BONDS - General Provisions - Book-Entry Only System" herein). Notice. Notice of any redemption will be mailed by first classmail by the Fiscal Agent at least thirty (30) but no more than sixty ( 60) days prior to the date fixed forredemption to the registered owners of any Bonds designatedfor redemption and to the Securities Depositories and Information Services provided in the Fiscal Agent Agreement. Neitherfailure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of theproceedings forredemption of such Bonds or the cessation of accrual of interest on the redemption date (see "THEBONDS - Redemption- Notice of Redemption" herein).

Legal Matters Thelegal proceedings in connection withthe issuance of the Bonds are subject to the approving opinion of Aleshire & Wynder LLP, Irvine, California, as Bond Counsel. Such opinion, and certain tax consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, are described more fullyunder theheading "LEGAL MATTERS" herein. Certain legal matters will be passed on forthe District and the Cityby Aleshire & Wynder LLP, Irvine, California, as City Attorney. Certain legal matters will be passed upon for the City and District by Fulbright & Jaworski L.L.P., Los Angeles, California, as Disclosure Counsel. Certain matters will be passed on for the Underwriter by Jones Hall, A ProfessionalLaw Corporation, SanFran cisco, California,Underwr iter's Counsel. Professional Services Wells Fargo Bank, National Association, Los Angeles, California, will serve as fiscal agent (the "Fiscal Agent") underthe Fiscal Agent Agreement. TheFiscal Agent will act on behalf of the Bondowners for the purpose of receiving all moneys required to be paid to the Fiscal Agent, to allocate, use and apply the same, to hold, receive anddisburse the Revenues andother fundsheld underthe Fiscal Agent Agreement, and otherwise to hold all the officesand perform all the functionsand duties provided in theFiscal Agent Agreement to be held and performedby the Fiscal Agent.

3 MuniFinancial, Temecula, California, preparedthe cash flow certificate demonstrating that there will be sufficient Special Taxes, assuming timely receipt, to pay debt service on the Bonds (see "'CONCLUDING INFORMATION- Experts" herein). Rod GunnAss ociates, Inc., Huntington Beach, California, Financing Consultant, advised the District as to the financial structure and certain other financial matters relating to the Bonds. Fees payable to Bond Counsel, Disclosure Counsel, Underwriter's Counsel and the Financing Consultant are contingent upon the sale and deliveryof the Bonds.

Offering of the Bonds Authority forIssuance. The Bonds are issued in accordance with the laws of the State of California(the "State"), and particularly the Mello-Roos Community Facilities Act of 1982, as amended constituting sections 53311 et seq. of the CaliforniaGovernme nt Code.

TheDi strict is not authorized to issue Additional Bonds on a parity with the Bonds securedby the Special Taxes (see "'DEBT STRUCTURE - No Additional Obligations" herein). The Bonds are being sold to O'Connor Southwest Securities (the "Underwriter"), pursuant to a Bond Purchase Contract, approved in form by the Cityby Resolution No. 3135 adopted June 24, 2003.

Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Aleshire & Wynder LLP, Irvine, California, as Bond Counsel. Certain legal matters will be passed upon for the City by Aleshire & Wynder LLP, Irvine, California, as City Attorney. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on or about July 24, 2003.

No dealer, broker, salesperson or other person has been authorized by the District, the Financing Consultant or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds described herein, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing.

This Official Statement does not constitute an offer to sell nor the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale or to any person to whom it is unlawful to make such offer , solicitation or sale.

INCONNECTION WITH THE OFFERINGOF THE BONDS, THEUND ERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHTOTHER WISE PREVAILIN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOFAND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THEUNDERWRITER. Forward Looking Statements

Certain statements included or incorporated by reference in this Official Statement constitute "forward� looking statements" within themeaning of the United States Private Securities Litigation ReformAct of 1995, Section 21E of the United States SecuritiesExchange Act of 1934, as amended, and Section 2 7A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan", "expect", "estimate", "project", "budget" or similar words. Such

4 forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THEDISTRICT - The Developer", "- General Description", "- The Development Plan", "­ Facilities Cost Estimates" and Table No. 4 "Projections of the Special Tax".

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OfflER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PEROFRMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THEDISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKINGST ATEMENTS SET FORTH INTHIS OFFICIAL STATEMENT. Information Concerning this Official Statement

This Official Statement speaks only as of its date. The information set forth herein has been obtained by Rod Gunn Associates, Inc., from theDis trict, theCity, and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financing Consultant, the City or the District. The Underwriter has provided the following sentence for inclusion in this Official Statement. TheUnderwriter has reviewed the information in thisOfficial Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be construed as representations of fact.

Preliminary Official Statement Deemed Final. The information set forth herein is in a form deemed final, as of its date, by the City for the purpose of Rule 15c2-12 under the Securities ExchangeAct of 1934, as amended. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of theCity or theDis trict since thedate hereof

Continuing Disclosure. The Districtand theDeveloper have covenanted forthe benefitof owners of the Bonds to provide certain financial information andoperating data relating to the District each year. The Districtand the Developer have agreed to make such information available not later than February 15 of each year, commencing February 15, 2004 (each an "Annual Report" and collectively the "Annual Reports"), and to provide notices of the occurrences of certain enumerated events, if material. The District and the Developer shall file or cause to be filed the Annual Reports with each Nationally Recognized Municipal Securities Information Repository and with the appropriate State information depository, if any. The notices of material events will be filed by the Dissemination Agent on behalf of the District and the Developer withthe Municipal Securities Rulemaking Board (andwith the appropriate State information depository, if any). The specific nature of information to be contained in the Annual Reports or the notice of material events is summarized in "APPENDIX E -- FORM OF CONTINUING DISCLOSUR E AGREEMENTS." Thesecovenants have been made by theDistrict and the Developer in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission. The Developer will be released from its obligation under the Developer Continuing Disclosure Agreement to provide Annual Reports and notices of material events at such time as the property owned by the Developer withinthe Di strict is no longer obligated to pay 20% or more of the Special Taxes. The District has never failed to meet its continuing disclosure requirement under such rule.

5 Each year until the final maturity of the Bonds, the District is required to, not later than October 30 of each year, supply the following information to the CaliforniaDebt and Investment Advisory Commission by mail, postage prepaid: 1. The principal amount of Bonds outstanding. 2. The balance in any Bond reserve fund. 3. The balance in any capitalized interest fund. 4. The number of parcels which are delinquent with respect to their Special Tax payments, the amount that each parcel is delinquent, the length of time that each has been delinquent, and when foreclosure was commenced foreach delinquent parcel. 5. The balance in any construction funds. 6. The assessed value of all parcels subject to Special Tax to repay the Bonds as shown on the most recent equalized roll. In addition, the District is required to notify theCalifornia Debt and InvestmentAdvisory Commission by mail, postage prepaid, within 10 days if any of the followingevents occur: 1. The City, the District or the Fiscal Agent fails to pay principal and interest due on any scheduled payment date. 2. Funds are withdrawn from any reserve fundto pay principal and interest on the Bonds. Neither the District, the City nor the CaliforniaDebt and Investment Advisory Commission will be liable for any inadvertent errorin reportingthe required information. The failure by the Districtto comply with its reporting obligations is not, initially, a default under the Fiscal Agent Agreement.

Av ailability of Legal Documents. The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds, and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forthin "APPENDIX A" hereto. Copies of the documents described herein are available for inspection during the period of initial offering of the Bonds at the offices of the Financing Consultant, Rod Gunn Associates, Inc., 16371 Gothard Street, Suite A, Huntington Beach, California 92647-3652, telephone (714) 841-3993, or the Underwriter, O'Connor Southwest Securities, 620 Newport Center Drive, Suite 300, Newport Beach, California92660, telephone (949) 717-2000. Copies of these documents may be obtained afterdelivery of the Bonds from the City at 101 North "D" Street, Perris, California925 70, telephone (909) 943-6100.

6 SELECTED ESSENTIALFA CTS The fo llowing summary does not purport to be complete. Reference is hereby made to the complete Offi cial Statement in this regard Further, the fo llowing summary makes certain assumptions regarding valuation of propertywithin the District. Neither the City nor the District makes any representation as to the current value of property in the District (s ee "BOND OWNERS' RISKS " herein) . THE BONDS Principal Amount of Bonds: $3,060,000 Additional Bonds: No Additional Bonds on a parity with the Bonds are authorized (see "DEBT STRUCTURE - No Additional Obligations"here in). First Optional Redemption Date: September 1, 2013 at 102% of Principal Amount (see "THEBONDS- Redemption" herein). First Mandatory Redemption Date: On any date from prepayment of Special Taxes at a premium, as describedherein . Primary Source of Revenues forRepayment: Special Taxes levied within the District as defined herein (see "FINANCIAL INFORMATION - Rate and Method of Apportionment" herein). Priority: TheBonds are secured by a firstple dge of and lien on all Special Taxes levied in the District (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS"here in). THE DISTRICT Estimated Acreage in theDis trict: 43.45 acres Number of Property Ownerson the Date of Delivery of the Bonds: One Appraised Value of Landand Improvements withinthe District: $10,260,000 Ratio of Appraised Value to Principal Amount of Bonds: 3.35 to 1 Minimum Ratio ofAutho rized Maximum Special Taxes in any Fiscal Year to Annual Debt Service on the Bonds: 110% Proposed Development: 112 Single family homes ranging from 2, 13 3 to 3, 170 square feet. Sales prices are expected to range from $254,500 to $285,000 CurrentStatus : 4 model homes and First Phase of 10 production homes under construction. 99 remaining lots in blue top condition.

7 THEBONDS General Provisions

Repayment of the Bonds. Interest is payable on the Bonds at the rate per annum set forth on the cover page hereof. Interest with respect to the Bonds will be computed on the basis of a year consisting of 3 60 days and twelve 30-day months.

Each Bond will be dated the Date of Delivery, and interest with respect thereto will be payable fromthe Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on an Interest Payment Date, in which event, interest with respect thereto will be payable from such date of authentication; (b) it is authenticated before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest with respect thereto will be payable from such Interest Payment Date; (c) it is authenticated before February 15, 2004, in which event interest with respect thereto will be payable from the Date of Delivery; provided, however, that if at such time of authentication interest with respect to any Outstanding Bond is in default, interest with respect thereto will be payable from the Interest Payment Date to which interest has previously been paid infull.

Interest with respect to the Bonds will be payable by check of the Fiscal Agent mailed by first class mail at least five (5) days before the applicableInterest Payment Date to the Owners thereof provided that in the case of an Owner of $1,000,000 or greater in aggregate principal amount of Outstanding Bonds, such payment may, at such Owner's option, be made by wire transfer of immediately available funds to an account in the continental United States in accordance with written instructions provided prior to the applicable Record Date to the Fiscal Agent by such Owner. The Owners of the Bonds shown on the Registration Books on the Record Date for the Interest Payment Date will be deemed to be the Owners of the Bonds on said Interest Payment Date for thepurpose of the paying of interest. Principal of the Bonds and any premium upon early redemption is payable upon presentation and surrender thereof, at the corporate trust office ofthe Fiscal Agent in Los Angeles, California.

Book-Entry Only System. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility forthe accuracy thereof.

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New Yo rk 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 1 7 A of the Securities Exchange Act of 1934. OTC holds andprovides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with OTC. DTC also facilitates thepos t-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. OTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing

8 Corporation, (respectively, "NSCC", "GSCC", ''MBSCC", and "EMCC", also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., theAmerican Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to theDTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard& Poor's highest rating: AAA. The OTC Rules applicable to its Participants are on file with the Securities andExchange Commission. More information about DTC can be foundat www.dtcc.com. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit forthe Bonds on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmationfrom 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 certificates representing their ownership interests in the Bonds, except in theevent that use of the book-entry system forthe Bonds is discontinued. To facilitate subsequent transfers, all Bonds depositedby 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 the Bonds with DTC and theirregi stration in the name of Cede & Co. or such otherDTC nominee do not effect any changein beneficialownership. 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 arecredited, which may or may not be theBeneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory orregulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nonrinee 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 theregistrar andreque st that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. lfless thanall of theBonds within an issue are being redeemed, DTC's practice is to determine by lot theamount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. 's consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on therecord date (identified in a listing attached to theOmnibus Proxy).

9 Payments of principal of, premium, if any, and interest evidenced by the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of OTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detailed information from the District or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Fiscal Agent, or the District, subj ect to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest evidenced by the Bonds to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. OTC may discontinue providing its services as depository with respect to the Bonds at anytime by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depositoryis not obtained, Bond certificates arerequired to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. In the event that the book-entry system is discontinued as described above, the requirements of the Fiscal Agent Agreement will apply. The foregoing information concerning DTC concerning and DTC's book-entry system has been provided by DTC, and neither the District nor the Fiscal Agent take any responsibility for the accuracy thereof. Neither the District nor the Underwriter can and do not give any assurances that DTC, the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to OTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the District nor the Underwriter is responsible or liable for the failure of OTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. Transfer or Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement, upon surrender of such Bond for cancellation at the corporate trust office of the Fiscal Agent. Whenever any Bond or Bonds shall be surrendered fortransfer or exchange, theFis cal Agent shall authenticateand deliver a new Bond or Bonds for like aggregate principal amount. The Fiscal Agent may require the payment by the Bondowner requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Fiscal Agent is not required to transfer or exchange (a) Bonds fifteen ( 15) days prior to the date established by the Fiscal Agent for selection of such Bonds for redemftion, (b) any Bonds selected for redemption, or ( c) any Bonds during the period of time between the 15 day of the month next preceding any Interest Payment Date and such Interest Payment Date. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond becomes mutilated, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series,tenor andauth orized denomination in exchange and substitution forthe Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent will be canceled by it. If any Bond issued under the Fiscal Agent Agreement is lost, destroyed or stolen, evidence of such loss, destruction or theftmay be submitted to the Fiscal Agent and, if such evidence is satisfactory to it and indemnity satisfactory to it is given, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series and tenor in lieu of and in substitution for the Bond so lost, destroyedor stolen ( or if any such Bond has matured or has been called forredemption, insteadof issuing

10 a substitute Bond, the Fiscal Agent may pay the samewithout surrenderthere of upon receipt of indemnity satisfactory to the Fiscal Agent). The District may require payment by the Bondowner of a sum not exceeding the actual cost of preparing each new Bond issued under the provisions of the Fiscal Agent Agreement described in thisparagraph and of the expenses which may be incurred by the District and the Fiscal Agent. Any Bond issued under the provisions of the Fiscal Agent Agreement described in this paragraph in lieu of any Bond alleged to be lost, destroyedor stolen will be equally and proportionately entitled to the benefits of the Fiscal Agent Agreement with all other Bonds secured by the Fiscal Agent Agreement. Authorization The Bonds are being issued pursuant to the Fiscal Agent Agreement. The Bonds are being sold to the Underwriter pursuant to, and subject to the terms and conditions of, the Purchase Contract by and between the Underwriter and the District (the"Purc hase Contract"). The Fiscal Agent Agreement and the Purchase Contract were approved by the Cityacting on behalf of the District pursuant to Resolution No. 3135 adopted June 24, 2003. Estimated Sources and Uses of Funds Under theprovisions of the Fiscal Agent Agreement, the Fiscal Agent will receive the proceeds fromthe sale of the Bonds and will apply them as follows: Sources of Funds Principal Amount of theBonds $3,060,000.00 OriginalIss ue Discount ( 48, 182.40) Underwriter's Discount (76.500.00) Total Bond Proceeds $2,935,317.60

Uses of Funds Improvement Fund $2,183,271.35 Capitalized Interest Account of the Bond Fund (l) 208,1 25.00 2 Costs of IssuanceFund ( ) 235,000.00 3 Reserve Accountof the Bond Fund( ) 308.125.00 Total $2,935,3 17.60

(1) Estimated Capitalized Interest to and including September1, 2004. (2) Expenses include fees of Bond Counsel, the Financing Consultant, Disclosure Counsel, Undenvriter's Counsel, Developer Counsel, the Appraiser, Special TaxConsultant, theDeveloper Consultant, the Fiscal Agent, costs of printing the Official Statement, and other costs of issuanceof the Bonds. (3) Equal to the initialReserve Requirement.

11 Investment of Funds All moneys in any of the funds or acconnts established withthe Fiscal Agent pursuant to the Fiscal Agent Agreement will be invested solely in Permitted Investments (see "APPENDIX A - DEFINITIONS OF CERTAIN TERMS" herein), as directed pursuant to the Written Request of the District or the District filed with the Fiscal Agent at least two (2) Business Days inadvance of the making of such investments. In the absence of any such Written Request, the Fiscal Agent will invest any such moneys in commercial paper or money market funds. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or acconnt. For the purpose of determining the amount in any fund, the value of Permitted Investments credited to such fund will be calculated at the market thereof (excluding any accrued interest).

Redemption Notwithstanding any prov1s10ns in the Fiscal Agent Agreement to the contrary, upon any optional redemption or special mandatory redemption from Special Taxes in part, the District shall deliver a Written Certificate to the Fiscal Agent at least sixty (60) days prior to the proposed redemption date or such later date as shall be acceptable to the Fiscal Agent so stating that the remaining payments of principal and interest on the Bonds, together with Special Taxes to be available, will be sufficient on a timely basis to pay debt service on the Bonds, as demonstrated in a cash flowcerti ficate delivered to the Fi scal Agent with such Written Certificate.

The District is required, in such Written Certificate, to certify to the Fiscal Agent that sufficient moneys for purposes of such redemption are or will be on deposit in the Revenue Fund and is required to deliver such moneys to the Fiscal Agent together with other Special Tax Revenues, if any, then to be delivered to the Fiscal Agent pursuant to the Fiscal Agent Agreement, which moneys are required to be identified to the Fiscal Agent in the Written Certificatedelivered with the Special Tax Revenues.

Optional Redemption. The Bonds are subject to redemption prior to maturity at the option of the District on any date on or after September 1, 2013, as a whole or in part, by lot, fromany available source of funds at the following redemption prices, (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to thedate fixed forredemption as follows:

Redemption Periods Redemption Prices September 1, 2013 through August 30, 2014 102.0% September 1, 20 14 through August 30, 2015 101.0% September l, 2015 and thereafter 100.0%

Special Mandatory Redemption fr om Prepayment of Special Taxes. The Bonds are subject to redemption prior to maturity on any date, in part, in a manner determined by the District from prepayments of Special Taxes for properties for which a building permit has been issued and for which no special taxes are delinquent at the following redemption prices, (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to thedate fixed for redemption as follows:

Redemption Periods Redemption Prices Closing Date throughAugust 30, 2006 103.0% September 1, 2006 throughAugust 30, 2013 102.5% September l, 2013 and thereafter as provided foroptional redemption

12 Mandatory Sinking Payment Redemption. TheBonds are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 2007 in the case of the Bonds maturing September 1, 2014 and September 1, 2015 in the case of the Bonds maturing September 1, 2033 from mandatory sinking payments pursuant to the Fiscal Agent Agreement at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption in the aggregate principal amounts and on September 1 in the respective years as set forth in the following schedule; provided, however, that if some but not all of the Bonds have been redeemed pursuant to optional redemption, special mandatory redemption from prepayment of Special Taxes or special mandatory redemption provisions as described herein, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated amongsuch sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by theDistrict. SCHEDULE OF MANDATORY SINKINGPA YMENT REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1, 2014 September 1 Principal September 1 Principal Year Amount Year Amount 2007 $ 5,000 2011 $25,000 2008 10,000 2012 30,000 2009 15,000 2013 35,000 2010 20,000 2014 40,000 (maturity)

SCHEDULE OF MANDATORY SINKINGPA YMENTREDEMPTI ONS TERM BONDS MATURINGSEPTEMBER 1, 2033 September 1 Principal September 1 Principal Year Amount Year Amount 2015 $ 50,000 2024 $140,000 2016 55,000 2025 155,000 2017 65,000 2026 170,000 2018 70,000 2027 185,000 2019 80,000 2028 205,000 2020 90,000 2029 220,000 2021 100,000 2030 240,000 2022 115,000 203 1 255,000 2023 125,000 2032 270,000 2033 290,000 (maturity)

Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on any date to which timely notice of redemption may be given, in integral multiples of $5,000 from the deposit of fees with the District by a public agency which has accepted facilities serving an area of theDistrict, and from insurance or condemnation proceeds or other mandatory redemption, sale or acceleration relating to the Bonds, without premium, plus accrued interest to the redemption date, all as determined by the District.

Upon any optional redemption, special mandatory redemption from Special Taxes or other special mandatory redemption in part, as described above, the maturity or maturities of the Bonds to be redeemed will be specifiedby theDi strict as furtherprovided in the Fiscal Agent Agreement.

13 Purchase in Lieu of Redemption. In lieu of any redemption described above, moneys inthe Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filingwith the Fiscal Agent of an Officer's Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may Bonds be purchased at a price in excess of theprincipal amount thereof,plus interest accrued to the date of purchase, unless a greater purchase price is permitted under the Act and the District determines that it will have sufficientamounts in the Bond Fund, following such purchase, to pay Debt Service on the Bonds.

Notice of Redemption. When redemption is authorized or required, the Fiscal Agent is required to give written notice of the redemption of Bonds to the Bondowners designated for redemption at their addresses appearing on the bond registration books, to certain Securities Depositories, and to one or more Information Services, all as provided in the Fiscal Agent Agreement, by first class mail, postage prepaid, no less than thirty (30), nor more than sixty (60), days prior to the date fixed for redemption. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the proceedings forredemption of such Bonds or the cessation of accrual of interest on theredemption date.

Effect of Redemption. The rights of a Bondowner to receive interest will terminate on the date, if any, on which the Bond is to be redeemed pursuant to a call for redemption. The Fiscal Agent Agreement contains no provisions requiring any publication of notice of redemption, and Bondowners must maintain a current address on file withthe Fiscal Agent to receive any notices of redemption.

Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the District will execute, on behalf of the District, and the Fiscal Agent will authenticate and deliver to the Bondownerthere of, at the expense of theDi strict, a new Bond or Bonds of the same series and maturity date, of authorizeddenominations in an aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.

14 SOURCES OF PAYMENT FOR THE BONDS Repayment of the Bonds General. The Bonds arepayable solely from andsecured by Special Taxes collected on real property within the District (the "Special Tax Revenues"), and amounts deposited in the Bond Fund and the Special Tax Fund held pursuantto the Fiscal Agent Agreement. Theprincipal of, premium, if any, andthe interest on the Bonds, and the Administrative Expenses of the City and the District, are payable from the Special Taxes collected on real property within the District and funds held by the Fiscal Agent and available forsuch purposespursuant to the Fiscal AgentAgreement.

The Bonds are limited obligations of the District payable solely from the proceeds of Special Taxes levied on certain parcels within the District. The Bonds shall not be deemed to constitute a debt or liability of the State of California or of any political subdivision thereof, other than the District. Neither the faith and credit nor the taxing power of the City of Perris, the State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds.

Special Taxes. The Special Taxes are excepted from the tax rate limitation of California Constitution Article XIIIA pursuant to Section 4 thereof as a "special tax" authorized by at least a two-thirds vote of thequalified electors as set forth in the Act. Consequently, the City Council of the City on behalf of the District has thepower and is obligated by the Fiscal AgentAgreem ent to cause the levy and collection of theSpecial Taxes.

The District has covenanted in theFisca l Agent Agreement to levy, subject to the Maximum Special Tax in each Fiscal Year, the Special Taxes in an amount sufficient to pay the debt service on the Bonds and the cost of providingcertain AdministrativeExpe nses of the District and the City.

The Special Taxes are to be levied and collected according to the Rate and Method of Apportionment described inthe section entitled "FINANCIALINFORMATION - Rate and Method of Apportionment" herein.

Although the Special Taxes will constitute a lien on parcels of real property within the District, they do not constitute a personal indebtedness of the owner(s) of real property. There is no assurance that the property owners, or any successors and/or assigns thereto or subsequent purchaser(s) of land withinthe District, will be able to pay theannual Special Taxes or if able to pay the Special Taxes that they will do so (see "BONDOWNERS' RISKS"here in). The Special Taxes initially are required to be collected by the County of Riverside Tax Collector in the same manner and at the sametime as regular ad valorem property taxes are collected by the Tax Collector of the County. When received, such Special Taxes will be deposited in the Special Tax Fund for the District to be held by the City and transferred by the City to the Fiscal Agent as provided in the Fiscal Agent Agreement.

Covenant for Superior Court Foreclosure. Pursuant to Section 53356.1 of the Act, in the event of a delinquency in the payment of the Special Taxeslevied on a parcel, the District may order theinstitution of a superior courtaction to foreclose the lien therefor, provided such action is brought not later than four years after the final maturity date of the Bonds. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale.

The Districthas covenanted in the Fiscal Agent Agreement forthe benefit of the owners of the Bonds that the District will review the public records of the County of Riverside, California, in connection with the collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with respect to individual delinquencies, if the District determines that any single property owner subject to the Special Taxis delinquent in the payment of Special Taxes in

15 the aggregate of $5,000 or more or that as to any single parcel the delinquent Special Taxes represent more than 5% of the aggregate Special Taxes within the District, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the Superior Court within 90 days of such determination against any pr operty for which the Special Taxes remain delinquent.

No assurances can be given that the real propertysubject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not require the District or the City to purchase or otherwise acquire any lot or parcel of propertysold at the execution sale pursuant to the judgmentin anysuch action if there is no other purchaser at such sale, nor does the Act specify the priority relationship, if any, between the Special Taxes and other taxes and assessment liens.

As a result of the foregoing, in the event of a delinquency or nonpayment by the property owners in the District of one or more Special Taxes installments, there can be no assurance that there would be available to the District sufficient funds to pay when due the principal of, interest on and premium, if any, on the Bonds (see "BONDOWNERS' RISKS - Bankruptcy and Fo reclosure Delays" and "BONDOWNERS' RISKS - Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies" herein).

Prepayment of Special Tax. A property owner may prepay its Special Taxes and thereby cause a redemption of Bonds.

Capitalized Interest Account. There will be an initial deposit to the Capitalized Interest Account of the Bond Fund out of Bond proceeds which has been calculated to be sufficient to make interest payments on the Bonds due to and including September 1, 2004.

Rese rveAccount. In order to securefurther the timely payment of principal of and interest on the Bonds, the Fiscal Agent is required, upon delivery of the Bonds, to deposit in the Reserve Account of the Bond Fund for the Bonds an amount equal to the Reserve Requirement. Thereafter, the District is required to transfer to the Fiscal Agent an amount of available Special Tax Revenues sufficientto maintainan amount of money equal to the Reserve Requirement in the Reserve Account at all times while the Bonds are Outstanding. Amounts in the Reserve Account will be used to pay debt service on the Bonds to the extent other moneys are not available therefor. Amounts in the Reserve Account in excess of the Reserve Requirement will be deposited into the Bond Fund. Amounts in the Reserve Account may be used to pay the final year 's debt service on the Bonds (see "SUMMARY OF THE LEGAL DOCUMENTS" herein). Upon mandatory redemption, amounts on deposit in the Reserve Account shall be reduced (to an amount not less than the Reserve Requirement) and excess money shall be transferred to the Bond Fund and used for the redemption of Bonds.

16 BONDOWNERS'RIS KS General

BEFORE PURCHASING ANY OF THE BONDS, ALL PROSPECTIVE INVESTORS AND THEIR PROFESSIONAL ADVISORS SHOfilD CAREFfilLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK FACTORS, WHICH ARE NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS. MOREOVER, THE ORDER OF PRESENTAT ION OF THE RISK FACTORS DOES NOT NECESSARILY REFLECT THE ORDER OF THEIR IMPORTANCE. The purchase of the Bonds involves investment risk. If arisk fa ctor materializes to a sufficient degree, it could delay or prevent payment of principal of and/or interest on the Bonds. Such risk fa ctors include, but are not limited to, the fo llowing matters.

The Bonds Theability ofthe District to pay theprincipal andinterest on the Bonds depends upon the receipt by the Districtof sufficient Special TaxRevenue s, amounts on deposit in the Reserve Account and amounts on deposit in the Capitalized Interest Account forthe Bonds established by the Fiscal Agent Agreement. A number of risks that couldprevent the District from repayingthe Bonds are outlined below. Limited Obligation. Neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof other thanthe District is pledged to the payment of the Bonds. Except for the Special Taxes derived from the District, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City, the State or any political subdivision thereofnor general obligations of the District, but are special obligations of the District, payable solely from net Special Tax Revenues and amounts deposited in certain funds and accounts under the Fiscal Agent Agreement. Early Bond Redemption. The Bonds are subject to optional, special mandatory and mandatory redemption and redemption from the Escrow Fund prior to their respective stated maturities. Special mandatory redemption from prepayment of Special Taxes may occur on any date (see "mE BONDS - Redemption" herein).

Loss of Tax Exemption. As discussed under the caption "LEGAL MATTERS - Ta x Exemption" herein, interest on the Bonds could 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 City or the District in violation of their covenants contained inthe Fiscal Agent Agreement. Should such an event of tax.ability occur, the Bonds are not subj ect to special redemption or any increase in interest rate and will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Fiscal Agent Agreement.

Secondary Market. There can be no guarantee thatthere will be a secondary market forthe Bonds or, if a secondary market exists, that such Bonds canbe sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantiallydifferent fromthe original purchase price.

17 Special Taxes Are Not Within Teeter Plan. The County has adopted a Teeter Plan as provided for in Section 4 70 l et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. However, by policy, the County does not include assessments, reassessments and special taxes in its Teeter program. The Special Taxes are not included in the County's Te eter Program.

Insufficiency of Special Tax Revenues. As discussed herein, the amount of Special Taxes that are collected could be insufficientto pay principal of, and/or interest and premium, if any, on the Bonds due to nonpayment of the Special Taxes levied and insufficient or no proceeds received from a foreclosure sale of land within the District.

The District has covenanted in the Fiscal Agent Agreement to institute foreclosure proceedings upon delinquencies in the payments of the Special Taxes as described herein and to sell any real property with a lien of delinquent Special Taxes to obtain funds to pay debt service on the Bonds. If foreclosure proceedings are ever instituted, any holder of a mortgage or deed of trust could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure" herein forprovisions which apply in the event foreclosure is required andwhich the District is required to followin the event of delinquency in the payment of Special Taxes.

No Personal Liability forSpecial Ta xes. No property owner will be personally liable forthe payment of the SpecialTa xes to be applied to pay the principal of and interest on the Bonds. In addition, there is no assurance that any property owner will be able to pay the Special Taxes or that any property ownerwill pay such Special Taxes even if it is financially able to do so. No property owner is obligated in any manner to continue to own any of the land it presently owns within the District.

Concentration of Ownership. Currently the Developer owns all of the land within the District (see "THEDIS TRICT" herein). The only asset of the Developer which constitutes security for the Bonds is its property holdings assessed within the District. There are expected to be subsequent transfers of ownership of the property within the District to individual owners of single family homes during the development of the land within the District. No representation is made that the Developer will have moneys available ( or that it will advance such moneys, if available) to complete the development of the land in the manner described herein. The factthat one property owner ownsall of land within the District presents substantial risk to the Bondowners.

Foreclosure and Sale Proceedings. Payment of the Special Taxes is secured by the parcels assessed. In the event an annual installment of the Special Taxes included in the County tax bill of an assessed parcel is not paid when due, the District can institute foreclosure proceedings in courtto cause the parcel to be sold in order to recover the delinquent amount from the sale of proceeds (see "SOURCES OF REPAYMENT FOR THE BONDS" herein). Foreclosure and sale may not always result in the recovery of any or the full amount of delinquent Special Taxes.

Sufficiency of the foreclosure sales proceeds to cover the delinquent amount depends in part upon the market for andthe value of the parcel at the time of the foreclosure sale (see "Land Values" below). The current appraised value is some evidence of such future value. However, future events may result in significant changes from the current appraised value. Such events could include changes in land ownership, development plans and other factors affecting the progress of land development, legal requirements affecting the development of parcels, a downturn in the economy, as well as a number of additional factors. Any of these factors may result in a significant erosion in value, with consequent reduced security of the Bonds.

18 Sufficiency of foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. A variety of governmental liens may presently exist or may arise in the future with respect to a parcel which, unless subordinate to the lien securing the Special Taxes, may effectively reduce the value of such parcel. Further, other governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise to the status of liens. Timely foreclosure and sale proceedings with respectto a parcel may be forestalled or delayed by a stay in the event the owner theof parcel becomes the subject of bankruptcy proceedings. Further, should the stay not be lifted,payment of Special Taxes may be subordinated to bankruptcylaw priorities. Land Values. If a property owner defaults in thepayment of the Special Tax, the District's only remedy is to commence foreclosure proceedings against the defaulting property owner's real property within the District for which the Special Tax has not been paid, in an attempt to obtain funds to pay the delinquent Special Tax. Therefore, the value of the land and improvements is a critical factor in determining the investment quality of the Bonds. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, droughts, or floods, stricter land use regulations, or other events may adversely impactthe securityunderl ying the Special Tax. The Districthad the followingAppr aisal preparedin order to estimate the current aggregate market value of land inthe Dis trict. Summary Appraisal Report, Community Facilities District No. 2003-1 of the City of Perris (Chaparral Ridge) prepared by Stephen G. White, MAI, Fullerton, California (the "Appraisal"), dated June 27, 2003. The purpose ofthe Appraisal was to estimate the aggregate retail value of the parcels in its "as-proposed" condition (which assumes sale of the Bondsand constructionof publicly-financedimprovemen ts), as well as the discounted "bulk sale" value of all parcelswithin the Dis trict.

On the basis of the assumptions and limitations described in theApprai sal, theAppr aiser has estimated the aggregate discounted "bulk sale" value of all the parcels in the District as of June 25, 2003 to be $10,260,000. The above amount is approximately 3 times theprincipal amount of the Bonds and all overlapping debt ( as described under the heading "THEDISTRICT - Direct and Overlapping Debt" herein). Prospective purchasers of theBonds should notassume that theland and improvements could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. In particular, the values of individual properties will vary in some cases significantly. The actual value of the land is subj ect to future events which might render invalid some or all of the basic assumptions of the Appraiser. The future value of the land can be expected to fluctuate due to many different, not fully predictable, real estate related investment risk factors, including, but not limited to: general tax law changes related to real estate, changes in competition, general area employment base changes, population changes, changes in real estate related interest rates affecting general purchasing power, advertising, changes in allowed zoning uses anddens ity, natural disasters such as floods, earthquakes andlandslide s, and similar factors.

Appraisals in general are the result of an inexact process, and estimated market value is dependent, in part, upon assumptions which may or may not be realized andupon market conditions and perceptions of market value, which are likely to change over time. Theappr aisal valuations representopinions only and are not intended to be absolutes or assurances of specific resale values. If more than one appraiser were employed, it is reasonable to assume that a reasonable range of value opinions on the land and improvement value within the District would be reflected depending upon personal professional inteipretation of data, facts and circumstances reviewed and assumptions employed. Prospective

19 purchasers should not asswne that the land could be sold for theapprai sed amount at a foreclosure sale for delinquent Special Taxes. A copy of the Appraisal is included in APPENDIX c. The summary herein of some of the conclusions in the Appraisal does not purport to be complete. Reference is made to the Appraisal for further information. The District makes no representations as to the value of the real property within the District, and prospective purchasers of the Bonds are referred to the Appraisal referred to above in evaluating the value of real property within the District. The Progress of Land Development; Risks of Real Estate Secured Investments. Landdevel opment is an activity subject to substantial risk. Risk factors include, without limitation, general or local economic conditions; local real estate market conditions; supply of or demand forcompeti tive properties; changes in the real estate tax rate; governmental regulation and approval requirements, particularly environmental quality, endangered species, land use, zoning and building requirements; development, fm ancing and marketing capabilities of the various landowners; natural disasters, including without limitation earthquakes, flood and fire which may result in uninsured losses; and accomplishment of development plans on a timely basis, including but not limited to the provision of infrastructure improvements in addition to the District's improvements. Since these are largely business risks of the type that landowners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District has undertaken the financing without regard to any such evaluation. Thus, the undertaking of the financing by the District in no way implies that the District has evaluated these risks or the reasonableness of theserisk s. Further, the risk to the owners of the Bonds of development delays may be heightened when land ownership is concentrated in only a few landowners or developers. If ownership is concentrated, timely payment of the Special Taxes may be dependent upon the financing available to such owners or developers. Further, the continued progress of land development may be one of the present facts and circwnstances forming the basis forthe appraiser's opinion of value. Diminished values may lessen the effectiveness of foreclosureproceedings as a remedy. The Special Taxes are to be collected from the owners of property located within the District, and levy of the Special Taxes is not dependent on the completion of the development of the properties within the District (see "FINANCIAL INFORMATION - Rate and Method of Apportionment" herein. Nevertheless, the extent of completion of the development of the property within the District may affect the ability and willingness of property owners to pay the Special Taxes and may affect the market value of any property foreclosedup on fornonpayment of installments of the Special Taxes. Geologic, Topographic and Climatic Conditions. Land and improvement value can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and private improvements of the parcels assessed and the continued habitability and enj oyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and overdraft of groundwater basins; topographic conditions such as earth movements and floods; and climatic conditions such as droughts.

Some of these factors have been taken into account, to a limited extent, in the design of the District's improvements and have or will be taken into account to a limited extent, in the design of other infrastructure and public improvements. Further, building codes require that some of these factors be taken into account, to a limited extent, in the design of private improvements of the parcels in the District. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of establishment between the present costs of protection and the future costs of lack of protections, based in part upon a present

20 perception of the probabilitythat thecondition will occur and the seriousness of the condition should the condition occur. Earthquakes. Southern California is among the most seismically active regions in the United States. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in tum, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in a greater reliance on undeveloped property in the payment of Special Taxes. In the event of a severe earthquake, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such an earthquake, reducing the resulting proceeds of foreclosure sales in theevent of delinquencies in the payment of Special Taxes. Certainprocedu res and design standards are required to be followed during the construction of buildings within the District to ensure that each building is designed and constructedto meet, at a minimum, the highest seismic standardsrequired by law.

Bankruptcy and Foreclosure Delays. Thepayment of the Special Taxes and the ability of the Districtto foreclose the lien of a delinquent unpaid Special Tax, as discussed in the section herein entitled "SOURCES OF PAYMENT FOR THE BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the lawsof theStat e of Californiarelating 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, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or of a partner or other owner of a property owner could result in a delay in prosecuting superior court foreclosurepro ceedings and could result in loss of priority of the lien securing any Special Taxes with respect to Special Taxes levied while bankruptcy proceedings are pending. In addition, theamount of any lien on property securing thepayment of delinquent Special Taxes could be reduced if the value of the propertywere determined by the bankruptcy courtto have become less than the amount of thelien, and the amount of the delinquent Special Taxes in excess of the reduced lien could be treatedas anunsecured claim by the court. Such delay or loss of priority or nonpayment, 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 Tax installments not being paid in full. To the extent a significant percentage of the property continues to be owned by a limited number of property owners, the payment of the Special Taxes and the ability of the Districtto foreclose the lien of a delinquent unpaid Special Taxes installment could be delayed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In that case, the court held that property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition forIn bankru re Glaptcysply were Ma notrin eent Initleddustries. to priority over a secured creditor withad a prior valorem lien on the property. The court upheld thepriority of unpaid taxes imposed afterthe filing of the bankruptcy petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was to foreclose on the property and retain all of the proceeds of the sale except theamount of the pre-petition taxes.

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

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

It should also be noted that on October 22, 1994, Congress enacted 11 U.S.C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision afterthe filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filedon or after October 22, 1994, the lien forad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that the potential effect of 11 U.S.C. Section 362(b)(l8) on the Special Taxes depends upon whether a court were to determine that the Special Taxes should be treated like ad valorem taxes forthis purpose. Additional Taxation. On June 3, 1986, California voters approved an amendment to Article XIIIA of the California Constitution to allow local governments and school districts to raise their property tax rates above the constitutionally mandated 1 % ceilingfor the purpose of repaying certainnew general obligation debt issued for the acquisition or improvement of real property and approved by at least two-thirds of the votes cast by the qualifiedelectorate. If any such voter-approved debt is issued, it may be on a parity with the lien of the Special Taxes on the parcels withinthe District. Parity Taxes and Special Assessments. Tue Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land within the District on which they will be annually imposed until they are paid in full. Such lien is on a parity with all special taxes and special assessments levied by other public entities, agencies and districts and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same real property. The Special Taxes have priority over all existing and future private liens imposed on the real property within the District. The District, however, has no control over the ability of other public entities, agencies and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the real property within the District and other public entities may issue indebtedness payable from Special Taxes. Any such special taxes or assessments may have a lien on such real property on a paritywith the Special Taxes (see "DEBT STRUCTURE - Direct and Overlapping Debt" herein). Accordingly, the liens on the real property within the District could greatly increase, without any corresponding increase in the value of the property and thereby severely reduce the lien to value ratio of the land secured public debt existing at the time the Bonds are issued. The imposition of such additional indebtedness could also reduce the willingness and ability of the property ownersto pay the Special Taxes when due.

Disclosure to Future Land Buyers. A "Notice of Special Tax Lien" for the District was recorded pursuant to Section 53328.3 of theAct and Section 3114.5 of the Streets and Highways Code, with the County Recorder forthe County (the "County Recorder"). Each Notice sets forth, among other things, the Rate and Method of Apportionment, the Assessor's Parcel Numbers as of the date of recording the Notice, and the boundaries of the Districtby reference to the map(s) recorded with the County Recorder. While title insurance and search companies normally refer to such notices in title reports, and sellers of property within the District are required to give prospective buyers a notice of special tax in accordance with Sections 53360.2 or 53341.5 of the Act, there can be no assurances that such reference will be made

22 or notice given, or if made or given, that prospective purchasers or lenders will consider such Special Tax obligation in the purchase of land or the lending of money thereon. Failure to disclose the existence of the Special Taxmay affect the willingness andability of future landownersto pay the Special Tax when due. Billing of Special Taxes. A special tax can result in a substantially heavier property tax burden being imposed upon properties withina community facilities district thanelse where in a city or county, and this in turn can lead to problems in the collection of the special tax. In some communityfacilities districts the taxpayers have refusedto pay the special tax and have commenced litigation challenging the special tax, the community facilities district and thebonds issued by the district. Under provisions of the Act, the Special Taxes arebilled to the properties within the District which were entered on the Assessment Roll of the County Assessor by January 1 of the previous fiscal year on the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, andbear the samepenalties and interest fornon-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inabilityto make regular property tax payments and installment payments of Special Taxes in the future. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant forSuperior Court Foreclosure" for a discussion of the provisions which apply, and procedures which the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes. Collection of Special Tax. In order to pay debt service on theBonds, it is necessarythat the Special Tax levied against land within the District be paid in a timely manner. The District has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments pending prosecution of the foreclosure proceedings and receipt of theproceeds of theforeclo sure sale, if any. No assurances can be given thatthe real property subj ect to foreclosure andsale at a judicial foreclosure sale will be sold or, if sold, that theproceeds of such sale will be sufficient to pay anydelinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not specifythe obligations of the District with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SOURCES OF PAYMENTFOR THE BONDS-Covenant forSuperior Court Foreclosure".

Maximum Rates. Within the limits of the Rate and Method of Apportionment, the District may adjust the Special Tax levied on all property within the District to provide an amount required to pay debt service on the Bonds and other obligations of the District, and the amount, if any, necessary to pay all annual Administrative Expenses and make rebate payments to the United States government. However, the amount of the Special Tax that may be levied against particularcategories of property is subject to the maximumrat es provided in the applicable Rate andMethod of Apportionment. There is no assurance that the maximum rates will at all times be sufficient to pay the amounts required to be paid by the Fiscal Agent Agreement. See "FINANCIALINFORMATION - Rate and Method of Apportionment". Exempt Properties. Certain properties are exempt from the Special Tax in accordance with the applicable Rate and Method of Apportionment and applicable provisions of the Act. The Act provides thatproperties or entities of the State, federal or local government at the time of formation of the District are exempt fromthe Special Tax; provided, however, thatproperty withinthe District acquired by a public entity through negotiated transactions, or by gift or devise, which is not otherwise exempt from the Special Tax will continue to be subject to the Special Tax. In addition, the Act provides that if property

23 subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, or another public agency, subject to the limitation of the maximum authorized rate of levy, the Special Tax may be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Ta x; however, the amount of Special Tax to be levied and collected from the property owner is subject to the Maximum Special Tax as set forth in the Rate and Method of Apportionment and to the limitation in the Act that under no circumstances shall Maximum Special Taxes be increased on a parcel used for private residential purposes by more than two percent in any year, and under no circumstances may the Special Taxes levied on any residential parcel be increased by more than ten percent as a consequence of delinquency by the owner of any parcel. If a substantial portion of land became exempt from the Special Tax because of public ownership, or otheiwise, the maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest.

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. The Act would prohibit the City Council, acting as the legislative body of the District, fromadopt ing a resolution to reduce the rate of the Special Tax or terminatethe levy of the Special Tax unless the City Council, acting as thelegislative body of the District determined that the reduction of termination of the Special Tax "would not interfere with the timely retirement" of the Bonds. See "BONDOWNERS'RISKS - Right to Vo te on Ta xes Act" below. No Acceleration Provision. The Fiscal Agent Agreement does not contain a provision allowing for the acceleration of the principal of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement.

Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies. The District's ability to collect interest and penalties specified by Sate law and to foreclose the lien of a delinquent Special Tax payment may be limited in certain respects with regard to propertiesin which the Internal Re venue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies has or obtains an interest. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Real Property Taxes. The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune fromreal property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of theinstitu tion's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any properly taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent.

24 The Policy Statement states that FDIC generally will not pay non ad valorem taxes, including special assessments, on property in which it has a feeinterest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it pwports to secure the payment of any such amounts. Special taxes imposed under the Mello­ Roos Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. With respect to property in California owned by theFDIC on January 9, 1997, and that was owned by the Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became property of the FDIC through foreclosure of a security interest held by theRT C on that date, the FDIC will continue the RTC's prior practice of paying specialtaxes imposed pursuantto the Mello-Roos Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes, including the Special Taxes which securethe Bonds may be challenged by the FDIC. The FDIC has filed claimsagainst the County of Orange withrespect to Mello-Roos community facilities district special taxes in the United States Bankruptcy Court and in Federal District Court in which the FDIC has taken a position similar to the position outlined in the Policy Statement. While all of such claims have not been resolved, the Bankruptcy Court has issued a tentative ruling in favor of the FDIC on certain of such claims. The County of Orange has appealed such ruling and the FDIC has cross-appealed. The City and the District are unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale. Owners ofthe Bonds should assume that the City and the District will be rmable to foreclose on any parcel owned by the FDIC. The City has not rmdertaken to determine whether the FDIC currently has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning the likelihood that therisks described above will materialize while theBonds are outstanding. Limitations on Remedies. Remedies available to the Owners may be limited by a variety of factorsand 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. Bond Cormsel has limited its opinion as to the enforceability ofthe Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subj ect to acceleration in the event of the breach of any covenant or duty underthe Fiscal Agent Agreement. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modificationof the rights of the Owners. Enforceability of the rights and remedies of the owners of theBonds, and the obligations incurred by the District, may become subj ect to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessaryexe rcise, in certain exceptional situations, of thepolice powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public pwpose and thelimitations on remedies against joint powers authorities in the State. See "BONDOWNERS' RISKS - Bankruptcy and Foreclosure Delays", "Billing of Special Taxes" and "Property Controlled by Federal Deposit Insurance Corporation and Other Federal Agencies" herein. Right to Vo te on Taxes Act. An initiative measure commonly referredto as the "Right to Vote on Taxes Act" was approved by the voters of the State of California at the November 5, 1996 general election. Proposition 218 added Article XIIIC ("Article XIIIC") and Article XIIID to the California Constitution. According to the "Title and Summary" of Proposition 218 prepared by the California Attorney General, the Proposition 218 limits "the authority of local governments to impose taxes and property-related

25 assessments, fees and charges." The provisions of Proposition 218 have not yet been interpreted by the courts, although a number of lawsuits have been filedrequesting the courts to interpret various aspects of Proposition 218.

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." Proposition 218 provides fora procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, Proposition 218 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 Proposition 218 unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. Although the matter is not free from doubt, it is likely that the exercise by the voters in the District of the initiative powerreferred to in Article XIIIC to reduce or terminate the Special Tax is subj ect to the same restrictions as are applicable to the District, pursuant to the Act. Accordingly, although the matter is not free from doubt, it is likely that the Proposition 218 has not conferred on the voters in the District the power to repeal or reduce the Special Taxes if such reduction would interfere withthe timely retirement of the Bonds.

It may be possible, however, forvoters or theDistrict to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes forAdministrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary forthe timely retirement of the Bonds.

The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts.

Ballot Initiatives and Legislative Measures. Proposition 218 was adopted pursuant to a measure qualified for the ballot pursuant to California'scons titutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions forparticular activities. From time to time, other initiative measures could be adopted by Californiavoters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the City or local districts to increase revenues or to increase appropriations or on the ability of a property owner to complete the development of the property.

26 THECITY GovEirnment Organfa:ation The CityCouncil mtimbers, 1heir occupations and term expiration dates are as follows:

Board Member Term Expires Daryl Busch, Mayor November, 2003 John Motte, Mayor Pro Tern November, 2003 Al Landers,. Council Member November, 2005 Rita Rogers. Council Member November, 2003 Raul (Mark, Yarbrough, Council Member November, 2005

The Cityperf orms certain gcmeral administrative functions forthe District. The costs of such functions, as welJI as additional service ; performed by City staffare allocated annually to the District. The District reimburses the City for such allocated costs out of available Revenues. Current City Staffassigned to administer the Distrkt include:

Hector Apodaca, CityMan ager Connie Rogers-Elmore, Finance Director Olivia Guiterrez, Planning Director Habib Motlagh, CityEngin eer Eric Dunn, CityAtt orney Margaret Rey, City Clerk

27 THEDI STRICT The information set fo rth herein regarding ownership of real property in the District, the Developer and any proposed development of property in the District was provided by the Developer and has not been independently verified. The District makes no representation as to the accuracy or completeness of any such information. This information has been included because it is considered relevant to an informed evaluation of the District. The inclusion in this Offi cial Statement of information related to the Developer 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 Developer or any other property owner. A property owner may sell or otherwise dispose of land within the District or a development of any interest therein at anytime. No assurance can be given that the proposed development within the District will occur as described below, if at all. As the proposed land development progresses and parcels are sold, it is expected that ownership of the land within the District will become more diversified. No assurance can be given that development of the land within the District will occur, or that it will occur in a timely manner or in th e configuration or intensityde scribed herein, or that the Developer willretain ownership of any land within the District. The Bonds and the Sp ecial Tax es are not personal obligations of any property owner and, in the event that a property owner defaults in the payment of the Sp ecial Tax es, the District maypr oceed with judicial fo reclosure but has no direct recourse to the assets of any property owners. As a result, other than as provided herein, no financial statements or information is, or will be, provided about the Developer. The Bonds are secured solely by the Sp ecial Tax es and other amounts pledged under the Fiscal Agent Agreement (s ee "SOURCES OF PA YMENT FOR THE BONDS" and "BONDOWNERS ' RISKS " herein) . Boundaries of the Community Facilities District The boundaries of the District coincide withthe Tract 28986-3 and comprises the westerly 112 lots of the 312 lot subdivision known as Chaparral Ridge.

The boundaries of the District are described on the reduced scale map entitled "Boundary Map of Proposed Community Facilities District No. 2003-1 (Chaparral Ridge)". A full scale map is on file with the Clerk of the Cityof Perris.

The Developer Richmond AmericanHomes of California, Inc., a Colorado corporation ("Richmond American Homes" or the "Developer") is the owner of all the land in the District, which was acquired in blue-top condition on May 8, 2003.

The Developer was formed in August 1985, and is a wholly-owned subsidiary of M.D.C. Holdings, Inc. ("MDC"), a Delaware corporation with homebuilding, mortgage and insurance operations in certain markets across the country. MDC is headquartered in Denver, Colorado, and its subsidiaries build homes under the name "Richmond American Homes" in Colorado, northern Virginia, Phoenix, Tucson, Las Vegas, suburban Maryland, northern California, southern California and Salt Lake City. MDC also has a growing presence in Dallas/Fort Worth and has recently entered the Houston, Tampa and Philadelphia/Delaware Valley markets. MDC'scommon stock is listed on the New York Stock Exchange under the symbol "MDC". The internet site for f\.IDC and Richmond American Homes is located at richmondamerican.com. Th is Internet address is included fo r reference only and the information on the In ternetsite is not a part of this Offi cial Statement or incorporated by reference into this Offi cial Statement. No representation is made in this Offi cial Statement as to the accuracy or adequacy of the information contained on the Internetsite.

28 Richmond American Homes is completely responsible for the acquisition, planning, engineering, financing, construction, marketing, sales and management of each of its communities. ChrisHolmq uist, Vice President of Land Acquisition and Development of Richmond American Homes, Irvine Division, who is responsible for overseeing land development activities of the land in the District, has been with the company for over two years. In 2002, Richmond American Homes closed approximately 1,654 single family homes. Richmond American Homes' development experience in the counties of Riverside, San Bernardino and Orange includes the followingpro jects:

No. of Proiect Name Location Units/Lots Size of Units Price Range Status

Chesapeake Orange County 101 1,75 5 - 2,071 $ 391,000 - $ 424,000 Close Out - Est. 12/03 Huntington Collection Orange County 95 3,445 - 4,004 $ 656,000 - $ 730,000 Closed Out 12/02 Windward Orange County 47 3,269 - 4,271 $1,200,000 - $1,400,000 Closed Out 1/03 Wescott Orange County 101 1,718 - 2,007 309,000 - 339,000 Closed Out 7 /02 Tiburon Orange County 70 1,547 - 2,045 $ 357,000 - 392,000 Closed Out 12/02 Arbor age Orange County 104 1, 762 - 2, 123 $ 444,000 - $ 489,000 Opening Est. 11/Cff $ Loma LindaCo urt San Bernardino County 38 1,706 - 2,200 $ 181,000 - 204,000 Closed Out 2/02 North Glen San Bernardino County 77 2,516 - 2,885 $ 289,000 - $ 309,000 Closed Out 9/02 North Glen II San Bernardino County 38 2,516 - 2,885 346,000 - $ 368,000 Close Out - Est. 9/f)3i Evening Star San Bernardino County 83 1,618 - 2,343 $ 220,000 - 250,000 Close Out - Est. 2/04 Providence Riverside County 85 2, 297 - 2, 589 $ 223,000 - 234,000 Closed Out 11/02 Madison Riverside County 71 2, 516 - 2, 885 $ 224,000 - $ 246,000 Closed Out 12/02 Somerset Riverside County 98 3, 138 - 4, 122 $ 305,000 - $ 338,000 Close Out - Est. 7 /03 Meadows at Loring Ranch Riverside County 111 1,618 - 2,343 203,000 - 225,000 Close Out - Est. 7 /03 Elsinore Terrace Riverside County 89 1,953 - 2,330 225,000 - 242,000 Close Out - Est. 4/03 Daybreak at Moreno Valley Riverside County 99 2, 713 - 3,340 $ 237,000 - $ 269,000 Close Out - Est. 3/04 Sun stone Riverside County 82 2,516 - 2, 885 $ 260,000 - $ 282,000 Closed Out 1/03 Brookside Riverside County 81 2,509 - 2,867 $ 259,000 - $ 286,000 Closed Out 12/02 Citrus Point Riverside County 83 1,758 - 2,000 $ 212,000 - 225,000 Close Out - Est. 7/05 Terrace Grove Riverside County 79 2,262 - 2,842 $ 240,000 - $ 262,000 Close Out - Est. 7/05 Lake Ridge Riverside County 127 1,771 - 2,739 $ 226,000 - $ 271,500 Close Out- Est. 11/04

29 General Description Location: The property within the District is located in the City of Perris, County of Riverside, State of California west of Goetz Road and south of Ethanac Road. The District consists of 112 lots (Tract Map 28986-3) of the overall 312 lot Chaparral Ridge project. The 112 lots in the District are proposed to be developed in a single neighborhood. Home sizes in the District are expected to range from approximately 2, 100 square feet to over 2,900 square feet in four floorplans.

Ownership: As previously mentioned, all the property within the District is currently owned by RichmondAmerican Homes.

The Developer 's predecessor, Riverview Estates Associates, LLC, a California limited liability company ("Riverview"), completed the grading in the entire project. Approximately 60% of all o:ffsite improvements are completed. Richmond American Homes is expected to construct all the homes within the District. Richmond American Homes has started construction on the first 14 homes and expects to be completed by November 2003. Richmond American expects to complete all 112 homes by June 2005.

In that portion of the Chaparral Ridge development outside theDis trict, consisting of the remaining 200 lots, Riverview has constructed 5 model homes and 61 production homes which have been sold to individual homebuyers and all escrows have closed. There is no standing inventory at this time. Further, Riverview has released another 53 homes for sale, of wh ich 50 are currently in escrow. Construction of the first 32 of these homes commenced April 21, 2003 and are expected to be complete and occupied by September 2003. Construction on the next 21 homes is expected to commence in June 2003 and be ready for occupancy by November 2003. Riverview first opened models and commenced selling homes in late May 2002 and has, to date, sold 101 homes (including the 50 homes which have yet to close escrow) for an average absorption rate of over 10 homes per month. Riverview expects to be complete on its 200 homes by September 2004.

The Development Plan The following summarizes the proposed development in the District:

Type of Development: 112 single familydetached homes in one neighborhood.

Development Status/ Entitlements/Permits: Tentative tract map for entire project and final maps for all phases (28986-1, -2, -3 and final) have all been recorded. All off site improvements are approximately 60% complete. Grading has been completed on all lots, permits for all in-tract improvements have been issued. Work can commence upon close of escrow as grading is completed. Building permits for construction of 67 homes (including the 4 models) have been issued by the City of Perris and 10 homes (including the 4 models) are under construction.

Additional Gov. Approvals Required: None

Development Program: All 112 homes to be built by Richmond American Homes.

Construction Financing: To be fundedby Richmond American Homes (see "The Financing Plan" below).

30 Size: 43.45 acres Est. Lot Sizes: Minimum 7,200 square feet, averaging in excess of 9,500 square feet.

Est. Base Prices: $245,000 to $279,000 Absorption Period: Close out June 2005 (approximately 60 units per year)

The Financing Plan Richmond AmericanHomes has financedthe acquisition of the property in the District and construction of the project through internal sources. Richmond American Homes intends to finance home construction costs through internal sources and proceeds of sales of completed homes to homeowners. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete the planned development in the District, the project may not be fully developed as planned, if at all. WhileRichmond American Homes has made such internalfinancing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Richmond American Homes, not its parent company, MDC, has any legal obligation of any kind to Bondownersto make any such funds available or to obtain loans. Other than pointing out the willingness of Richmond American Homes to provide internal financing in the past, Richmond American Homes has not represented in anyway that it will do so in thefut ure. As of April 21, 2003, the estimated cost to develop the lots to the stage of finishedlots ready to build homes is as follows: Description Estimated Cost Land Cost $ 7,280,000.00 In-Tract Improvements $ 2,105,600.00 Fees at Building Permit $ 2,240,000.00* Engineering/Land Consultants $ 246,400.00 Total $11,648,000.00

Fees are to be paid by theDeveloper at the time of issuanceof building permits or certificatesof occupancy. The fees are the estimated total feesand not a net number after funding out of District bond proceeds. History of Property Tax Payment; Loan Defaults; Bankruptcy. The Developer has made the following representation: (a) the Developer has never defaulted in a material amount or manner in payment of, and is not currently delinquent in the payment of, any ad valorem property taxes, special assessments or special taxes in anymaterial amount or manner related to theDistrict ;

(b) the Developer is not currently in material default on any loans, lines of credit or other obligation related to its development in theDis trict, and

31 ( c) there is no litigation of any nature in which the Developer has been served, or to its actual knowledge, pending or threatened, wh ich if successful, would materially adversely affect the ability of the Developer to complete the development and sale of the property currently ownedwithin the District or to pay District special taxes or ad valorem tax obligations when due on its property within the District. For the purposes of this Official Statement, the actual knowledge of the Developer means the actual knowledge of Robert T. Shiota and Jon Sasaki, Regional President and Regional Vice President of Finance, respectively, of the Developer.

Facilities Cost Estimates The cost estimates forthe Facilities authorized to be financedby the District is based upon current dollars with no provision for escalation. The following table summarizes the authorized Facilities which are expected to be designed, acquired or constructedthrough the District financing.

TABLE N0. 1 CITY OF PERRIS COMMUNITYFA CILITIES DISTRICT NO. 2003-1 (Chaparral Ridge) FACILITIESCOSTS (Estimated Costs)

Facilities Estimated Costs Police, Fire & Library Facilities $ 145,376 Park Facilities 209,440 Street Improvements 554,530 Water/Sewer Facilities 592,667 School Facilities 791,298 Total Project Costs $2,283,311

Substitution of Facilities. The description of the Facilities, as set forthherein, is general in its nature. The final nature and location of the Facilities will be determined upon thepreparation of final plans and specifications. The final plans may show substitutes in lieu of, or modification to, the proposed Facilities in order to provide the public facilities necessitated by development occurring in the District, and any such substitution shall not be a change or modification in the proceedings as long as such substitute facilities serve a function or provide a service substantially similar to that function served or the service provided by theFacilities.

The Appraisal All estimates and projections included in the Appraisal are characterized as reasonably professional opinions based on known data and information available as of their date. The estimates are not intended to represent guarantees of future sales rates or resale value. Future value of the land within the District can be expected to fluctuatedue to many different, not fullypredictable, real estaterelated investmentrisk factors (see "BONDOWNERS'RISKS - Land Values" herein).

32 DEBT STRUCTURE Outstanding Indebtedness The District will not have any other indebtedness securedby the Special Taxes. No Additional Obligations Pursuant to the provisions of the Fiscal Agent Agreement, the District is only authorized to issue additional parity bonds for the purpose of refunding the Bonds. The District may issue bonds on a subordinate basis to the Bonds. On the Closing Date, the District will enter into a Subordinate Indenture to provide for the issuance of a Subordinate Bond to fm ance the cost of certain facilities for Romoland. The payment of debt service on the Subordinate Bond is subordinate to Debt Service payments for the Bonds.

33 Direct and Overlapping Debt Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc., as of May 1, 2003. The Debt Report is included for general information purposes only. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations are not payable from District Special Taxes nor are they necessarily obligations secured by property within the District. In many cases, long-term obligations issued by a public agency are payable only from thegeneral fund or other revenues of such public agency. Presently, the property within the District is subject to $1,898 of direct and overlapping tax and assessment debt and overlapping general fund obligation debt, a figure which excludes the Bonds (see table below). To repay the direct and overlapping tax and assessment debt and overlapping lease obligation debt, the property owners of the land within the District must pay the annual SpecialTax and the general property tax levy. In addition, other public agencies whose boundaries overlap those of the District could, without the consent of the District, and in certain cases without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the real property within the District in order to finance public improvements or services to be located or furnishedinside of or outside of the District. The lien created on the real property within the District through the levy of such additional taxes or assessments may be on a parity with the lien of theSpecial Taxes. The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Tax and increases the possibility that foreclosure proceeds, if any, will not be adequate to pay delinquent Special Taxes. TABLE N0. 2 CITYOF PERRIS COMMUNITYFA CILITIES DISTRICT NO. 2003-1 (Chaparral Ridge) 2002-03 Local Secured Assessed Valuation: $79,486

DIRECTAND OVERLAPPING TAX AND ASSESS:MENT DEBT: % Applicable Debt 5/1/03 Metropolitan Water District 0.00001% $ 44 Perris Union High School District 0.002 312 City of Perris Community Facilities District No. 2003-1 100. -(1) TOTALDIRECT ANDOVERLAPPING TA X AND ASSESSrvlENTDEBT $356

OVERLAPPINGGENERAL FUND OBLIGATION DEBT: Riverside County General Fund Obligations 0.001% $ 645 Riverside County Board of Education Certificates of Participation 0.001 14 Perris Union High School District Certificates of Participation 0.002 398 Perris School DistrictCertificates of Participation 0.009 485 TOTAL GROSS OVERLAPPING GENERAL FUND OBLIGATION DEBT $1,542 Less: Riverside County Administrative Center Authority (100% self-supporting from tax increment revenues) --12 TOTAL NET OVERLAPPING GENERAL FUND OBLIGATION DEBT $1,513

GROSS COMBINEDTOTAL DEBT $1,898 (2) NET COMBINEDTOT AL DEBT $1,869

( 1 ) Excludes Mello-Roos Act bonds to be sold. (2) Excludes taxand revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

Ratios to 2002-03 Assessed Valuation: Direct Debt ...... - % Total Direct and Overlapping Taxand Assessment Debt...... 0.45% Gross Combined Total Debt ...... 2.39% Net Combined Total Debt ...... 2.35%

STATE SCHOOL BUILDINGAID REP AYABLE AS OF 6/30/02: $0 Source: CaliforniaMu nicipal Statistics, Inc.

34 Scheduled Debt Service on the Bonds Thefollowing is thescheduled Debt Serviceon theBonds. Interest Pal'.mentDate Princinal Counon Interest Annual Debt Service March 1, 2004 $ 114,196.25 September 1, 2004 94,725.00 $ 208,921.25 March 1, 2005 94,725.00 September 1, 2005 94,725.00 189,450.00 March 1, 2006 94,725.00 September 1, 2006 94,725.00 189,450.00 March 1, 2007 94,725.00 September 1, 2007 $ 5,000.00 5.250% 94,725.00 194,450.00 March 1, 2008 94,593.75 September 1, 2008 10,000.00 5.250% 94,593.75 199,187.50 March 1, 2009 94,33 1.25 September 1, 2009 15,000.00 5.250% 94,331.25 203,662.50 March 1, 20 10 93,937.50 September 1, 2010 20,000.00 5.250% 93,937.50 207,875.00 March 1, 201 1 93,412.50 September 1, 2011 25,000.00 5.250% 93,412.50 211,825.00 March l, 2012 92,756.25 September 1, 2012 30,000.00 5.250% 92,756.25 215,512.50 March 1, 2013 91,968.75 September 1, 2013 35,000.00 5.250% 91,968.75 218,937.50 March 1, 2014 91,050.00 September 1, 2014 40,000.00 5.250% 91,050.00 222,100.00 March 1, 2015 90,000.00 September 1, 2015 50,000.00 6.250% 90,000.00 230,000.00 March 1, 2016 88,437.50 September 1, 2016 55,000.00 6.250% 88,437.50 231,875.00 March 1, 2017 86,718.75 September 1, 2017 65,000.00 6.250% 86,718.75 238,437.50 March 1, 20 18 84,687.50 September 1, 2018 70,000.00 6.250% 84,687.50 239,375.00 March 1, 2019 82,500.00 September 1, 2019 80,000.00 6.250% 82,500.00 245,000.00 March 1, 2020 80,000.00 September 1, 2020 90,000.00 6.250% 80,000.00 250,000.00 March 1, 2021 77,187.50 September 1, 2021 100,000.00 6.250% 77,187.50 254,375.00 March 1, 2022 74,062.50 September 1, 2022 115,000.00 6.250% 74,062.50 263,125.00 March 1, 2023 70,468.75 September 1, 2023 125,000.00 6.250% 70,468.75 265,937.50 March 1, 2024 66,562.50 September 1, 2024 140,000.00 6.250% 66,562.50 273,125.00 March 1, 2025 62,187.50 September 1, 2025 155,000.00 6.250% 62,187.50 279,375.00 March 1, 2026 57,343.75 September 1, 2026 170,000.00 6.250% 57,343.75 284,687.50 March 1, 2027 52,03 1.25 September 1, 2027 185,000.00 6.250% 52,031.25 289,062.50 March 1, 2028 46,250.00 September 1, 2028 205,000.00 6.250% 46,250.00 297,500.00 March 1, 2029 39,843.75 September 1, 2029 220,000.00 6.250% 39,843.75 299,687.50 March 1, 2030 32,968.75 September 1, 2030 240,000.00 6.250% 32,968.75 305,937.50 March 1, 2031 25,468.75 September 1, 203 1 255,000.00 6.250% 25,468.75 305,937.50 March 1, 2032 17,500.00 September 1, 2032 270,000.00 6.250% 17,500.00 305,000.00 March 1, 2033 9,062.50 September 1, 2033 290,000.00 6.250% 9,062.50 308,125.00

35 SUMMARY OF THE LEGAL DOCUMENTS THEFISCAL AGENT AGREEMENT The fo llowing is a summary of certain provisions of the Fiscal Agent Agreementap plicable to the Bonds and does not purport to be a complete restatement thereof Reference is hereby made to the Fiscal Agent Agreement fo r fu rther information in this regard. Copies of the Fiscal Agent Agreement are available from the City upon request upon paymentof a charge fo r copying, handling and mailing.

Funds and Accounts; Flow of Funds Pledge of Special Tax Revenues. All of the Special Tax Revenues and all moneys deposited in the Bond Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund are pledged to secure the repayment of the Bonds. Such pledge shall constitute a first lien on the Special Tax Revenues and said amounts. The Special Tax Revenues and all moneys deposited into said 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 have been set aside irrevocably for that purpose in accordance with the Fiscal Agent Agreement.

Amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund are not pledged to the repayment of the Bonds. The Facilities 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.

Special Tax Fund.

Establishment of Special Tax Fund. There is established under the Fiscal Agent Agreement a separate fund to be held by the Fiscal Agent, designated as the "Special Tax Fund," to the credit of which the District or the City, on behalf of the District, shall deposit, immediately upon receipt, all Special Tax Revenues received by the District or the City on behalf of the District and any amounts required by the Fiscal Agent Agreement to be deposited therein. Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the District and the Owners of the Bonds, shall be disbursed as provided in the Fiscal Agent Agreement and shall be subject to a lien in favorof the Owners of the Bonds.

Disbursements. After depositing an amount of Special Tax Revenues budgeted for Administrative Expenses to the Administrative Expense Fund pursuant to a written direction of the District, no later than ten ( I 0) Business Days prior to each Interest Payment Date as determined by the District, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer (i) to the Bond Fund (a) an amount equal to any prepayments of Special Taxes (to be used to redeem Bonds on the next Interest Payment Date for which notice of redemption can timely be given), and (b) delinquent payments of Special Taxes (including the proceeds of any foreclosure action to enforce the lien of the Special Taxes) to the extent of any past due instalhnents of principal, interest and premium on the Bonds (including any interest thereon pursuant to the Fiscal Agent Agreement), (ii) to the Bond Fund an amount, taking into account anyamounts then on deposit in the Bond Fund (other than by reason of the preceding clause (i)) such that the amount in the Bond Fund equals the principal, premium, if any, and interest due on the Bonds on the next Interest Payment Date, and (iii) to the Fiscal Agent for deposit in the Reserve Account an amount, taking into account amounts then on deposit in the Reserve Account, such that the amount in the Reserve Account equals the Reserve Requirement.

36 Notwithstanding theforegoing, amounts constituting prepayments of Special Taxes shall be transferredby theTreasurer to the Fiscal Agent, and placed by theFiscal Agent in a segregatedaccount withinthe Bond Fund designated as "Prepayment Account" and used to redeem Bonds pursuant to the Fiscal Agent Agreement. Investment. Moneys in the Special Tax Fund shallbe invested and deposited in accordance with the Fiscal Agent Agreement. Interest earnings andprofits resulting from such investment and deposit shall be retained in the Special Tax Fundto be used forthe purposes thereof. Improvement Fund. Establishment of Improvement Fund. There is established under the Fiscal Agent Agreement a separate fund to be held by the Fiscal Agent, designated the "the Improvement Fund," to the credit of which a deposit shall be made as required thereunder. Moneys in the Improvement Fund shall be held in trust by the Fiscal Agent for the benefit of the City and the District and shall be disbursed, except as otherwise provided in the Fiscal Agent Agreement, for the payment or reimbursement of costs of Facilities. CityAccount. There is established a separate account in the Improvement Fund designated as the "City Account", to the credit of which a deposit shallbe made as required by the Fiscal Agent Agreement. Moneys in the City Account shall be held intrust bythe Fiscal Agent forthe benefit of the City and the District and shall be disbursed, except as otherwise provided in the Fiscal Agent Agreement, for the payment or reimbursement of the cost of construction andacquisition of the Facilities. Romoland Account. There is established a separate account in the Improvement Fund designated as the "RomolandAccount", to thecredit of which a deposit shall be made as required by the Fiscal Agent Agreement. Moneys in the Romo land Account shall be held in trust by the Fiscal Agent forthe benefit of the District and the Romoland School District ("Romoland") and shall be disbursed as provided in the Fiscal Agent Agreement to finance the cost of construction and acquisition of certain public school facilities ofRomoland ("Romoland Facilities").

EMWD Account. There is established a separateaccount in theImprovement Fund designated as the "EMWD Account", to the credit of which a deposit shall be made as required by the Fiscal Agent Agreement. Moneys in the EMWD Account shall be held in trust by the Fiscal Agent for the benefit of the District and the Eastern Municipal Water District ("EMWD") and shall be disbursed as provided in theFiscal Agent Agreement to financethe cost of construction and acquisition of certain sewer facilities and water facilities ofEMWD ("EMWD Facilities"). Disbursement. Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer's Certificate stating that (1) the conditions to therelease of such funds have been satisfied, (2) the name of the person to whom payment is due, (3) the amount to be paid, (4) the purpose forwhich the obligation to be paid was incurred, and(5) therehas not been filedwith or served uponthe Districtnotice of any lien, right to lien or attachment, stop notice or claim affecting the rightto receive payment of, any of the moneys payable to any of the persons named in such certificate or written requisition, which has not been released or will not be released simultaneouslywith the payment of, such obligation, otherthan materialmen's or mechanic'sliens accruing by mere operation of law. Investment. Moneys in the Improvement Fund shall be invested and deposited by the Fiscal Agent in accordance with the Fiscal Agent Agreement. Interest earnings and profits from such investment and deposit shall be transferred for deposit in the Bond Fund to be used for the purposes of such fund. Interest earnings and profits on moneys held in individual accounts within the Improvement Fund shall remain within each respective account and be disbursed pursuant to the Fiscal Agent Agreement to finance the Facilities, Romoland Facilities and/or EMWD Facilities, as applicable, until all such funds

37 have been disbursed. Upon receipt of a written request :fromthe Developer, the Fiscal Agent may transfer funds among the various accounts held within the Improvement Fund.

Administrative Expense Fund.

Establishment of the Administrative Expense Fund. There is established under the Fiscal Agent Agreement a separate fund to be held by the Fiscal Agent, designated as the "Administrative Expense Fund," to the credit of which the amount budgeted and levied forAdministrative Expenses shall be made. Moneys in the Administrative Expense Fund shall be held in trust by the Fiscal Agent for the benefit of the District, andshall be disbursed as provided in the Fiscal Agent Agreement.

Disbursements. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent andpaid to the District or the City or its order upon receipt by the Fiscal Agent of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense, and the nature of such Administrative Expense.

Annually, at least five (5) days prior to the last day of each Bond Ye ar, the Fiscal Agent shall withdraw any amounts then remaining in the AdministrativeExpense Fund thathave not been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered or expected to be needed forthe purposes of such fund, and transfer such am ounts to the Special Tax Fund, or, to the extent necessary, to the Reserve Account an amount necessary to replenish the Reserve Account to the Reserve Requirement, and thereafterto the Special Tax Fund.

Investment. Moneys in the Administrative Expense Fund shall be invested and deposited in accordance with the Fiscal Agent Agreement. Interest earnings and profits resulting fromsa id investment shall be retained by the Treasurer in the Administrative Expense Fund to be used for the purposes of such fund.

Costs of Issuance Fund. There is established under the Fiscal Agent Agreement a separate fund to be held by the Fiscal Agent designated as the "Costs of Issuance Fund" into which shall be deposited the amounts set forth in the Fiscal Agent Agreement. The moneys in the Costs of Issuance Fund shall be used to pay Costs of Issuance from time to time upon receipt of a Requisition of the District. On the date which is one hundred eighty (180) days following the Closing Date, or upon the earlier receipt by the Fiscal Agent of a written request of the District stating that all Costs of Issuance have been paid, the Fiscal Agent shall transfer all remaining amounts in the Costs of Issuance Fund to be deposited in the Bond Fund.

Bond Fund.

Establishment of the Bond Fund. There is established under the Fiscal Agent Agreement a separate fun d to be held by the Fiscal Agent, designated as the "Bond Fund" to the credit of which deposits shall be made as required by the Fiscal Agent Agreement and any other amounts required to be deposited therein by the Act. Moneys in the Bond Fund shall be held intr ust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.

Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw fromthe Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, then due and payable on the Bonds, including any amounts due under the Fiscal Agent Agreement; provided that available amounts in the Bond Fund shall first be used to pay any past due installments of interest, principal (including mandatory sinking payments) of and premium, if any, on the Bonds, in that order. Notwithstanding the foregoing, amounts transferred to the Bond Fund from the Special Tax Fund constituting delinquent payments of Special Taxes pursuant to the Fiscal Agent Agreement shall

38 immediately be paid to the Owners of the Bonds in respect of past due payments on the Bonds, and amounts transferred to the Bond Fund from the Special Tax Fund constituting prepayments of Special Taxes pursuant to the Fiscal Agent Agreement shall be deposited in a segregated account within the Bond Fund designated as the "Prepayment Account" andused to redeem Bonds pursuant to the Fiscal Agent Agreement. If afterthe foregoing tra nsfers, thereare insufficient funds in the Bond Fund to make payments of the principal of, and interest and any premium due andpayable on the Bonds, the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal and any mandatory sinking payments due on the Bonds. Any installment of principal (including mandatory sinking payments), premium, if any, or interest on the Bonds which is not paid when due shall accrue interest at the rate of interest on the Bonds until paid, andshall be paid whenever funds inthe Bond Fund are sufficient therefor.

If at any time theFiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, the Fiscal Agent shall notify the District and the Treasurer in writing of such failure, and the Treasurer shall notify theCalifornia Debt andInves tmentAdvisory Commis sion of such failure within 10 days of the failureto make such payment, as required by Section 53359(c)(l) of the Act. Capitalized Interest Account. There is establishedby the Fiscal Agent Agreement a separate account within the Bond Fund, designated as the "Capitalized Interest Account", to the credit of which a deposit shall be made as required by the Fiscal Agent Agreement. Moneys in the Capitalized Interest Account will be held by the Fiscal Agent and used and withdrawn solely for the purpose of paying the interest on the Bonds as it becomes due and payable. ReserveAccount. There is established under the Fiscal Agent Agreement a separate account within the Bond Fund, designated as the "Reserve Account," to the credit of which a deposit shall be made as required by the Fiscal Agent Agreement. The Reserve Account shall be funded and maintained at the ReserveRequirement. In the event thatthe Fiscal Agent has actual knowledge that theamount on deposit in the Reserve Account at any time becomes less thanthe Reserve Requirement, the Fiscal Agent shall promptly notify the District of such fact. Promptly upon receipt of any such notice, the District shall transfer to the Fiscal Agent an amount of available Special Tax Revenues sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. Amounts in the Reserve Account shall be used andwithdrawn by the Fiscal Agent solely forthe purpose of making transfers to the Bond Fund, on any date which the principal of or interest on the Bonds becomes due and payable under the Fiscal Agent Agreement, in the event of any deficiency at any timein such fi.md, or at any time for theretirement of all the Bonds then Outstanding. So long as no Event of Default shall have occurred and be continuing under the Fiscal AgentAgreement, any amount in the ReserveAccount in excess of the Reserve Requirement on the Business Day preceding each Interest Payment Date shall be withdrawn from the Reserve Account by the Fiscal Agent and deposited in the Bond Fund.

TheReserve Account may be maintained in theform ofone or more separate sub-account s which are established for the purpose of holding the proceeds of separate issues of the Bonds in conformity with applicable provisions of the Code.

Limited Obligation. All obligations of the District under the Fiscal Agent Agreement and the Bonds shall be special obligations of the District, payable solely fromthe Special Tax Revenues and the fi.mds pledged therefore under the Fiscal AgentAgreement . Neitherthe faith and credit nor thetaxing power of the District(except to thelimited extent set forthin the FiscalAgent Agreement) or the State of California or any political subdivision thereofis pledged to thepayment of theBonds.

39 Certain Covenants of the District Punctual Payment. The District will punctually pay or cause to be paid the principal of, and interest and any premium on, the Bonds when and as due in strict conformity with the terms of the Fiscal Agent Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Agreements and of the Bonds.

Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the District shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or fimding said claims for interest or in any other manner. In case any such claim forinterest shall be extended or funded, whether or not with the consent of theDistrict, such claim for interest so extended or funded shall not be entitled, in case of default under the Fiscal Agent Agreement, to the benefits of the Fiscal Agent Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have so extended or funded.

Against Encumbrances. The District will not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien created under the Fiscal Agent Agreement for the benefit of the Bonds, except as permitted therein.

Books and Records. The District will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund and theSpecial Tax Fund and relating to the Special Tax Revenues. Such books of record and accounts shall at all times during business hours and upon reasonable prior notice be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of theBonds then Outstanding, or their representatives duly authorized in writing.

The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Bond Fund, the Reserve Account and the Costs of Issuance Fund. Such books of record and accounts shall at all times during business hours and upon reasonable prior notice be subject to the inspection of the City, the District and the Owners of not less than ten percent ( 10%) of theprincipal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

Protection of Security and Rights of Owners. The Districtwill preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the District, the Bonds shall be incontestable by theDistrict .

Compliance with Law, Completion of Facilities. The District and the City will comply with all applicable provisions of theAct and law in completing the acquisition and construction of the Facilities.

Collection of Special Tax Revenues. The District shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. On or within five (5) Business Days of each June 1, the Fiscal Agent shall provide the Treasurer with a notice stating the amount then on deposit in the Bond Fund within the Special Tax Fund, and informing the District that the Special Taxes may need to be levied pursuant to the Ordinance as necessary to provide for Annual Debt Service, replenishment of the Reserve Account as provided in the Fiscal Agent Agreement and Administrative Expenses. The receipt of such notice by the

40 Treasurer shall in no way affect the obligations of theTreasurer under the following three paragraphs. In any event, on or about July 10 of each year, theTreasurer shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are· to be levied, ta1cing into account any parcel splits during the preceding and then current year. TheTreasurer shall effect the levy of the Special Taxes each Fiscal Ye ar on the parcels within the District in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which theAuditor will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, the Treasurer shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next secured tax roll.

The Treasurer shall fixand levy the amount of Special Taxes within the District required forthe payment of principal of and interest on any outstandingBonds of the District becoming due and payable during the ensuing year, an amount necessary to replenish theReserve Account to the Reserve Requirement and an amount estimated to be sufficient to pay the Administrative Expenses during such year, all in accordance with theRMA and the Ordinance. TheSpecial Taxes so levied shall not exceed the authorizedamounts as provided in theproceeding s pursuant to the Resolution of Formation. Tax Covenants. Whenused in thefoll owing paragraphs, thefollowing term s have the followingmeanings: "Code " means the Internal Revenue Code of 1986. "Computation Date " has themeaning set forth sectionin 1.148-1 (b) of theTax Regulations. "Gross Proceeds " means any proceeds as defined in section 1.148-l(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any replacement proceeds as defined in section 1.148-l(c) of the Tax Regulations, of theBonds. "Investment" has the meaningset forth in section 1.148-l(b) of theTax Regulations. "Rebate Amount" has the meaning set forthin section 1.148-l(b) of the Tax Regulations. "Tax Regulations " means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code, or section 103 of the 1954 Code, as applicable. "Yield" of any Investment has the meaning set forthin section 1.148-5 of the Tax Regulations; and of any issue of governmental obligations has the meaning set forth in section 1.148-4 of the Tax Regulations. No Arbitrage. Except as would not cause the Bonds to become "arbitrage bonds" within the meaning of section 148 of the Code and the Tax Regulations andrulin gs thereunder, the District will not (and shall not permit any person to), at any time prior to the final cancellation of the last Bond to be retired, directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment theYield of any Investment acquired with Gross Proceeds, whether then held or previously disposed of, would materially exceed theYi eld of theBonds withinthe meaningof said section 148. Maintenance of Tax-Exemption. The District covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other amounts ( or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a mannerthat if made or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to section 103(a) of the Code fromthe gross income of the ownerthereof for federal income tax purposes.

41 Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f)of the Code and the Tax Regulations: (1) the District shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least sixyears after the day on which the last Bond is discharged. However, to the extent permittedby law, the District may commingle ( and may allow the City to commingle) Gross Proceeds of Bonds with its other monies, provided that it separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith; (2) not less frequently than each Computation Date, the District shall calculate the Rebate Amount in accordance with rules set forth in section 148(±) ofthe Code and the Tax Regulations andrulings thereunder. The District shall maintain a copy of the calculation with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date; and (3) in order to assure the excludability pursuant to Section 103(a) of the Code of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, the District shall pay to the United States the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of the Final Computation Date as defined in section 1.148- 3( e)(2) of the Tax Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in thecase of any otherComputat ion Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the District at the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by section 148(f)of the Code and the Tax Regulations and rulings thereunder forexecution and filing by the District. Notwithstanding the foregoing, and provided that the District takes all steps available to it to cause the provision of such amounts, the monetary obligation of the City descrobed under this paragraph shall be limited to amounts provided to it forsuch purpose by the District.

Covenant to Foreclose. The District will review the public records of the County of Riverside, California, in connection with the collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with respect to individual delinquencies, if the District determines that any single property owner subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of $5,000 or more or that as to any single parcel the delinquent Special Taxes represent more than 5% of the aggregate Special Taxes within the District, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the Superior Court within 90 days of such determination against any property forwhich the Special Taxes remain delinquent.

Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosurerelated to delinquent Special Taxes:

(A) The City, or the Fiscal Agent, is expressly authorized under the Fiscal Agent Agreement to credit bid at any foreclosure sale, without any requirement that funds be placed in the Bond Fund or otherwise be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of the Act or such less amount as determined under clause (B) below or otherwise under Section 53356.6 of the Act.

(B) The District may permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specifiedin Section 53356.5 of theAct (but not for less than the amount of delinquent scheduled principal and interest without written consent of the Bon downers), if it determines that such sale is in the interest of the Bondowners. The Bondowners, by their acceptance of the Bonds, consent to such sale for such lesser amounts ( as such consent is described in Section 53356.6 of the Act), and release the District, the City, andtheir respective officers and agents from any liability inconnection therewith.

42 (C) The District is expressly authorized widerthe Fiscal Agent Agreement to use amounts in the Special Tax Fund to pay costs of foreclosureof delinquent Special Taxes. (D) The District may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in the District, so long as the Districtdetermi nes that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on theBonds under the Fiscal AgentAgreement.

Investments; Disposition of Investment Proceeds Deposit and Investment of Moneys in Funds. Moneys in any fundor accowitcreated or established by the Fiscal Agent Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filedwith the Fiscal Agent at least two (2) Business Days in advance of themaking of such investments.

The Fiscal Agent or the Treasurer, as applicable, shall sell at the highest price reasonably obtainable, or present forredemption, any investment securitywh eneverit shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited and neitherthe Fiscal Agent nor the Treasurer shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance with theFiscal Agent Agreement.

Events of Default and Remedies of Bond Owners Events of Default. The followingevents shallbe Events of Default: 1. Failure to pay any installment of principal of any Bonds when and as the same shall become due and payable, whether at maturity as thereinexpre ssed, by proceedings forredemption or otherwise.

2. Failure to pay any installment of intereston any Bonds when and as the same shall become due andpaya ble. 3. Failure by the District to observe and perform any of the other covenants, agreements or conditions on its partin the Fiscal Agent Agreement or in the Bonds contained, if such failure shall have continued for a period of 60 days after written notice thereof, specifying such failure and requiring the same to be remedied, shall have been givento theDistrict by the Fiscal Agent or the Owners of not less than25% in aggregateprincipal amount of theBonds at thetime Outstanding;prov ided, however, if in the reasonable opinion of theDis trictthe failure stated in the notice can becorrected, but not within such 60 day period, such failure shall not constitute an Event of Default if corrective action is instituted by the · District within such 60 day periodand the District shall thereafter diligently and in good faith cure such failure in a reasonable period of time.

4. Commencement by the Districtof a voluntary case underTitle 11 of the United States Code or any substitute or successor statute. Remedies of Bond Owners. Subject to theprovi sions of the Fiscal AgentAgreement, any Bond Owner shall have the right, for the equal benefit and protection of all Bond Owners similarly situated: (1) by mandamus, suit, action or proceeding, to compel the District and its officers, agents or employees to perform each and every term, provision and covenant contained in the Fiscal Agent Agreement and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the District and the fulfillment of all duties imposed upon it by theAct; (2) by suit, action or proceeding in equity, to enj oin any acts or things which are unlawful, or the violation ofany of the Bond Owners' rights; or (3) upon the happening of any Event of Default, by suit, actionor proceeding in any court of competent jurisdiction, to require the District and its officers and employees to account as if it and they were the trustees of an express trust.

43 Application of Special Ta xes and Other Funds After Default. If an Event of Defaultshall occur and be continuing, all Special Taxes, including any penalties, costs, fees and other charges accruing under the Act, and any other funds then held or thereafter received by the Fiscal Agent under any of the provisions of the Fiscal Agent Agreement shall be applied by the Fiscal Agent as follows and in the followingorder :

To the payment of any expenses necessary in the opinion of the Fiscal Agent to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Fiscal Agent (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Fiscal Agent Agreement;

To the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Fiscal AgentAgreement, as follows:

First: To the payment to the Persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficientto pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the Persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in fullall the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference.

Any remaining fundsshall be transferred by the Fiscal Agent to the Bond Fund.

The Fiscal Agent Removal of Fiscal Agent. So long as there is no Event of Defaultunder the Fiscal Agent Agreement, the District may remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank or trust company having a combined capital (exclusive of borrowed capital) and smplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of the Fiscal Agent Agreement, combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

If no appointment of a successor Fiscal Agent shall be made pursuant to the provisions of the Fiscal Agent Agreement within forty-five (45) days after the Fiscal Agent shall have given to theDistrict written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Bondowner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, aftersuch notice, if any, as such court may deem proper, appoint a successor Fiscal Agent.

Modificationor Amendment of the Fiscal AgentAgreement Amendments Permitted. The Fiscal Agent Agreement and the rights and obligations of the District and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent withouta meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Fiscal Agent Agreement. No such modification or

44 amendment shall (i) extend the maturity of anyBond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the District to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the District of any pledge or lien upon the Special Taxes superior to or on a paritywith the pledge and lien created for thebenefit of the Bonds ( except as otherwise permitted by the Act, the laws of the State of California or the Fiscal Agent Agreement), or reduce thepercentage of Bonds required forthe amendment thereof. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent.

The Fiscal Agent Agreement and therights and obligations of theDi strict and of the Owners may also be modifiedor amended at any timeby a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only forany one or more of the following purposes:

(A) to add to the covenants and agreements of theDi strict in the Fiscal Agent Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power in theFiscal Agent Agreement reserved to or conferred upon theDi strict;

(B) to make modifications not adversely affecting any outstanding series of Bonds of theDi strict in any material respect;

(C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defectiveprov ision contained in the Fiscal Agent Agreement, or in regard to questions arising under the Fiscal Agent Agreement, as the District and the Fiscal Agent may deem necessary or desirable and not inconsistent with the Fiscal Agent Agreement, and which shall not adversely affect the rights of theOwners of the Bonds;

(D) to make such additions, deletions or modifications as may be necessary or desirable to assure the exclusion from gross income forfederal incometax purposesof interest on theBonds.

Procedure forAmendment with Written Consent of Owners. The District and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of the Fiscal Agent Agreement or any Supplemental Agreement, to the extent that such amendment is permittedby the Fiscal Agent Agreement, to takeeffect when and as provided therein. copyA of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as provided in the Fiscal Agent Agreement.

Such Supplemental Agreementshall not become effective unless there shall be filedwith the Fiscal Agent the written consents of the Owners of at least sixty percent ( 60%) in aggregate principal amount of the Bonds then Outstanding ( exclusive of Bonds disqualifiedas provided in theFiscal Agent Agreement) and a notice shall have been mailed as provided in theFiscal Agent Agreement.

Miscellaneous Discharge of Agreement. The District shall have the option to pay and discharge theentire indebtedness on all or any portion of the Bonds Outstanding inany one or more of the followingways :

(A) by well and truly paying or causing to be paid theprincipal of, and interest and any premium on, such Bonds Outstanding, as and whenthe same become due and payable;

(B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amountsthen on deposit in thefunds and accountspro vided forin the Fiscal Agent Agreement is fully sufficientto pay such Bonds Outstanding, including all principal, interest and redemption premiums; or

45 (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities and/or investments described in clause (10) of the definition of Permitted Investments in such amount as the District shall determine as confirmedby Bond Counsel or an independent certifiedpublic accountant will, together with the interest to accrue thereon andmoneys then on deposit in the fundand accounts provided for in the Fiscal Agent Agreement, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates.

If the District shall have taken anyof the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in the Fiscal Agent Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the District, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in the Fiscal Agent Agreement and all other obligations of the District under the Fiscal Agent Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the obligation of the District to pay or cause to be paid to the Ovmers of the Bonds not so surrendered and paid all sums due thereon and all amounts owing to the Fiscal Agent pursuant to the Fiscal Agent Agreement, andot herwiseto assure that no action is taken or failedto be taken if such action or failure adversely ectsaff the exclusion of interest on the Bonds from gross income for federal income tax purposes, shall continue in any event.

Upon compliance by the District with the foregoingwith respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all feesand expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the District and any Special Taxes thereafter received by the District shall not be remitted to the Fiscal Agent but shall be retained by the Districtto be used forany purposepermitted under the Act.

Waiver of Personal Liability. No member, officer, agent or employee of the Districtor the City shall be individually or personally liable for the payment of the principal of, or the interest or premium on, the Bonds; but nothing contained in the Fiscal Agent Agreement shall relieve such member, officer, agent or employee from the performance of any official duty provided by law.

46 FJNANCIALINFO RMATION District Accounting Records and Financial Statements The financial transactions of the District are included in the City's annual audit pursuant to the requirements prescribed by theState Controller forsp ecial districts.

Pursuant to the Fiscal Agent Agreement, theFiscal Agent is required to keep proper books of record and accounts in which complete andcorrect entries are required to be made of all transactions relating to the proceeds of the Bonds, the Special Taxes received by the Fiscal Agent, all funds and accounts established pursuant to the Fiscal Agent Agreement, including the Costs of Issuance Fund, the Administrative Expense Fund and the Bond Fund. The District is required to keep proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed fromthe Special Tax Fund.

Budgetary Process and Administration The District is required each Fiscal Year to determine the amount of Special Taxes needed to pay debt service on each series of Bonds issued by the District and Administrative Expenses of theDistrict. The District is expected to incur Administrative Expenses forthe levy and collection of the Special Taxes, foreclosure proceedings, Fiscal Agent fees andarbitrage rebate calculations.

The District is required to communicate with the County 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 Fiscal Year. The District is required by resolutionto provide forthe levy of the Special Taxes within the District in the current Fiscal Ye ar. A certified list of all parcels subject to the Special Tax, including the amount of theSpecial Tax to be levied on each such parcel, is filed by the District with the · County Auditor on or beforethe tenth (10th) day ofAugust of that tax year. The Special Taxes so levied may not exceed the authorized amounts as provided in theRate and Method of Apportionment relating to theDi strict (see "Rate and Method of Apportionment" below).

The Special Taxes are payable andare collected in thesame manner and at the same time and in the same installment as the general taxes on real property are payable and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest afterdeli nquency as do the general taxes on real property.

Special Taxes are due in two equal installments. Special Taxes levied become delinquent on the following December 10thand April 10th. Currentlya 10% penalty is added to delinquent taxes.

When received, the Special Taxes are required to be deposited in a separate Special Tax Fund for the Districtto be held by the City andtransf erred by the Cityto the Fiscal Agent as provided in the Fiscal Agent Agreement.

As of thedel ivery date of theBonds, the Districthas retained MuniFinancial to assist in theprepara tion of the Special Tax roll and the determination of theamount of Special Taxes required in each Fiscal Year.

47 Rate and Method of Apportionment The City levies the Special Ta xes in accordance with the Rate and Method of Special Tax Apportionment (see "APPENDIX D - RATE AND METHOD OF APPORTIONMENT" herein). Because the Special Taxes have been authorized by a two-thirds (2/3) vote of the qualified electorate within the District, the Special Taxes are a special tax imposed within the limitations of Section 4 of Article XIIIA of the State Constituti on. The City Council, as the legislative body of the District, has the power and is obligated, pursuant to the covenants contained in the Authorizing Documents, to cause the levy and collection of the Special Ta xes annually.

The Rate and Method of Apportionment may be modified pursuant to the provisions of the Mello-Roos Act provided that the District determines that such modification will not impair the timely payment of the Bonds.

The District has covenanted that no modification of the maximum authorized Special Tax shall be approved which would prohibit the District from levying the Special Taxin any Fiscal Ye ar at such a rate as could generate Maximum Special Tax Revenues in each Fiscal Ye ar at least equal to 110% of annual debt service in such Fiscal Year.

48 TABLE N0. 3 CITY OF PERRIS COMMUNITY FACILITIES DISTRICT NO. 2003-1 (Chaparral Ridge) PROPERTY DATA Sine:le Famil Class 1 Class 2 Class 3 Class 4 Undeveloped Description (< 2 399 sfl (2 400-2 599 sfl (2 600-2 799 sfl (2 800 + sf) Per Acre Total SquareFootage (Average) 2, 133 2,479 2,688 3, 170 374,232 Number of Units 22 0 26 64 112 Base Sales Price (Average) $ 254,500 $ 269,000 $ 275,000 $ 285,000 Total Projected Value $ 5,599,000 $ 0 $ 715,000 $ 18,240,000 $ 30,989,000

Total Units 112 Gross Acreage 43.45 NonTaxable Acreage 6.60 Net Taxable Acreage 36.85

Assessed Value FY 2002/03 $ 79,486. 00 Effective Tax Rate Tax/SA Estimated Existing Ad Valorem Tax Rate $ 794.86 1.000000% $ 2,545.00 $ 2,690.00 $ 2,750.00 $ 2,850.00 Perris Union HSD $ 13.88 0. 017462% $ 44.44 $ 46.97 $ 48.02 $ 49. 77 MWD East lsr FR 13010039 $ 5.32 0. 006693% $ 17.03 $ 18.00 $ 18.41 $ 19.08 MWD Water Standby Charge (I) 0. 066200% $ 1.68 $ I. 78 $ 1.82 $ I. 89 EMWD Standby-Combuned 0.000191% $ 0.49 $ 0.51 $ 0.52 $ 0. 54 Proposed Maintenance Districts $ 500. 84 $ 500.84 $ 500.84 $ 500. 84 Proposed CFD 2003-1 Sepcial Tax $ 1,595. 75 $ 1,716.00 $ 1,782.20 $ 1,849. 20

Total 1.025008% $ 4, 705. 24 $ 4,974. 11 $ 5, 101. 81 $ 5,271. 31 $ 5,548.00

Effective Tax Rate Percentage 1.85% 1.85% 1.86% 1.85%

( 1) Assumes all parcels are less than one acre.

Sources: RichmondAmencan, Webb Associates; MumFinancial

49 TABLE N0. 4 CITY OF PERRIS COMMUNITY FACILITIESDISTRICT NO. 2003-1 (Chaparral Ridge) PROJECTION OF SPECIAL TAX

Fiscal Year Total Projected Beginning Developed Annual Debt Estimated July Special Taxes Service (1) Coverage

2003 $ 0 $ 0 NIA 2004 203, 788. 35 208,921.25 NIA 2005 207, 864. 12 189,450.00 109. 71978% 2006 212,021.40 189,450.00 111.91417% 2007 216,261.83 194,450. 00 111.21719% 2008 220, 587.06 199, 187. 50 1 10. 74343% 2009 224,998.81 203,662. 50 110.4763 1% 2010 229, 498.78 207,875.00 110.40230% 20 11 234,088. 76 21 1,825.00 110.51045% 20 12 238, 770.53 215,512.50 110. 79196% 20 13 243,545.94 218,937. 50 111.23994% 2014 248,416.86 222, 100.00 111.84910% 2015 253,385.20 230,000. 00 110. 16748% 2016 258,452.90 23 1,875.00 111.462 17% 2017 263,621.96 238,437.50 110.56229% 2018 268,894.40 239,375. 00 112.33186% 2019 274,272.29 245,000.00 111.94787% 2020 279, 757. 73 250,000.00 111.90309% 2021 285,352. 89 254,375.00 112. 17804% 2022 291,059. 95 263, 125.00 110.61661% 2023 296, 881.15 265,937.50 111.63568% 2024 302, 818. 77 273, 125.00 110. 87186% 2025 308, 875. 14 279,375.00 110. 55934% 2026 315,052.65 284,687. 50 110.66613% 2027 321,353. 70 289,062. 50 111.17101% 2028 327, 780. 77 297,500. 00 110. 17841% 2029 334,336.39 299, 687. 50 111.56167% 2030 341,023. 12 305,937. 50 111.46823% 203 1 347, 843.58 305, 937. 50 113.69759% 2032 354, 800. 45 305, 000. 00 116.32802% 2033 361,896.46 308, 125.00 117.45118%

Totals $ 8,267,302 $ 7,427,934

So urce: MuniFinancial, Te mecula, California

50 Delinquencies and Foreclosure Actions

The District has covenanted to initiate foreclosure action in the Superior Court against parcels with delinquent Special Taxes as provided in theFiscal Agent Agreement. Foreclosure proceedings are directed by theDistrict through a notificationto foreclosurecounsel as to the delinquent assessor parcel numbers for which foreclosure proceedings are to be initiated. The District first removes the delinquent Special Taxes from the County Tax Roll, as required by law. Foreclosure counsel theninitiates a request for a title search to identify the current legal owner of a delinquent parcel. Foreclosure counsel also sends a written demand for payment to the owner shown on the Tax Roll, followed by the filing of a complaint with the Superior Court in Riverside County and recording a /is pendens against the property at the officeof the County Recorder. Each legal owner and all holders of any other interest in the land must file an answer to the complaint within 30 days following the completion of service of process on them. If no answer is filedwith such 30 day period, foreclosure counsel files a request that a defaultjud gment be entered by the Court. If any party filesan answer, then the case must be litigated, and foreclosure counsel will typically file a motion forsummary ju dgment. Following the entry of a judgment, whether by default or otherwise, against all defendants, foreclosure counsel requests a writ of sale from the Court for deliveryto the Sheriff. The writ of sale is delivered to the Sheriffwith instructions to execute on the delinquent parcel. Levy by the Sheriff consists of posting notice on the delinquent property, followed by mailing of notice to the last known address of the legal owner and publication of the notice of levy. Thereafter,the delinq uent propertyowner is entitled to a redemption period of 120 days. Following such 120 day period, foreclosure proceedings can continue followingthe publication and mailing of a notice of sale of the delinquent parcel or parcels, which sale must be at least 20 days following such notice. The foreclosurepr ocess described above typically takes at least six months from the date on which a judgment is entered and can take substantially longer. To date, the property owner has been current in the payment of ad valorem property taxes.

51 LEGAL MATTERS Enforceabilityof Remedies Theremedies available to the Fiscal Agent and the Owners of the Bonds upon an event of default under the Fiscal Agent Agreement or any other document described herein are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualifiedto the extent that the enforceability of certain legal rights related to the Fiscal Agent Agreement is subj ect to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.

Approval of Legal Proceedings Aleshire& Wynder LLP, Irvine, California, as Bond Counsel, will render an opinion which states that the Fiscal Agent Agreement and the Bonds are valid and binding contracts of the District and are enforceable in accordance with their terms. Aleshire & Wynder LLP will render an opinion which states that the Fiscal Agent Agreement andthe Bonds are valid and binding contracts of the District and are enforceable in accordance with their terms. The legal opinions of Bond Counsel will be subject to the effect of bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights and to the exercise of judicial discretion in accordance with general principles of equity. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairnessof this Official Statement.

The District has no knowledge of any factor other information which would indicate that the Fiscal Agent Agreement is not so enforceable against the District, except to the extent such enforcement is limited by principles of equity and by state andfederal laws relating to bankruptcy, reorganization, moratorium or creditors' rightsgenerally.

Certain legal matters will be passed on forthe District and the District by Aleshire & Wynder LLP, Irvine, California, as City Attorney. Certain legal matters will be passed upon forthe City and the District by Fulbright & Jaworski L.L.P., Los Angeles, Californiaas Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, as Underwriter's ColUlsel.

Fees payable to Bond Counsel, Disclosure Counsel and Underwriter's Counsel are contingent upon the sale anddelive ry of the Bonds.

Tax Exemption In the opinion of Aleshire & Wynder LLP, Bond Collllsel, based on existing statutes, regulations, rulings and court decisions, interest on the Bonds is excluded fromgr oss income forfederal income taxpu rposes and is exempt from State of Californiapersonal income taxes. A copy of the proposed opinion of Bond Counsel is set forth in "APPENDIXF" hereto.

The Internal Revenue Code of 1986 (the "Code"), imposes various restrictions, conditions and requirements relating to the exclusion fromgross income for federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine ( or to inform any person) whether any actions taken ( or not taken) or events occurring ( or not occurring) after the date of issuance of the Bonds may

52 affect the value of, or the tax status of interest on the Bonds. Further, no assurance can be given that pending or future legislation or amendments to the Code, will not adversely affect the value of, or thetax status of interest on, the Bonds. Prospective owners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Bond Counsel is further of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes. Bond Counsel observes, however, that interest on the Bonds is included in adjusted current earnings in calculating corporate alternative minimum taxable income. Prospective purchasers of the Bonds should be aware that(i) with respect to insurance companies subj ect to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest with respect to the Bonds, (ii)Bonds interest with respect to the Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (iii) passive investment income, including interest with respect to the Bonds, may be subject to federal income taxation under Section 1375 of the Code forsubchapter S corporations having subchapterC earnings and profits at the close of the taxable year and gross receipts more than 25% of which constitute passive investment income, and (iv) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on theBonds. Certain agreements, requirements and procedures containedor referredto in the Fiscal Agent Agreements and other relevant documents may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in those documents, upon the advice or with theap proving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as to any Bond or the interest payable with respect thereto if any change occurs or action is taken or omitted upon the advice or approval of counsel other than Bond Counsel. Although Bond Counselhas rendered anopinion that interest on the Bonds is excluded from federal gross income, and is exempt fromState of Californiapersonal income taxes, the ownership or disposition of the Bonds, and the accrual or receipt of interest on the Bonds may otherwise affect an Owner's state or federal tax liability. The nature and extent of these other tax consequences will depend upon each Owner's particular tax status and the Owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such othertax consequen ces.

Absence of Litigation TheDistrict will furnisha certificate dated as of theDate of Delivery of theBonds that thereis not now knownto be pending or threatened any litigation restraining or enjoining the execution or deliveryof the Fiscal Agent Agreement or the sale or delivery of theBonds or in any mannerquestioning theproceedings and authority under which the Fiscal Agent Agreement is to be executed or delivered or the Bonds are to be delivered or affecting the validity thereof.

53 CONCLUDINGINFORMA TION No Ratings on the Bonds The City has not made, and does not contemplate making, any application fora rating on the Bonds. No such rating should be assumed based upon any other City rating that may be obtained. 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. Should a Bondholder elect to sell a Bond prior to maturity, no representations or assurances can be made that a market will have been established or maintained forthe purchase and sale of the Bonds. The Underwriter assume·s no obligation to establish or maintain such a market and is not obligated to repurchase any of the Bonds at the request of the holder thereof.

Underwriting O'Connor Southwest Securities, Newport Beach, California (the "Underwriter") is offering the Bonds at the yields and prices set forth on the front cover page hereof. The initial offering prices may be changed from time to time and concessions from the offering prices may be allowed to dealers, banks and others. The Underwriter has purchased the Bonds at a price equal to $2,935,317.60 (95.925%), which amount represents the principal amount of the Bonds, less an original issue discount of $48, 182.40 and less an Underwriter's discount of $76,500.00. The Underwriter will pay certain of its expenses relating to the offering of the Bonds.

Experts The Appraisal prepared by Steve White, MAI, Fullerton, California, has been included in this Official Statement in reliance on and upon the authority of said firm as experts in thematters covered therein.

The Financing Consultant The material containedin this Official Statement was preparedby Rod GunnAssoc iates, Inc., Huntington Beach, California, an independent financial consulting firm, who advised theDi strict as to the financial structure and certain other financial matters relating to the Bonds. The information set forth herein has been obtained by Rod Gunn Associates, Inc. from sources which are believed to be reliable, but such information is not guaranteed by Rod Gunn Associates, Inc. as to accuracy or completeness, nor has it been independently verified. Fees paid to Rod Gunn Associates, Inc. are contingent upon the sale and delivery of the Bonds.

54 Additional Information The summaries and references contained herein with respectto the Fiscal Agent Agreement, the Bonds, statutes and other documents, do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute and references to the Bonds are qualified in their entirety by reference to the form hereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forth in "APPENDIX A". Copies of the Fiscal Agent Agreement are available for inspection during the period of initial offering on the Bonds at the offices of the Financing Consultant, Rod Gunn Associates, Inc., 16371 Gothard Street, Suite A, Huntington Beach, California 92647-3652, telephone (714) 841-3993 or the Underwriter, O'Connor Southwest Securities, 620 Newport Center Drive, Suite 300, Newport Beach, California 92660, telephone (949) 717-2000. Copies of these documents may be obtained after delivery of theBonds fromthe Districtthrough the City Manager, City of Perris, 101 North "D" Street, Perris, California 92570.

References Any statements in this Official Statement involvingmatters of opinion, whetheror not expressly so stated, areintended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Districtand thepurchasers or Owners of any of the Bonds.

Execution The execution of this Official Statement by the City Manager has been duly authorized by the City Council of the City, acting on behalf of the District.

CITY OF PERRIS

By: Isl Hector Apodaca City Manager

55 [THIS PAGE INTENTIONALLY LEFT BLANK] APPEND IX A DEFINITIONS OF CE RTAIN TERMS Unless otherwise defined in this Official Statement, the following terms have the following meanings.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the CaliforniaGovernment Code.

"Administrative Expenses" means any or all of the following: thefees andexpen ses of theFi scal Agent (including any fees or expenses of its counsel), the expenses of the City or the District in carrying out its duties under the Fiscal Agent Agreement (including, but not limited to, the levying and collection of the Special Taxes, complying with thedisclo sure provisions of theAct, the Continuing Disclosure Agreement and the Fiscal Agent Agreement, including thoserelated to public inquiries regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the costs of the City and the District or their designeesrelated to an appeal of the Special Tax; any costs of the City and the District (including fees and expenses of counsel) to defend the first lien on and pledge of the Special Taxes to the payment of the Bonds or otherwise in respect of litigation relating to the District or theBonds or with respect to any other obligations of the District, any amounts required to be rebated to the federal government in order forthe District to comply with the Fiscal Agent Agreement) including the fees and expenses of its counsel, an allocable share of the salaries of City staff directly related thereto and a proportionate amount of City general administrative overhead related thereto, and all other costs and expenses of the City, the District or the Fiscal Agent incurred in connection with the discharge of their respective duties under the Fiscal Agent Agreement, and in the case of theCi ty, in anyway related to the administration of the District and all actual costs andexp enses incurred in connectionwith the administration of the Bonds.

"Administrative Expense Fund" means the fund by that name established by the Fiscal Agent Agreement.

"Administrator" means the City Manager or his/herdesignee.

"Agency" means the Redevelopment Agency of the City of Perris, a public body corporate and politic organized under the laws of theState, and any successor thereto.

"Agreement" means theFiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions of theFi scal Agent Agreement. "Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amountof theOutstanding Bonds due in such Bond Year.

"Auditor" means the auditor/tax collector of the County of Riverside.

"Authorized Officer" means the City Manager, Assistant City Manager or City Clerk of the City, or any other officer or employee authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in the Fiscal Agent Agreement as required to be undertaken by an Authorized Officer.

"Bond Counsel" means (i) Aleshire & Wynder LLP, or (ii) any attorney orfirm of attorneys acceptable to the District and nationally recognized for expertisein rendering opinions as to the legalityand tax-exempt status of securities issued by public entities.

"Bond Fund" means the fundby thatname establishedby the Fiscal Agent Agreement.

A-1 "Bond Year" means the one-year period beginning on the September 2 in each year and ending on September 1 in the following year except that the firstBond Ye ar shall begin on the Closing Date and end on September 1, 2003.

"Bonds" means the Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris Special Tax Revenue Bonds, 2003 Series A, authorizedby, and at any time Outstanding pursuant to the Fiscal Agent Agreement. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a day on which the offices of the City are not open for business, or (iii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office is authorized or obligated by law or executive order to be closed.

"Capitalized Interest Account" means the account by that name established by the Fiscal Agent Agreement.

"CDIAC" means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of Californiaor any successor agency or bureau thereto.

"City" means the City of Perris, California.

"Closing Date" or "Date of Delivery" means the date upon which there is a physical delivery of the Bonds in exchange for the amount representing the purchase price of the Bonds by the Original Purchaser.

"Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced in the Fiscal Agent Agreement) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable officialpublic guidance published, under the Code.

"Continuing Disclosure Agreement" shall mean that certain Continuing Disclosure Agreement by and between the District and the Dissemination Agent, relating to the Bonds, executed on the Closing Date, as originallyexecuted and as it may be amended from time to time in accordance with the terms thereof.

"Corporate Trust Office" means the corporate trust office of the Fiscal Agent at Los Angeles, California, provided, however, for transfers, registration, exchange, payment, and surrender of Bonds means the corporate trust office of the Fiscal Agent in Minneapolis, Minnesota, or such other office designatedfrom time to time by the Fiscal Agent in writingto the District.

"Costs of Issuance Fund" meansthe fundby that name established by the Fiscal Agent Agreement.

"County" means the County of Riverside, California.

"Debt Service" means the scheduled amount of interest and amortization of principal payable on the Bonds during the period of computation, excluding amounts scheduled during such periodwhich relate to principal which has been retired beforethe beginning of such period.

"Developer" means RichmondAmerican Homes of California, Inc., aColorado corporation.

"Developer Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement, by andbetween the Dissemination Agent and the Developer, relating to the Bonds.

''Dissemination Agent" means MuniFinancial or such other Dissemination Agent as may be appointed by the District under the Continuing Disclosure Agreement.

A-2 "District" means the Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris, formedpursuant to the Resolution of Formation. �'DTC" means the Depository Trust Company. "Facilities" means the facilities more particularly described in the Resolution of Intention, or any portion of the Facilities. "Fair Market Va lue" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (withinthe meaning sectionof 1273 of the Code)and, otherwise,the term "Fair Market Value" meansthe acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulationsof the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. "Federal Securities" means any of the following which are non-callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent, as shall be certifiedby the Districtto theFiscal Agent: (1) direct general obligations of theUnited States of America (including obligations issued or held in book entry form onthe books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of theforegoing which are commonly referred to as "stripped" obligations and coupons; (2) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of theExport-Import Bank, (b) certificates of beneficialownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, ( d) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and(f) public housing notes andbonds guaranteedby theUnited States of America; or refunded municipal obligations, the timelypayment of principal of and interest on are fully guaranteedby the United States of America. "Fiscal Agent" means the Fiscal Agent appointed by the District and acting as an independent fiscal agent with the duties and powers provided in theFiscal Agent Agreement, its successors and assigns, and any other corporation or association which may at anytime be substituted in its place, as provided inthe Fiscal Agent Agreement. "Fiscal Year" means thetwelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. "Information Services" means Financial Information, Inc. 's "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10006; Moody's "Municipal and Government," 5250-77 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attention: Called Bonds Department; and S&P's "Called Bond Record," 25 Broadway, 3rd Floor, New

A-3 York, New York 10004; or at such other addresses or such other services providing information with respect to called bonds as the District may designate in an Officer's Certificate delivered to the Fiscal Agent.

"Interest Payment Date" means March 1 and September 1 of each year, commencing March 1, 2004.

"Investment Earnings" means all interest earned and anygains and losses on the investment of moneys in any fundor account created by the Fiscal Agent Agreement.

"Legislative Body" means the City Council of the City.

"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the finalmaturity date of any Outstanding Bonds.

"Officer's Certificate" means a written certificate of the District or the City signed by an Authorized Officer of the City.

"Ordinance" means any ordinance of the City levying the Special Taxes, including Ordinance No. 1120, adopted by the Legislative Body on June 24, 2003.

"Original Purchaser" means O'Connor Southwest Securities.

"Outstanding," wh en used as of any particular time with reference to Bonds, means (subj ect to the provisions of the Fiscal Agent Agreement)all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of the Fiscal Agent Agreement; and (iii) Bonds in lieu of or in substitution forwh ich other Bonds shall have been authorized, executed, issued and delivered by the District pursuant to the Fiscal Agent Agreement or any Supplemental Agreement.

"Owner" or "Bondowner" means any person who shall be the registered owner of any Outstanding Bond.

"Participating Underwriter" means any of the original underwriter(s) of any Series of Bonds required to comply with 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, in connection with the offering of such Series of Bonds.

"Permitted Investments" means any of the following which at the time of investment are legal investmentsunder the laws of the State of Californiafor the moneys proposed to be invested therein:

(1) direct obligations of the United States ofAmerica and securities fullyand unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, provided, thatthe full faith and credit of the United States of America must be pledged to any such direct obligation or guarantee ("Direct Obligations"); (2) direct obligations and fully guaranteed certificates of beneficial interest of the Export- Import Bank of the United States; consolidated debt obligations and letter of credit-backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation ("FHLMCs"); debentures of the Federal Housing Administration; mortgage­ backed securities ( except stripped mortgage securities which are valued greater thanpar on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association ("FNMA"); obligations of Resolution Funding Corp. ("REFCORP"); participation certificates of the General Services Administration; guaranteed mortgage-backed securities and guaranteed participation certificates of the Government National Mortgage Association ("GNMAs"); guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit-

A-4 backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing & Urban Development; guaranteed Title XI financings of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority; Resolution Funding Corporation securities; (3) direct obligations of any state of the United States of America or any subdivision or agency thereofwhose unsecured, uninsured and unguaranteed general obligation debt is rated "A" or better by Moody's Investors Service and "A" or better by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated "A" or better by Moody's Investors Service and "A" or betterby S&P; (4) commercial paper (having original maturities of not more than 270 days) rated, "P-1" by Moody's Investors Service and "A-1" or better by S&P; (5) Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of anydomes tic bank including a branch office of a foreign bank which branch officeis located inthe United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a short-term "Bank Deposit" rating of "P-1" by Moody's and a "Short-Term CD" rating of "A-1" or better by S&P; (6) deposits of any bank or savings and loanassoc iation which has combined capital, surplus and undivided profits of not less than $3 million, provided such deposits are continuously and fully insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation; (7) investments in money-market funds rated "AAAm" or "AAAm-G" by S&P including such funds for which the Fiscal Agent or an affiliate acts as an investment adviser or performs other services; (8) repurchase agreements collateralized by Direct Obligations, GNMAs, FNMA or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by theFDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-1" or "A3" or better by Moody's Investors Service, and "A-1" or "A-" or better by S&P, provided: a. a master repurchase agreement or specificwritten repurchase agreement governs the transaction; and b. the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such thirdparty is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation andwhich has combined capital, surplus andl.Ul divided profits of not less than $50 million or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clearof any lien, as agent forthe Fiscal Agent; and c. a perfected first security interest l.Ulder the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created forthe benefitof the Fiscal Agent; and d. therepurc hase agreementhas a term of 180 days or less, and the Fiscal Agent or theAgent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and e. thefair market value of the securities in relation to theamount of therepurchase obligation, includingprincipal and interest, is equal to at least 103%;

A-5 (9) With prior notice to any rating agency rating the Bonds, investment agreements, including guaranteed investment contracts, with a financial institution the long-term unsecured obligations or the claims paying ability of which, or, inthe case of a guaranteed corporation the long-term debt of the guarantor are rated in one of the three highest rating categories by S&P or Moody's at the time of initial investment. If the provider's rating by either S&P or Moody's is withdrawn or suspended or fallsbelow the third highest rating categories of S&P or Moody's, theprovider must at the direction of the Fiscal Agent, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Fiscal Agent; (10) Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's Investors Service meeting the following requirements: a. The municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; b. The municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; c. The principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certifiedpublic accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ("Verification"); d. The cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (i) No substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and up on delivery of a new Verification; and (ii) The cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or againstthe trustee or escrow agent; and ( 11) Local Agency Investment Fund of the State of California (LAIF), created pursuant to Section 16429. 1 ofthe CaliforniaGovernment Code.

"Person" means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

"Rebate Fund" means the fund by that name established by the Fiscal Agent Agreement.

"Record Date" means the fifteenth day of the month next preceding the month of the applicable Interest Payment Date.

"ReserveAccount" means the account by that name established by the Fiscal Agent Agreement.

"Reserve Requirement" means, as of any date of calculation, the lesser of (a) Maximum Annual Debt Service forthe Bonds and any Additional Bonds, or (b) ten percent (10%) of the original principal amount of the Bonds and any Additional Bonds.

�'Resolution" means Resolution No. 3135, adopted by the Legislative Body, acting as the legislative body of the District on June 24, 2003.

A-6 "Resolution of Formation" means Resolution No. 3132 adopted by the Legislative Body on June 24, 2003, as now in effect or as it may hereafterbe amended fromtime to time. "Resolution of Intention" means Resolution No. 3089, adopted by the Legislative Body on April 8, 2003. "RMA" meansthe Rate and Methodof Apportionment of the Special Tax. "Romoland" meansthe Romoland School District. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and its successors andassi gns.

4 th ' Securities Depositories" means TheDepository Trust Company, 55 Water Street, 50 Floor, New Yo rk, New York 10041-0099, Fax-(212) 855-7232 and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Districtmay designate in anOfficer's Certi ficate delivered to the Fiscal Agent. "Special Tax Fund" means the fundby thatname esta blished by theFiscal Agent Agreement. "Special Tax Revenues" means the proceeds of the Special Taxes received by the District including any scheduled payments and any prepayments thereof, interestthereon and proceeds of :the redemption or sale of property sold as a result of foreclosure of thelien of theSpecial Taxes to the amount of said lien and interest andpenal ties thereon. Notwithstanding the foregoing, "Special Tax Revenues" does not include any penalties or interest in excess of the interest payable on the Bonds collected in connection with delinquent Special Taxes. "Special Taxes" means the specialtaxes levied withinthe Districtpursuant to the Act,the Ordinance and theFiscal Agent Agreement. "State" means the State of California.

"Subordinate Bond" meansthe subordinate bondissued pursuant to theSubordinate Indenture.

"Subordinate Indenture" means that certain Subordinate Indenture dated July 1, 2003, by and among the District,Romoland and the Fiscal Agent. "Supplemental Agreement" means an agreement the execution of which is authorized by a resolution which has been duly adopted by the Legislative Body of the District under the Act and which agreement is amendatory of or supplemental to the Fiscal Agent Agreement, but only if and to the extent that such agreement is specifically authorized under the Fiscal Agent Agreement. "Tax and N onarbitrage Certificate" means, with respect to any series of Bonds, the Tax and Nonarbitrage Certificate, dated the date of issuance of such series of Bonds, as originally executed and as it may fromtime to time be amended or supplementedpursuant to its terms. "Treasurer" means the person who is acting in thecapacity as treasureror finance director to the City.

A-7 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXB CITY OF PERRISINFORMA TION STATEMENT Thefollowing information concerning the City of Perris is presented as general backgrmmd data. The Bonds are payable solely from Special Taxes as described in the Official Statement. The Bonds are not an obligation of the City, andthe taxing power of the City is not pledged to the payment of the Bonds.

General Information The City of Perris encompasses 33 square miles and is located at the westernend of Riverside County 15 miles south of the City of Riverside. It is 70 mileseast of downtown Los Angeles and75 miles north of downtown San Diego. Neighboring communities include Lake Elsinore, Moreno Valley and Hemet. March Air Force Base andthe Riverside National Cemetery areloc ated in thevicinity of the City. In recent years, the Perris area has benefited from thecontinuing development of Lake Perris State Park as a major Southern Californiarecreational attraction and the upgrading of Interstate 215 as an important north-south transportation corridor.

Governmental Services The City of Perris was incorporated as a general law city on May 26, 1911. The City has a Council/Manager form of municipal government. The City Council appoints the City Manager who is responsible forthe day-to-day administration of Citybusiness and the coordination of all departments of the City. The City Council is composed of five members elected bi-annually at large to four-year alternating terms. The mayor is selected by the City Council from among its members. Perri s employs a staffof 45 full-timeemployees and 4 part-time employees under the direction of the City Manager. The City provides trash collection, street sweeping, park maintenance, tree trimming and building inspection. Forty-two full-time sworn officers, six patrol cars, two detective units and six dispatchers are provided by the City's police department. Support services are made available by the Riverside County Sheriff's Department. Fire protection and emergency paramedics are contracted with the Riverside County Fire Department. The City has a six to nine FireInsurance Rating by Robinson's Rating Service. The City of Perris provides sewer maintenance and water services in cooperation with the Eastern Municipal Water District. Flood control is a cooperative provision between the City and County of Riverside.

Transportation Interstate 215, linking the San Bernardino/Riverside area to theSan Diego area, crosses centrallythrough theCi ty. Interstate 215 provides access to Riverside, San Bernardino and Los Angeles via Interstate 60 and to Orange Countyvia Interstate 91. Air Cargo and passenger flight services are provided at the Ontario International Airport, 48 miles northwest. There are several general aviation airportsclose to and within the City of Perris, includingthe Riverside Municipal Airport, 20 miles west, the County owned Hemet-Ryan Airport, 14 miles east, and the privately owned Perris Valley Airport. Runway lengths are 5,400 feet, 4,300 feet, and 2,720 feet, respectively. Commercial and passenger rail services are provided by a branch line of theSanta Fe Railway Co., with one local freight daily. Truck freight services are provided through 11 regular daily direct carriers to Riverside.

B-1 Community Information Recreational facilities include Lake Perris State Park, Orange Empire Railway Museum and the Perris Raceway. Also, the Perris Valley Airport offers flying, skydiving and hot-air ballooning. The City operates 3 parks and 2 playgrounds. Additional outdoor recreational facilities are available within a short drive to the San Jacinto mountain area and the Palm Springs area. Educational services are provided by six elementary schools, two junior high schools, one high school and three parochial schools. The University of Californiaat Riverside, CaliforniaBaptist College, the La Sierra campus of Loma Linda University and Riverside City College are located in Riverside and Mt. San Jacinto Community College is located in San Jacinto, all within commuting qistance. The Caesar E. Chavez Library was recently constructed adjacent to the Civic Center and includes a community meeting facility.

B-2 Population The following charts provide a comparison of population growth for Perris, surrounding cities and Riverside County between 1998 and 2002.

TABLE NO. B-1 CHANGE1N POPULA TION PERRIS,SURROUNDING CITIES AND RIVERSIDE COUNTY 1998 - 2002

30.0%

25.0% 20.8%

20.0%

14.1% 15.0%

10.0%

5.0%

Perris Surrounding Cities Riverside County

PERRIS SURROUNDING CITIBS RIVERSIDE COUNTY Percentage Percentage Percentage Year Population Change Change Population Change

1998 31,050 : ;Populatio]?.222, 650' 1,441,000 1999 31,550 1.6 % 229,500 3.1% 1,473,300 2.2% 2000 36, 700 16.3 % 232,950 1.5% 1,557,800 5.7% 2001 36,750 0. 1 % 233,500 0. 2% 1,583,600 1.7% 2002 37,500 2.0 % 238,950 2. 3% 1,644,300 3.8%

% IncreaseBetween 1998 - 2002 20. 8% 7.3% 14. 1%

Surrounding cities include LakeElsinore, MorenoVa lley andHemet.

Source: State of CaliforniaDeparbnent of Finance,Population Re searchUnit, "Population Estimates fo r California Cities andCounties", published annually in May for currentyear.

B-3 Personal Income

Median personal income information for Riverside County, the State of California and the United States are summarized in the following charts. Personal income data is not available for smaller geographical areas such as the City of Perris.

TABLE NO. B-2 EFFECTIVE BUYING INCOME RIVERSIDE COUNTY, CALIFORNIAANDUNITED STATES 1997 - 2001

$50,000

$45,000

$40,000

$35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0 1997 1998 1999 2000 2001

• Riverside Countv IIState of California D United States

Year Riverside County State of California United States

1997 $ 32,289 $ 36,483 $ 34,618 1998 32,555 37,091 35,377 1999 34,356 39,492 37,233 2000 37,863 45,077 39, 129 2001 37,692 43,532 38,365 % Increase Between 1997 - 2001 17% 19% 11%

Source: Sales and Marketing Management, "Surveyof Buying Power ", published annually in September for prior year.

B-4 Employment and Industry TheCity is located in the PerrisVa lley labor market area within the Riverside/San BernardinoArea MSA. Four major job categories constitute 81.6% of the work force. They are services (34.6%), wholesale and retail trade (16.7%), government (19.8%) and manufacturing (10.5%). The March, 2003 unemployment rate in the Riverside/San Bernardinoarea was 5.6%. The State of CaliforniaMarch, 2003 unemployment rate (unadjusted) was 6.8%. The distribution of employment in the Riverside/San Bernardino area is as follows:

TABLE NO. B-3 RIVERSIDE/SANBERNARDINO MSA WAGE AND SALARYWORKER S BY INDUSTRY (1) (inthousands)

Industry 1999 2000 2001 2002 2003

Government 181.8 190.4 197.0 212.4 215. 4 Services * 242. 3 262.2 279. 5 282.2 376.9 Finance, Insurance & Real Estate 30.6 32.4 31.6 34.3 40.4 Wholesale & Retail Trade * 226. 1 234. 7 250. 5 259.4 181. 7 Transportation & Public Utilities 47.2 50. 5 50:8 52.0 44. 9 Manufacturing: Nondurable goods 35.9 39. 2 40.7 39.7 33.4 Durable goods 78.4 82. 7 86.2 83.5 81.1 Construction and Mining 61.1 74. 9 79.8 89. 0 93.7 Total Nonagricultural 903.4 967.0 1,016. 1 1,052. 5 1,067.5 Agriculture, forestry & fisheries 24.6 24.5 20.8 20.3 22.0 Total (all industries) 928. 0 991.5 1:036.9 1:072.8 1:089.5

% OF TOTAL WORKERS

Industry 1999 2000 2001 2002 2003

Government 19.6 % 19. 2 % 19.0 % 19. 8 % 19.8 % Services * 26. 1 % 26.4 % 27.0 % 26. 3 % 34.6 % Finance, Insurance & Real Estate 3.3 % 3.3 % 3.0 % 3.2 % 3.7 % Wholesale & Retail Trade * 24.4 % 23.7 % 24.2 % 24.2 % 16.7 % Transportation & Public Utilities 5. 1 % 5.1 % 4. 9% 4.8 % 4. 1 % Manufacturing: Nondurable goods 3.9 % 4.0 % 3.9 % 3.7 % 3. 1 % Durable goods 8.4 % 8.3 % 8.3 % 7. 8 % 7.4 % Construction and Mining 6.6% 7.6 % 7. 7% 8.3 % 8.6 % Total Nonagricultural 97. 3 % 97. 5 % 98.0 % 98. 1 % 98.0 % Agriculture, forestry & fisheries 2.7 % 2.5 % 2.0 % 1.9 % 2.0 % Total (all industries) 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

(1) Annually, as of March. Source: State of California Employment Development Department, "CaliforniaLabor Market Bulletin ". * Beginning in February, 2003 Labor Force andIndustry data differs frompr evious information due to the U.S. Department of Labor's annual visre ion process from the Standard Industrial Classification (SIC) system to theNorth American Industry Classification System (NAICS). As a result, some of the industrytitles and numbers may have undergone significant change.

B-5 Commercial Activity

The following charts summarize the volume of retail sales and taxable transactions forthe City of Perris for 1997 through 2001.

TABLE NO. B-4 CITY OF PERRIS TOTAL TAXABLE TRANSACTIONS (in thousands) 1997 - 2001

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0 1997 1998 1999 2000 2001 l!IRetai l Sales D All Other Outlets

Total Taxable Retail Sales Retail Sales Transactions Issued Sales Year ($000's) %Change Permits ($000's) %Change Permits

1997 172,599 259 269,318 632 1998 166, 792 (3.4)% 246 263,976 (2.0)% 494 1999 181, 190 8. 6 % 289 264,810 0.3 % 563 2000 195,216 7. 7 % 272 333,045 25. 8 % 523 2001 210, 717 7.9 % 324 331,046 (0.6)% 614

Source: State Board of Equalization, "Taxable Sales in California", published approximately 15 months after close of current year listed forthe next sequential year.

B-6 Taxable transactions by type of business for the City of Perris for 1997 through 2001 are summarized below.

TABLE NO. B-5 CITY OF PERRIS TAXABLE TRANSACTIONS BY TYPE OF BUSINESS (in thousands) 1997 -2001

1997 1998 1999 2000 2001

RetailStores Apparel Stores $ 1, 739 $ 2,125 $ 2, 134 $ 2,991 $ 4,404 General Merchandise Stores 39,814* 34,785* 37, 705 41,617 43,825 Drug Stores * * * Food Stores 21, 185 20,570* 22, 519 24,358* 25,540 Packaged Liquor Stores * * * Eating/Drinking Places 20,985 22,387 23,396 25,391 26, 849 Home Furnishingsand Appliances 750 720 766 696 907 Building Materials and Farm hnplements 11, 725 14,258 14, 155 12,372 16, 861 Auto Dealers/Suppliers 25, 132 27,228 28,551 29,895 34,589 Service Stations 37,123 33,482 39,798 44,056 42, 888 Other retail stores 14 146 11=237 12, 166 13,840 14,854 Total Retail Stores 172,599 166.792 181,190 195,216 210, 717

All Other Outlets 96 719 97 184 83,620 137.829 120,329

Total All Outlets $ 269s318 � 263s976 $ 264s810 $ 333,045 $ 331,046

# Sales omitted because theirpublication would result inthe disclosure of confidential information. They are includedwith Total All Outlets. * As of 1997, Drug Stores have been merged with General Merchandise Stores and Packaged Liquor Stores have been mergedwith Other Retail Stores. Source: State Board of Equalization, "Taxable Salesin California ", published approximately 15 months after close of current yearlisted forthe next sequential year.

B-7 The following charts summarizethe change in taxable transactions for the City of Perris and surrounding cities.

TABLE NO. B-6 CITY OF PERRISAND SURROUNDINGCITIES CHANGE INTOTAL TAXABLE TRANSACTIONS (in thousands) 1997 -2001

70% 65% 55.6 % 60% 55% 47, 9 Ofo 50% 45% 35.7 % 40% 35%

30% 22.9 % 25% 20% 15% 10% 5%

0% PERRIS LakeEls inore Moreno Valley Hemet

% Change from City 1997 1998 1999 2000 2001 1997-2001

PERRIS $ 269,318 $ 263,976 $ 264, 810 $ 333,045 $ 331,046 22.9 % Lake Elsinore 253,502 287,228 324,924 371,686 394,323 55.6 % Moreno Valley 607, 772 647,240 704,546 789,232 824,707 35.7 % Hemet 455,610 502,107 599,281 672, 174 673,955 47 .9 %

Source: State Board of Equalization, "TaxableSales in California ", published approximately 15 monthsafter close of currentyear listed for thenext sequentialyear.

B-8 APPENDIX C APPRAISAL REPORT

C-1 [THIS PAGE INTENTIONALLY LEFT BLANK] SUMMARY APPRAISALREPORT

COVER1NG CommunityFacilities District No. 2003-1 ofthe City of Perris (Chaparral Ridge)

DATE OF VALUE: SUBMITTED TO:

June 25, 2003 City of Perris Attn: Hector Apodaca 101 North"D" St. Perris, CA 92570

DATE OF REPORT: SUBMITTED BY:

June 27, 2003 Stephen G. White,MAI 1370 N. Brea Blvd., Suite 205 Fullerton, CA 92835 Stephen G. White, MAI

Real Estate Appraiser

1370 N. BREA BLVD ., SUITE 205 · F"ULLERTON, CALI FORNIA 92835-4128 <714l 738-1595 • FAX C7 14l 738-4 37 1

June 27, 2003

City of Perris Re: Communities Facilities District No. 2003-1 Attn: HectorApodaca of the City of Perris (Chaparral Ridge) 101 North "D" St. Perris, CA 92570

DearMr. Apodaca:

In accordance with the City's request and authorization, I have completed a Complete Appraisal of the property comprising the above-referenced Community Facilities District (CFD). This property comprises the westerly 112 lots of the planned 312-lot tract of homes called Chaparral Ridge. These 112 lots range from blue-top condition to near finished condition, with the model homes and the first phase of production homes under construction. The purpose of this appraisal is to estimate the market value of the as is condition of these lots and homes under construction, reflecting the proposed CFD bond :financing for certain City of Perris facilities, EMWD water/sewer facilities and school facilities, together with the overall tax rate to futurehomeowners of± 1.9%, including special taxes. Based on the inspections of the property and analysis of matters pertinent to value, the following conclusion of market value has been arrived at, subject to the Assumptions and Limiting Conditions, and as of June 25, 2003:

$10,260,000

(TEN MILLION TWO HUNDRED SIXTYTHOUSAND DOLLARS) The following is the balance of this 26-page Summary Appraisal Report which includes the Certification,Assumptions and Limiting Conditions, definitions, exhibits, and a summaryof the pertinent propertydata, valuation and market data fromwhich the value conclusion was derived.

Sincerely,

(State CertifiedGeneral Real Estate AppraiserStepen{l No.White, AGO 133MAI 1 1) SGW:sw Ref: 03010 TABLE OF CONTENTS

PAGES Certification...... 4 Assumptions andLimiting Conditions...... 5-6 Purpose andUse of the Appraisal, Scope of the Appraisal, Date of Value, PropertyRights Apprai sed, Definitions, Ownership/ Sales History...... 7-8

PROPERTY DATA Location Map, Location, General Area Description, Legal Descrip- tion, Map of Subject Property, Assessor Data, LandArea/Lot Sizes, Major Streets/Acc ess, Utilities, Zoning/General Plan/ Approvals, Topography/Drainage, Soil/Geologic/Environmental, Conditions, Title Report, Existingand Proposed Development, Highest and Best Use ...... 9-15

VALUATIONMethod of Analysis, Analysis of Finished Lot Value, Deduction for RemainingCosts/ Fees, Allocation to Homes Under Construction, ValueConclusion of As Is Condition...... 16-21

ADDENDATabulation of Residential LandSale s...... 22-23 Qualifications of Appraiser...... 24-26 CERTIFICATION

I certify that, to the best ofmy knowledge andbeli ef:

1. The statements of fact contained in this report aretrue and correct.

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

3. I have no present or prospective interest in the property that is the subj ect of this report, and no personal interest with respect to the partiesinvo lved.

4. I have no bias with respect to theproperty that is the subject of this report or to the parties involved with this assignment.

5. My engagement in this assignmentwas not contingent upon developing or reporting predetermined results.

6. My compensation for completing this assignment is not contingent upon the development or reporting ofa predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal.

7. My analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

8. I have made a personal inspection of the propertythat is the subject of this report.

9. No one provided significant professional assistance to the person signing this report, other than data research by my associate,John Hockman.

10. The use of this report is subj ect to the requirements of the AppraisalInstitute relating to review by its duly authorized representatives.

As of the date of this report, I have completed the requirements of the continuing program of the appraisal Institute.

Step�White, MAI (State Certified General Real Estate Appraiser No. AG013311)

4 ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal has been based upon the following assumptions andlimiting conditions:

I. No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be good andmarketab le unless otherwisesta ted.

2. The property is appraised free andclear of anyor all liens or encumbrances unless otherwise stated.

3. Responsible ownership and competent property management are assumed.

4. The information furnished by others is believed to be reliable, but no warranty is given forits accuracy.

5. All engineering studies, if applicable, are assumed to be correct. Any plot plans or other illustrative material in thisreport are included only to help the reader visualize the property.

6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be requiredto discover them.

7. It is assumed that the property is infull com pliancewith allapp licable federal, state andlocal environmental regulations andlaws unless the lack of compliance is stated, described and considered in the appraisal report.

8. It is assumed that the property conforms to allapp licable zoning and use regulations andrestrictions unless a nonconformity hasbeen identified, described and considered in theappraisal report .

9. It is assumed that all required licenses, certificates of occupancy, consents andother legislative or administrative authority from any local, stateor national government or privateentity or organization havebeen or canbe obtained or renewed for any use on which the value estimatecontained in the reportis based.

10. It is assumed that the use of the land and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespassunless notedin thereport.

11. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraiser. However, the appraiser is not qualified to detect such substances. The presence of such substancesmay affect the value of theproperty, but the value estimated in this

5 ASSUMPTIONS AND LIMITING CONDITIONS, Continuing

appraisal is based on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field, if desired.

12. Possession of this report, or a copy thereof, does not carry with it the right of publication, unless otherwise authorized. It is understood and agreed that this report will be utilized in the Official Statement, as required forthe bond issuance.

13. The appraiser, by reason of this appraisal, is not required to give further consultation or testimony or to be in attendance in court with reference to the property in questions unless arrangementshave previously been made.

SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS

1. Estimates of costs and fees to get all of the lots from their as is condition to finished lot condition have been obtained from the current property owner, Richmond American Homes, and have been relied upon in this appraisal as being reasonably accurate and reliable.

6 PURPOSE AND USE OF THE APPRAISAL

The purpose of this appraisal is to estimate the market value of the property comprising CommunityFacilities DistrictNo. 2003-1 of the City of Perris (Chaparral Ridge), reflecting the proposed public bond financing. This Summary Appraisal Report is to · be used as requiredin the bond issuance.

SCOPE OF THE APPRAISAL

It is the intent of this Complete Appraisalthat all appropriate data considered pertinent in the valuation of the subj ect property be collected, confirmed and reported in a Summary Appraisal Report, in conformance with the Uniform Standards of Professional Appraisal Practice and with the California Debt and Investment Advisory Commission. This has included aninspection of the subjectproperty and the surroundings; review of variousmaps and documents relating to the property and the development which is currently underway; obtaining of pertinent property data on the subject property; obtaining of comparable land and home sales from a variety of sources; and analysis of all of the data to the value conclusion.

DATE OF VALUE

The date of value forthis apprai sal is June 25, 2003.

PROPERTYRIGHTS APPRAISED

This appraisal is of the fe e simple interest in the subject property, subj ect to the special tax liens of theCity of Perris CFD 2003-1 (ChaparralRidge).

DEFINITION OF MARKET VALUE

The most probable price, as of a specifieddate, in cash or in terms equivalent to cash, or in other precisely revealed terms for which the specified property rights should sell after reasonable exposure in a competitive market underall conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assumingthat neitheris under undue duress.

DEFINITION OF FINISHEDLOT

This term describes the condition of residential lots in a single-family subdivision for detached homes in which the lots are fullyimpro ved andready for homes to be built. This reflects that the lots have all development entitlements, infrastructure improvements completed, finish grading completed, all in-tract utilities extended to the property line of each lot, street improvements completed, common area improvements/landscaping (associated with the tract) completed, resource agency permits (if necessary) , and all development fees paid, exclusive of building permit fees, in accordance withthe conditions of approval of the specifictract map.

7 DEFINITION OF BLUE-TOP LOT

This term describes residential lots in a single-family subdivision for detached homes in which the lots and streets have been rough graded, and the offsite infrastructure of streets and utilities are completed to the tract, but not within the tract.

DEFINITION OF RAW LAND

In this case, the land is entitled for development, but it has not been graded from its raw condition, and still_ lacks the necessary infrastructure of streets, utilities, etc.

OWNERSHIP/SALES HISTORY

The current owner of the property is Richmond AmericanHomes of California, Inc. They acquired title from River View Estates Associates, LLC by grant deed recorded May 9, 2003, Document No. 334776. The purchase price was $7,280,000 for the lots in blue-top condition.

River View Estates Associates, LLC had acquired title for the overall 312-lot site from Inland P.K. Holdings Inc. by grant deed recorded July 10, 2001, Document No. 315001. It is noted that Inland P.K. Holdings and River View Estates are related entities. In this transaction, the land for the 312 lots was contributed to River View Estates at a basis of $2,496,000 plus 50% of the project's proj ected profits, which was projected to equate to well over $4,500,000. Inland P.K. Holdings Inc. had acquired this land from Southern CaliforniaEdison Company in November 1999.

8 [TIDS PAGE INTENTIONALLY LEFT BLANK] LOCATION MAP

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I

-i- ·--,--- - :l������ r : ,' \.__ qp ll :� f. 1 � ' of�" Fo-- i ... -- . ( _.:!ilL--- f.>. _81 � ----+-"- r,---�---n-ROOS=( I� . t �1 i, :::i:L -ht � 'S:1-'(Y) ' L .. \ I..IJ c::c \1'. '!'°{, .... I fj:J'.·(\. 0::! --- !\ __ l. j�-,J-��-f 19 -.,., -�.f.c. ._ �/V ., "' '•<+).�'\\ ;._:/i

30

....I

9 PROPERTY DATA

LOCATION

The subject property is located about Yimile west of Goetz Rd. at Goldenrod Ave. (future McLaughlin Rd. to the east), in the City of Perris. This location is in the southwest partof Perris, about Yimile south ofEthanac Rd. and about 2% miles west ofthe 215 Freeway.

GENERAL AREA DESCRIPTION

The City of Perris lies along both sides of the 215 Freeway, about half-way between Riversideto the northand Temecula to the south. Adjacent to the north is the City of Moreno Valley and the March Air Reserve Base, and adjacent to the south is the unincorporated Menifee Valley area, which includes the communities of Sun City and Quail Valley. Nearby to the southwest are the Cities of CanyonLake and Lake Elsinore. To the east andwest of Perris is unincorporated County area.

The current population of Perris is about 38,000, which is an increase of close to 16,000 over the past 10 years. This is a significant percentage increase, though development within the city has been fairly limited, and most of it has been toward the north end, though now also toward the south end. Perris is best known for various recreational attractions. The Lake Perris Recreation Area offers fishing, boating andswimming, as well as campgrounds and hiking andbiking trails. There is also the Perris Auto Speedway which is part of the Fairgrounds adj acent to Lake Perris, and includes motocross tracks. The Perris Valley Airport and Parachuting Center is one of the largest skydivingcenters in thecountry. Inaddition, the Orange Empire Railroad Museum is located in Perris, which displays the West's largest collection of railway cars dating back to the 1870's.

The subject tract is located in the southwest partof Perris, in a mostlyundeveloped area. Along the north side of thetract areov erhead Edison electric lines which run east-west throughthis general area, and north of that is undeveloped and fairly flat landwhich continues over a:. mile. theTo east, beyond the east 200-lot portion of the Chaparral Ridge tract and beyond Goetz Rd., is undeveloped land, mostly flat to the northeast and mostly hilly to the southeast. Scattered residential development is within ±% mile. Adj acent to the south and west of the subject tract is hilly, undeveloped land. The nearest residential development to the west is over a mile away, and within mile'/.a to the south are a few custom homes on ±4 to 20-acre lots.

LEGAL DESCRIPTION

The 112 lots are described as Lots 1 to 112 of Tract Map No. 28986-3, in the City of Perris, as per map recorded in Book 333, Pages 1 through 7, inclusive, of Maps in the Officeof the County Recorder of theCounty of Riverside, California.

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-N-l J ASSESSOR DATA

The subject property consists of Assessor Parcel Nos. 330-170-022 & 028 (small portion). The current assessed values do not reflectthe current status of the land,and an allocation to the appropriate portion of parcel 028 is not known. The tax rate areas are 8-147 and 8-151, with a basetax rate of just over 1.0%. However, the total tax rate to futurehomeowners , including specialtaxes, will be ± 1.9%.

LAND AREA/LOT SIZES

The gross land areafor the 112 lots is ±43.5 acres. The lots rangein size from 7,249 s.f. to 34,991 s.f., other than one lot at 8.83 acres. Excluding the 8.83-acre lot, the average lot size is 11,205 s. f.

MAJOR STREETS/ACCESS

The primary street which provides accessto this Chaparral Ridge tract is Goetz Rd., whichis a secondarynort h-southroad through this area. Itis located about 100' east of the north end of the overall tract, and about Yi mile east of the subj ect property comprising this CFD. It is a 60' right-of-way and is currently improved as a two­ lane paved road with left and right tum lanes at Goldenrod Ave., but typically dirt shoulders on both sides. Goldenrod Ave. comes west from Goetz Rd. and is paved through the Chaparral Ridgetract up to the subject property.

Secondary access to the overall Chaparral Ridge tract is a narrow two-lane paved road which comes west from Goetz Rd. just northof theEdi son lines, andthen south to the northeastcomer of the subjectproperty, and paved for a short distance into the subject tract. Other in-tract streets in the 112-lot subj ect property are graded but not yet improved.

UTILITIES

All utilities areavaila ble andare being extended to the subject lots from the easterly portion of the Chaparral Ridge tract. Sewer and water are provided by Eastern Municipal Water District, electricity is provided by Southern California Edison Co., gas is provided by Southern California Gas Co., telephone is provided by General Telephone, and cable service is providedby Adelphia.

ZONING/GENERALPLAN/APPROVALS

The zoning for the subj ect property is Chaparral Ridge Specific Plan-R7 and the general planis R7, both of which designate single family residential with a density of up to 7 dwelling units per acre. The overall Tentative Tract Map 28986 for 312 single-familyresidential lots (including the 112 subject lots) was approved in August 1999, and the map for Tract No. 28986-3 for the 112 subject lots just recently recorded.

12 TOPOGRAPHY/DRAINAGE

These 112 lots terrace up to the south and also terrace slightly up to the west. The lots are approximately at grade of the lots adjacent to the east, and are terraced above the land to the north under the Edison lines. The land to the south of the subj ect slopes up into the adj acent hills, and the west end of the subject which comprises the one large custom lot slopes up to the west and southwest into the hillside.

Onsite drainage will be in gutters and public storm drain fa cilities to be constructed within the tract. Per FEMA Flood Insurance Rate Map No. 060245208SC dated 11/20/96, the subj ect property is in Zone C or outside of the floodplain.

SOIL/GEOLOGIC/ENVIRONMENTAL CONDITIONS

Soils and geologicreports have not been reviewed. However, thetent ative tract map indicates that the land is not subject to liquefactions or other geologichazards . It has been assumed in this appraisal that there are no soil, geologic or environmental conditions which would have an ecteff on the continuing development of the propertyas planned withthe 112 homes, andthat the cost of any required mitigation measures arereflected in the lot costs as provided by the property owner.

TITLE REPORT

A title report has not been reviewed on the subject property. Thus, it has been assumed that there are no pertinent easements or exceptions to title which would have an effect on the development of the property as proposed to the 112 homes.

EXISTINGAND PROPOSED DEVELOPMENT

These 112 lots are currently being developed with a tract of homes called Richmond American Homes at Chaparral Ridge. As of June 25, the 3 model homes and the first phase of 10 production homes are under construction, and the remaining 99 lots are vacant and in a graded blue-top condition with underground utilities being installed or recently installed in the streets. All of the in-tract streets are not yet paved, but for the short portion coming south from the northeast comer of the tract, and in front of the model homes. The 3 model homes are about 50% completed, and due to be finished in August. The 10 homes comprising the first phase have foundations and underground plumbing completed, and are due to be finished in November.

There are fourfloor plans ( only three will be modeled), described as follows:

Residence One: 2, 133 s.f., 1-story, with 3 to 4 bedrooms, 2 baths, den, optional master bedroom retreat, and 3-car garage.

Residence Two : 2,479 s.f., 2-story, with 4 to 5 bedrooms, 2Yz baths, den. optional superfamily room,opti onal bonus room,and 3 Yz-c ar garage.

13 EXISTING AND PROPOSED DEVELOPMENT, Continuing

Residence Three: 2,687 to 2,887 s.f.,2-s tory, with 4 to 6 bedrooms, 2 \4baths, den, optional superfamily room, optional office, optional bedroom #6 suite, optional master bedroom deck, and 3-car garage.

Residence Four: 3,162 to 3,419 s.f., 2-story, with 5 bedrooms, 3 baths, master bedroom retreat, optional superfamily room,opti onal office, optional master bedroom deck, and 3-car garage. The plannedmix of floorplans is 22 of Residence One, 26 of Residence Two, 30 of Residence Three, and 34 of Residence Four. The current base pricing $254,500 for Residence One, $269,000 for Residence Two, $275,000 for Residence Three, and $285,000 for Residence Four, or anaverage of ±$271,000. It is noted that these base prices are$9,000 higher per planthan had been projected as of mid-April.

The actual pricing forthe 10 homes in Phase l, including lot premiums, rangesfrom $256,500 to $290,000, or an average of ±$273,000. This reflects lot premiums ranging from $2,000 to $5,000, though it is noted that the larger lots and better view lots arelocated in the futuresou therly portionof the tract.

As of June 25, there were pending sales on 2 of the 10 homes in the first phase, due to close in November 2003 upon completion of the homes. Another 18 homes are due to be released forsale on July 12.

HIGHEST AND BEST USE

The term highest and best use is defined as that use which is reasonable and probable, and supports the highest present value of the land or improvements. It is also described as the most profitable use which is legal, physically possible and financiallyfe asible.

Based on the zoning, general plan, surroundings, and entitlements by way of the recorded tract map for thesubj ect lots, I have concluded that the highest and best use is for continued development of the tract of homes as planned. This use is well supported to be financiallyfe asible as evidenced by the strong demand forboth new homes and residential land in this general area. This strong demand is reflected by the good sales activity in the subject tract, as well as in the tract of Chaparral Ridge homes adjacent to theeast. Inthat tract, all 61 of the completed homes have sold and closed, andthe next 78 homes being built or soon to be built are already sold anddue to close upon completion by year end. In addition, it is noted that the most recent base pricing of $229,990 to $285,990 is 34-36% higher than the original pricing of $168,990 to $213,990 as of July 2002.

As previously indicated, the homes on the subject lots rangein size from 2,133 s.f. to 3,162 s.f. (optional up to 3,419 s.f.),with base pricing of $254,500 to $285,000. To consider the supportability of thispricing, the currentpricing of various other new

14 HIGHEST AND BEST USE, Continuing

home proj ects in this general areahave been obtained and are shown in the following table:

Min. Proiect Lot Size Floor Plan Base Price Price/S.F.

Chaparral Ridge 7,200 1,576 s.f. $229,990 $145.93 (Perris) 1,772 s.f. $240,990 $136.00 2,055 s.f. $259,990 $126.52 2,320 s.f. $279,990 $120.69 2,739 s.f. $285,990 $104.41

Pacific Landing 4,000 1,625 s.f. $186,990 $115.07 (Perris) 2,198 s.f. $204,990 $93.26 2,365 s.f. $214,990 $90.90 2,392 s.f. $214,990 $89.88

Stone Gate at 7,200 1,371 s.f. $209,990 $153.17 Menifee Valley 1,585 s.f. $230,990 $145.74 1,974 s.f. $247,990 $125.63 2,409 s.f. $291,990 $121.21 2,432 s.f. $293,990 $120.88

CitationHomes at 7,200 1,558 s.f. $205,990 $132.21 MenifeeValley 1,715 s.f. $219,990 $128.27 1,954 s.f. $227,990 $116.68

Newport Hills 7,200 1,717 s.f. $249,000 $145.02 (Menifee) 1,997 s.f. $261,000 $130.70 2,152 s.f. $271,000 $125.93 2,663 s.f. $289,000 $108.52 2,740 s.f. $292,000 $106.57 3,142 s.f. $302,000 $96.12 3,581 s.f. $328,000 $91.59

Subject 7,200 2,133 s.f. $254,500 $119.32 2,479 s.f. $269,000 $108.51 2,687 s.f. $275,000 $102.34 3,162 s.f. $285,000 $90.13 In general, the projected pricing is slightly lower on a per s.f. basis than for the homes in the existing Chaparral Ridge tract to the east. The pricing of Pacific Landing supports a far lower limit due to the inferior location and much smaller lot sizes. Stone Gate at Menifee Valley is a smaller product, but a superior freeway location, and its pricing is higher than the subject. The location of Newport Hills is considered to be superior, thus that pricing supports anupper limit for the subject.

In summary, I have concluded that this new home pricing data well supports the projected basepricing forhomes on the subject site.

15 VALUATION

METHOD OF ANALYSIS

The Sales Comparison Approach is used to estimate thevalue of the subject lots, as if in a finished lot condition. This approach considers recent sales of residential land or bulk lots from the general area in comparison to the subj ect property. Then, a deduction is made forthe estimated remaining costs and fe es to get the lots fromthe as is nearlyraw condition to finished lots.

ANALYSIS OF FINISHED LOT VALUE

A search was made in the general subject area, including the Menifee Valley area and nearby areas of Lake Elsinore, Murrieta and Wildomar, for recent sales of similarresidential land or bulk single-familylots. Consideration was givento closed sales, current escrows and recent or pending offers. A detailed tabulation of the pertinent data is in the Addenda section at the end of this report. The following discussion andana lysis references thedata in thatta bulation.

Data No. 1 is the recently closed sale of the subject property, which supports a close lower limit at current date at ±$94,000 per finished lot, considering at least a minor upward time adjustment since the sale was negotiated some months ago. This upward time adjustment is supported by the fact that the current home pricing is about 3% higher thanpro jected asof mid-April, shortly beforethe sale closed.

Data No. 2 is located on thenortheast part ofthe Menif ee LakesCountry Club golf course, just over Y2 mile northof Newport Rd. and about 1 Yi miles east of the 215 Freeway. This was a recent sale to Beazer Homes of 159 lots, 5,500 s.f. minimum, at a price which reflects $113,000 perfinished lot. The land was delivered in raw condition but with a tract map ready to record, and 35 of the lots will have golf course frontage. In comparisonto the subject, theseare smaller lots, but this is more than offset by the superior location being closer-in to Murrieta/Temecula as well as having the significantpotential premiumsfrom the golf coursefrontage. Overall, the price of $113,000 perfinished lot supports a far upper limit forthe subj ect.

Data Nos. 3 and 4 are located just to the southeast of Data No. 2, also fronting on the golf course, andju st northof Newport Rd. and west of Lindenberger Rd. These two planning areas consist of 226 lots at 4,000 s.f. minimum and 262 lots at 4,400 s.f. minimum, and the lots areto be delivered as rough gradedwith tractmaps ready to record. They had been marketed at $85,000 and $90,000 per finished lot, respectively, but Data No. 3 is in escrow at the much higherprice of $103,451 per finished lot andoff ers of $105,000 per finishedlot had been received on Data No. 4. Similarto Data No. 2, these aremuch smaller lots thanthe subject, and thebulk size of 226 and 262 lots is much largerthan the subject, but the location is far superior including the significant amount of golf course frontage. The superior location is evident by the much smaller homes but only slightlylower projected base pricing for

16 ANALYSIS OF FINISHED LOT VALUE, Continuing

homes on Data No. 3 than on the subject lots, plus there is the benefit of the potential golf course premiums. Overall, the indications at $103,45 1 and $105,000 per finished lot support close but firmupp er limits forthe subject.

Data No. 5 is located across Lindenberger Rd. to the east of Data Nos. 3 and4, at the northeast comer of Newport Rd. and Lindenberger Rd. This is to be a 310-lot subdivision with 5,000 s.f. minimum lots, that will include an 11-acre lake. The fill fromthe excavation for the lake will be used for the gradingof the lots. The land is currently in raw condition but with a final tract map ready to record, and a grading permit. The property sold in February 2003 to Granite Homes reflecting a price of ±$120,000 per finished lot, but the proj ected size and pricing of homes was not available. In comparison to the subj ect, the lots are much smaller at 5,000 s.f. minimum, and the bulk size of 310 lots is much larger, but the general location is superior, and the lake willbe a far superior amenity. It results in the relatively high finished lots at $120,000, but will also result in significant lot premiums. Overall, the indicationat $120,000 per finishedlot supports a fa r upper limit for thesubj ect.

Data No. 6 is located at the southeast corner of MurrietaRd. and Craig Ave., which is ±1 Yi miles south of Newport Rd. and ±2 miles west of the 215 Freeway in the Menifeearea. This is a current escrow to KB Home of 537 lots, 7,200 s.f. minimum but with an average size of 8,400 s.f. The land is in raw condition, but there is an approved tentative tract map and environmental permits for the plannedsub division which comprises five planning areas. The sale price is based on $113,000 per finished lot, and the escrow is due to close in late Summer 2003. Incomparison to the subject, the lots are similar in size, but the bulk size of 537 lots is much larger. However, the closer-in location is considered to be far superior to the subj ect, and is more thanoff setting to the bulk size. Overall, the indication at $113,000 per finished lot supports a far upper limit for the subject.

Data No. 7 is located along and just north of Scott Rd., ±1 mile east of the 215 Freeway, in the southerly Menifee area and just north of the Murrieta city limits. This property consists of several parcels of raw land, withthree tentative tract maps, ready to record. Richmond American Homes had been in escrow to purchase all 325 lots at a price reflecting $131,500 per finished lot, but the escrow fell through. GraniteHomes now has a pending deal on the 59-lot portion and Laing Homes has a pending deal on the 266-lot portion atpr ices above the $131,500 figure. These are 10,000 s.£ minimum lots, and the projected home pricing is an average near $375,000. IIi comparison to thesub ject, the lots aremuch larger and the closer-in · location is far superior, resulting in the potential formuch higher home prices. Thus, the priceof $131,500+ per finished lot supports a far upper limit forthe subject.

Data Nos. 8 to 12 are portions of the master-plannedcommunity of Mapleton, which is located at the far north end of Murrieta, just east of the 215 Freeway and north of Keller Rd. Data No. 8 was the most recent sale in Phase 1, and reflected $85,000 per

17 ANALYSIS OF FINISHED LOT VALOE, Continuing

finished lot for 5,000 s.f. minimum lots as of May 2002. Data Nos. 9, 10 and 11 were the lots comprising Phase2, and thesesales closed in August and September of last year. The indicated prices were $93,000 per finished lot for 6,000 s.f. lots, $95,000 perfinished lot for 6,500 s.f. lots and $98,000 per finished lot for 7,000 s.f. lots. SaleNo. 12 was a bulk sale of 440 lots, 6,000 s.f. minimum, comprising all of Phase 3, which closed in January2003 at an indicated price of $115,000 per finished lot.

In comparison to the subject, the lots range frommuch smaller to similarin size, but the Murrieta location is considered to be far superior, as evident by the larger and higher-pricedhomes on the 7,000 s.f. lots of Data No. 11. However, it is also noted that an upward time adj ustment would be needed to Data Nos. 8 to 11 which were negotiated up to a yearago . This is evident by the price of $98,000 per finished lot in September 2002 for the 7,000 s.f. lots of Data No. 11, and the much higherprice of $115,000 per finished lot in January 2003 forthe 6,000 s.f. lots of Data No. 12, including being a bulk purchase of 440 lots. Overall, the best indication for the subj ect is a far upper limit at $11 5,000 per finished lot by Data No. 12, reflecting smaller lots and a bulk purchase, but with these inferior factors being more than offset by the superior location.

Data No. 13 is located in the northpart of Murrieta, in the hilly area as it slopes up to the north from Clinton Keith Rd. This is a pending sale to Shea Homes of 172 lots, 7,200 s.f. minimum,which is partof the Blackmore Ranchproperty. The sale is due to close by July of this year, upon completion of the lots to blue-top condition, with finaltract ma ps. The sale price reflects finishedlots at $130,000, and thebuyer plans to build homes ranging from 2,650 to 3,600 s.f., with pricing from about $310,000 to $380,000. In comparisonto the subj ect, theselots are similar in terms of the size, but the Murrieta location is far superior, as evidenced by the larger and much higher-pricedhom es which areplanned on these lots than on the subj ect lots. Thus, this sale supports a far upper limit forthe subject at $130,000 per finished lot.

Data No. 14 is located about a mile west of Data No. 13, and wasa purchaseby Van Daele Homes of blue-top lots with a map ready to record, reflecting a price of $136,500 per finishedlot. These are 7,200 s.f. minimum lots, but ±9,500 s.f. average and with good views, and will be developed with a continuation of the Oakmont I product which is located just east of the 215 Freeway and north of Los Alamos Rd. in Murrieta. In comparisonto the subject, the lots are similarin size, but the location is far superior which results in the potential for the larger and higher-priced homes which are plannedto be built. In addition, theprice is likely on the high side since the buyer is able to reduce costs by using models from a nearby tract. Overall, the indication at $136,500 per finishedlot is a far upper limit forthe subject.

Data No. 15 is located at the easterly comer of Palomar St. and Catt Rd. in the Wildomararea, just northwesterlyof Murrieta. This was a sale of 78 lots, 7 ,200 s.f.

18 ANALYSIS OF FINISHED LOT VALUE, Continuing

minimum size, which consisted of raw land with an approved tentative tract map. The price reflected$92,000 per finished lot, but had been negotiated in May 2002.

In comparison to the subject, the lots are similar in size, but the location near to Murrieta and the 15 Freeway is considered to be superior to the subject. The superior location is evidenced by the larger and higher-priced homes which were planned forthis sale than on the subject. Considering an upward time adj ustment of at least 20% since the sale was negotiated just over a year ago, this sale supports a firm upper limit forthe subject at ±$110,000 per finishedlot.

Data No. 16 is located across Catt Rd. to the northwest of Data No. 15. It was a sale to Beazer Homes of raw landwith an approved tentative tract map which closed in January2003, reflecting a price of $105,000 per finished lot. These will be 7 ,000 s.£ minimum lots which are currently being grading forconstruction of a tract of homes to be priced from the high $200,000's to the low $300,000's. The comparison to the subject is similarto that of Data No. 15, except less of anupward time adjustment is necessarydue to the date of sale. Overall, the upward time adjustment is far more than offset by a downward adjustment for the superior location, resulting in a firm upper limit forthe subject at $105,000 per finished lot.

Data No. 17 is located at the easterly comer of Grand Ave. and Turtle Dove Dr., which is in unincorporated County areabut close to the Lake Elsinore city limits, at the southerly end of the lake. This was a sale of 127 lots, 7,200 s.f. minimum size, which consisted of raw land withan approved tentative tractmap . In comparison to the subject, the lots are similar in size, and the location is considered to be fairly similar to slightly superior, as evidenced by the slightly smaller but fairly similar­ priced homes which were planned on this site in comparison to the subject. However, considering at least a minor upward time adjustment since the sale was negotiated over 6 months ago, the price of $91 ,025 per finished lot would support a close lower limit forthe subject.

Data No. 18 is a raw and hilly site which is located just east of Tuscany Hills and just west of Canyon Lake, with good views to the east of the lake and surrounding homes. The landwas sold in raw condition but with anapp roved tentative tract map. The 133 lots will be 10,000 s.f.minimum size, but no information was availableas to the planned size or price of the homes. In comparison to the subject, the lots are much larger and the locationand view potential is far superior. Overall, the superior location and larger lots are far more than offsetting to a minor upward time adjustment since the sale date inDe cember 2002, thus the indication at $125,000 per finished lot supportsa far upper limit for the subject.

Data No. 19 is located in an unincorporated area,ju st to the south of the community of Wildrose Ranch, about a mile westerly of the I-15 Freeway and several miles southof the city limitsof Corona. These lots are part ofthe communityof Montecito

19 ANALYSISOF FINISHED LOT VALUE, Continuing

Ranch, with several tracts of homes now being built by Citation Homes. The 53 lots are 7,200 s.f. minimum size, with anaverage of just over 10,000 s.f., andthey terrace up a hillside providing view potential. In comparison to the subject, the lots are similar in size, but the closer-in/near South Corona location is far superior, as evidenced by the much largerand higher-priced homes which areplanned. Thus, the sup�or location is far more than offsettingto an upward time adjustment since the sale date in September 2002, resulting in a far upper limit forthe subject at $160,000 per finishedlot.

In summary, on a finished lot basis, the data supports close lower limits for the subject at $91,025 and $94,000, close but firm upper limits at $103,451 and $105,000, firm upper limits at $105,000 and $110,000, and far upper limits from $113,000 to $160,000.

On thebasis of the finished lot ratio (ratio of finishedlot value to average base home price), the sales indicate the overall range of 31% to 42%. The upper end of the range is indicated by Data No. 14, whichlikely reflects the higher price due to lower costs to the buyer by using the models from a nearby tract. Data No. 19 was next highest at 39%, andthis sale has a far superior location in the South Corona area, and sales in superior locations such asthis tend to have higherfinished lot ratios.

In general, the mid-portion of the range, say 35-3 7% is more supportable for the subject property, and as indicated, the recent sale of the subj ect indicated a finished lot ratio of 36%. Thus, based on the average base home price of ±$271,000 (as previously discussed), and a finished lot ratio in the range of 35-37%, the following indication results:

$271,000 x .35-.37 = $94,850 to $100,270/fin. lot Based on the foregoing, I have concluded on a finished lot value for the subject propertynear the mid-portion of thisrange, or$97 ,000 per finished lot.

DEDUCTION FOR REMAINING COSTS/FEES

Information provided by Richmond American Homes is that, at the time of their purchase of the lots in blue-top condition, the total estimated land development costs and fees to get to finished lots were $4,965,731, less an amount of $1,714,944 that was to be CFO bond-financed. Since purchasing the lots, Richmond American Homes has completed some of the land development work, and has already paid a significant amount of the fees so as to avoid the TUMF (Transportation Uniform Mitigation Fee) on 67 of thelots.

As of June 25, the remaining land development costs and fees to get from as is condition to finished lots are $2,939,140, of which $981,027 is to be CFO bond­ financed. Inaddition, it is also noted thatRichmond AmericanHomes is to be

20 DEDUCTION FOR REMAINING COSTS/FEES, Continuing

reimbursed by the CFD bond proceeds for some of the land development costs and fees already spent, in an estimated amount of $1,187,284. This reimbursement effectively reflects a further reduction in the remaining land development costs and fees which are yet to be spent.

Thus, it is reflected that the total amount of CFD bond proceeds to go for public facilities is $2,168,311, and the net remaining costs to Richmond American Homes are indicated as follows:

Remainingcosts/fees to get to finished lots: $2,939,140 Less amount to be CFD bond.financed: · 981,027 Less reimbursement for costs/fees already spent: · 1,187,284

Net remaining costs/fees to builder: $ 770,829

ALLOCATION TO HOMES UNDER CONSTRUCTION

A conservative allocation is made to reflect the approximate costs that have been spent thus far on the homes which are under construction. For the 3 model homes which are ±50% completed, I have considered an average cost amount of 50% of ±$55.00 per s.f.total costs or $27.50 per s.f. on the average home size of ±2,780 s.f., or an amount of ±$76,000. For the 10 homes which have foundations and underground plumbing completed, as well as additional building permit fees paid, I have concluded on a lump sum amount of$10,000 per home, or a total of $100,000.

Thus, the total cost allocation forthese 13 homes is estimated at $176,000.

VALUE CONCLUSION OF AS IS CONDITION

In summary, the indicated value for the as is condition of the 112 lots plus the 13 homes under constructionis calculated as follows:

112 lots @$97,000/lot, if finished condition = $10,864,000 Cost allocationto homes under construction = + 176,000 $11,040,000 Less net remaining costsfe & es to get to finished lots: 770.829

Value Indication, As Is Condition: $10,269,171

Thus, as the result of this analysis, I have arrived at the following conclusion of market value for the as is condition of the subj ect property, subject to the Assumptions and Limiting Conditions, and as of June 25, 2003:

(TEN MILLION TWO HUNDRED SIXTY THOUSANDDO LLARS)

21 ADDENDA TABULATION OF RESIDENTIAL LAND SALES

Rec. No. Min. Price/Lot Fin. Lot l'lQ, µ>cation/ProjectName Seller/Buyer Date Lots Lot Size Product Finished Lot Ratio Remarks

Subjectproperty River View Estates 5103 112 7,200 2,1 28-2,922 s.f. $65,000 36% Sold as blue-top lots with approved tent- Perris Richmond American Homes $245,500-$276,000 $94,025 alive tract map; ± 1 .9% tax rate (Chaparral Ridge)

2 EIS Menifee Rd., S/0 Aldergate Dr., Diamond MenifeeWest 2/03 159 5,500 2,380-2,904 s.f. $63,71 1 36% Part of Menifee Greens; delivered as raw Menifee Beazer Homes Holdings Corp. High $200,000's to $11 3,000 land with tract map ready to record; 35 lots (n/a) Mid $300,000's with golf course frontage; has CFD

3 N/0 Newport Rd., W/0 Lindenberger Diamond Bros. Escrow 226 4,000 1,500-2,500s.f . n/a 38% P.A. 3-5 of MenifeeGr eens; delivered as Rd., Menifee n/a $245,000-$305,000 $103,451 rough graded with map ready to record; 55 (n/a) lots with golf course frontage; has CFD

4 N/0 Newport Rd., W/0 Lindenberger Diamond Bros. Offers 262 4,400 n/a n/a P.A. 3-3 of Menifee Greens; delivered as Rd., Menifee n/a n/a ±$105,000 n/a rough graded with map ready to record; (n/a) Golf course frontage; has CFD

5 NEC Newport Rd. & Lindenberger Rd., Newport Lake, LLC 2/03 310 5,000 n/a $30,645 nla Raw land with finalmap ready to record Menifee Menifee 310, L.P. n/a ±$120,000 and gradingpermit; will include I I-acre (n/a) lake

6 SEC Murrieta Rd. & Craig Ave., JeffWiggins Escrow 537 7,200 n/a n/a n/a Raw, undulating land with approved tent- Menifee KB Home n/a $1 1 3,000 ative tract map and environ. permits; incl. (n/a) 5 planning areas

7 NIO Scott Rd., between Menifee Rd. & Warmington Land Pend. 59 10,000 n/a n/a 35%+ Two different buyers; 3 tentative tract maps El Centro Ln., Menifee Granite/Laing 266 ±$375,000avg. $131,500+ ready to record; + 1.9" /o tax rate (n/a)

8 N/S Mapleton, ±\/, mile W/0 Menifee, CRV Murrieta 5102 101 5,000 2,156-2,470 s.f. n/a 35% Sold as blue-top lots; part of Phase I of Murrieta Lennar Homes $237,000-$255,000 $85,000 Mapleton planned community; 1.7-l.8% (Lantana) lax rate

9 SIS Mapleton at Poinsettia, CRV Murrieta 8/02 55 6,000 1,978-2,580 s.f. n/a 37% Sold as blue-top lots; part of Phase 2 of Murrieta Western Pacific Housing $239,990-$259,990 $93,000 Mapleton planned community; l .7-1.8% (Thyme) tax rate

10 SWIS Poinsettia, S/0 Mapleton, CRV Murrieta 8/02 57 6,500 2,583-3,000 s.f. n/a 34% Sold as blue-top lots; part of Phase 2 of Murrieta Western Pacific Housing $270,990-$284,990 $95,000 Mapleton planned community; 1.7-1 .8% (Sage) tax rate

II NWC Menifee & Keller, CRV Murrieta 9/02 84 7,000 2,808-4,04l s.f. n/a 31% Sold as blue-top lots; part of Phase 2 of Murrieta John LaingHomes $295,000-$333,000 $98,000 Mapleton planned community; 1.7-1.8% (IvyGate ) tax rate

12 FJS Menifee at Mapleton & Poinsettia, CRV Murrieta 1103 440 6,000 ±2,449-4,000 s.f. n/a n/a Raw land with approved tentative tract Murrieta Centex Homes n/a $11 5,000 maps; all of phase 3 of Mapleton planned (n/a) community; 1 .7-1 .8% tax rate TADULATION OFRec. RESIDENTIAL No. Min. LAND SALES, ContinuingPrice/.Lot Fin. Lot No. 1..ocation1Proj!.£t Name Seller/Buyer Date Lots LotSize Product Finished Lot Ratio Remarks 13 NW of Clinton Keith & Nutmeg, BlackmoreRanch LLC Escrow 172 7,200 2,650-3,600s.f . ±$93,000 38% Ptn of Blackmore Ranch; to be delivered Murrieta Shea Homes ±$3 10,000-$380,000 $130,000 as blue-top lots with final tractmaps; (n/a) ±1.8% tax rate

14 NIS Clinton Keith, � mile E/0 Smith CRY Wildomar96 LP 3/03 96 7,200 2,537-3,137 s.f. n/a 42% Delivered as blue-top lots with map ready Ranch Rd., Wildomar Oakmont 96, LLC $312,990-$330,990 $136,500 to record; good views; to be continuation of (Oakmont II) Oakmont I product; I.9% tax rate 15 E'ly comer Palomar St. & Catt Rd., Donald & Katharine Dickson 9/02 78 7,200 2,639-3,210 s.f. $37,000 31% Raw land with approved tentative tract Wildomar Wildomar Dickson Ventures $279,990-$3 19,990 $92,000 map; ±1 .7% tax rate (Palomar Ridge)

16 N'ly comer Palomar St. & Catt Rd., Nancy Brown, et al 1/03 66 7,000 2,209-2,954 s.f. n/a 35% Raw land with approved tentative tract Wildomar Beazer Homes Holdings Corp. High $200,000'sto $105,000 map; to be CFD (Willow Creek) Low $300,000's

17 E'ly comer Grand Ave. & Turtle Dove Northern Light Development 12/02 127 7,200 1,772-2,739 s.f. $51,181 37% Raw land with approved tentative tract Dr., Lake Elsinore area Richmond AmericanHomes $226,000-$271,500 $91,025 map; 1.7-1 .8% tax rate (Lake Ridge)

18 N/S Via De LaValle, ±400' EIO Lusk Elsinore, Inc. 12/02 133 10,000 2,391-3,448 s.f. n/a n/a Raw undulating land with approved tent- Summerhill, LakeElsi nore Brehm Communities nla $125,000 ative tract map; goodviews of Cyn Lake; (Water Ridge) likely have CFD

19 WIO Knabe Rd. at Hunt Rd., Citation Homes 9/02 53 7,200 ±3,200-3,600 s.f. :!:$1 18,000 ±39% Part of Montecito Ranch; delivered as near Unincorporated Centex Homes Low $400,000's ±$1 60,000 finished lots; some views (Alicante) QUALIFICATIONS OF STEPHEN G. WHITE, MAI

PROFESSIONALReal Estate Appraiser EXPE sinceRIE 1976.NCE 1983 through current date: Self-employed; office located at 1370 N. Brea Blvd., Suite 205, Fullerton, CA 92835 (Phone: 714-738-1595) 1976-1982: Employedby Cedric A. White, Jr., MAI, independent appraiser located in Anaheim. Real estate appraisals have been completed on most types of properties forpu rposesof fair market value, leased fee value, leasehold value, easement value, partial acquisitions and severance damages.

PROFESSIOMember,NALAppraisal ORGANIZ Institute; ATIONSMAI designation obtained 1985

Affiliate Member, Pacific West Association of Realtors

LICENSESLicensed by the State of Californiaas a Certified General Real Estate Appraiser; OREAID No. AGO 13311; valid through September22, 2004.

EDUCATIONB.A. Econom ics & Business, Westmont College, Santa Barbara (1976) Appraisal Institute Courses: Basic Appraisal Principles, Methodsand Techniques Capitalization Theoryand Techniques Urban Properties LitigationValuation Standards of Professional Appraisal Practice Numerous seminars and continuing education on various appraisal subjects, including valuation of easements and leased fee interests, litigation, the money marketand its impact on real estate, and standards of professional appraisal practice.

COURT/QualifiedTESTIMONYan as expert EXPE witnessRIENCE inthe Superior Courts of Orange, Los Angeles, Riverside and San BernardinoCount ies; also beforethe Asses sment Appeals Board of Orange and Los Angeles Counties.

TYPESResidenti OF PRal:OPE vacantRTY lots, APP acreageRAI andSEDsubdivisions ; single family residences, condominiums, townhomes and apartmentcomplexes.

Commercial: vacant lots/acreage; officebuilding s, retail stores, shopping centers, restaurants, hotels and motels.

24 QUALIFICATIONS, Page 2

Industrial: vacant lots and ac reage; warehouses, manufacturing buildings, R&D buildings, industrial parks, mini-warehouses.

Special Purpose: mo bilehome parks, churches, automobile agencies, medical buildings,con valescent ho spitals, easeme nts, leased fe e and leasehold interests.

CLIENT LIST

Corporations:

Aera Energy MCP Foods British Pacific Properties Merrill Lynch Relocation BSI Consultants Orangeland RV Park Crown Central Petroleum Pacific Scientific EastmanKo dak Company Penhall International Firestone Building Materials Pie 'N Save Stores Food.makerRe alty Corp. Sargent-Fletcher Co . Greyhound Lines Shell-We sternE&P Holiday Rambler Corp. SouthernDi stributors Corp. International BakingCo . Southern CaliforniaEd ison Johnson Controls The HomeDe pot Kampgrounds of America Tooley and Company La Habra Products, Inc. Wastewater Dispo sal Co . Developers:

Brighton Homes Mi ssion Viejo Co . Citation Builders Premier Ho mes Davison-Ferguson Investment Devel. Presley Homes D.T. Smith Homes Ro ckefeller & Associate s Irvine Company Taylor Woodrow Homes Kathryn Thompson Developers Unocal Land & Development Mark Taylor, Inc. Law Firms:

Baldikoski, Klotz& Dragonette Nossaman, Guthner, Knox & Elliott Best, Best & Krie ger Oliver, Barr& Vo se Bowie, Arne son,Ka di, Wiles & Giannone Ollestad, Freedman & Taylor Bradshaw, John Palmieri, Tyler, Wiener, Wilhelm & Bye , Hatcher & Piggott Waldron Callahan, Mc Cu ne & Willis Paul , Hastings, Jonofsky& Walker Cooksey, Coleman & Howard Piggott, George B. Hamilton & Samuels Po thier, Ro se Horgan, Ro sen, Beckham & Coren Rosenthal & Zimmerman Kent, John Rutan& Tucker Kirkland & Ellis Sikora & Price, Inc . Lathan & Watkins Smith &Po litiski McKee, Charle s C. Williams, Gerold G. Mosich, NicholasJ. Woodruff, Spradlin & Smart Long, David M. Yates, Sealy M.

25 QUALIFICAFinancialTIO InstitutiNS, Pageons: 3 Barclays Bank San Clemente Savings & Loan Chino Valley Bank United Calif. Savings Bank Continental Bank National Credit Union Admin. First Interstate Mortgage First Wisconsin Bank Security PacificBa nk Ah manson Trus t Company Washington Square Capital Sunwest Bank

Cities:

City of Anaheim City ofOra nge City of BaldwinPark City ofPl acentia City of Buena Park City of Riverside City of Cypress City of Santa Ana City of Duarte City of Santa Fe Springs Cityof La Habra City of Stanton City ofLagu na Beach City of Tustin City ofMi ssion Viejo City of Yorb a Linda Counties:

County of Orange County of Riverside Other Governmental:

Agua Mansa IndustrialGro wth Associatio n Metropolitan Water District El Toro Water District Orange County Water District Federal Deposit Insurance Corporation (FDIC) Trabuco Canyon Water District Kem CountyEmplo yees Retirement Association U.S. Postal Service

School Districts:

Anaheim Union High School Dist. Mo reno Valley Unified School Dist. Banning Unified School Dist. Newhall School Dist. Capistrano Unified School Dist. Newport-Mesa Unified School Dist. CastaicUnion School Dist. Placentia-Yorba Linda Unified Dist. Cypress School Dist. Poway Unified School Dist. Etiwanda School Dist Rialto Unified School Dist. Fullerton School Dist. Saddleback Unified School Dist. Garden Grove Unified School Dist. Santa Ana Unified School Dist. Irvine Unified School Dist. So. Org. Cnty Comm. College Dist. Lake Elsinore Unified School Dist . Temple City School Dist. Churches/Church Organizations:

CalvaryChurc h, SantaAna First Church ofthe Nazarene Central Baptist Church,Pomona Lutheran Church, MissouriSyn od Christian& Missionary Alliance Church, Santa Ana Presbytery of Los Rancho ChristianCh urch Fo undation St. Mark's LutheranChurch, Hae. Hts. Congregational Church, Fullerton Vineyard Christian Fellowship Other: Biola University Garden Grove Boys' Club Cedars-Sinai Medical Center The Sheepfold

26 APPENDIX D RATE ANDMET HOD OF APPORTIONMENT

CITY OF PERRIS COMMUNITYFACILITIES DISTRICT NO. 2003-1 (Chaparral Ridge)

A Special Tax shall be levied on all Taxable Property in the City of Perris Community Facilities District No. 2003-1 and collected each Fiscal Year commencing in Fiscal Ye ar 2003-2004 -according to the tax liability determined by the Council, through the application of therate and methodof apportionment of the Special Tax set forthbelo w. All Taxable Property shallbe taxed to theextent and in the mannerherein provided. I. DEFINITIONS "Acreage" means theland area of an Assessor's Parcel as shownon an Assessor's Parcel map, or if the landarea is not shown on anAssessor 's Parcel map, the land area shown on the applicable final map, parcel map, condominiumplan, or other recorded County parcel map. An Acre means 43,560 square feetof land.. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 of Part1 of Division 2 ofTi tle 5 ofthe Government Code of theState of California.

"Administrative Fees" or "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of: the costs of computing the Special Taxes; thecosts of preparing the annual Special Tax collection schedules (whether by the City or designee thereofor both);the costs of collecting the Special Taxes (whether by the City, the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFO No. 2003-1, or any designee thereof complying with arbitrage rebate requirements; the costs to the City, CFD No. 2003-1, or any designee thereof complying with disclosure or reporting requirements of the City or CFD No. 2003-1, associated with applicable federal andState laws; the costs associated withpreparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs to the City, CFD No. 2003-1, or any designee thereofrelated to an appeal of the Special Tax; and the City's annual administration fees and third partyexpe nses. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 2003-1 for any other administrative purposes of, including attorney's fees and other costs related to commencing and pursuing any foreclosure of delinquent Special Taxes. "Assessor" meansthe Assessor of theCounty of Riverside.

D-1 "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's parcel number.

"Assigned Special Ta x" means the Special Tax foreach Land Use Class of Developed Property, as determined in accordance with Section III below.

"Backup Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section III below.

"Bonds" means any bonds or other indebtedness (as defined in the Act) of CFD No. 2003-1, whether in one or more series, secured by the levy of Special Taxes.

"CFD No. 2003-1" meansthe City of Perris Community Facilities District No. 2003-1.

"CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and for levying and collecting the Special Taxes.

"City" means the City of Perris, California.

"Council" means the City Council of the City of Perris acting as the legislative body of CFD No. 2003-1 under the Act.

"County" means the County of Riverside, California.

"Debt Service" means foreach Fiscal Year, the total amount of principal and interest payable on any Bonds during the calendar year commencing on January 1 of such Fiscal Year.

''Developed Property" means for each Fiscal Year, all Taxable Property, exclusive of Taxable Property OwnerAs sociation Property or Taxable Public Property, forwh ich a building permit for new construction or renovations was issued prior to March 1 of the previous Fiscal Year.

"Final Subdivision" means a subdivision of property created by recordation of a final map, parcel map, pursuant to the Subdivision Map Act (CaliforniaGovernment Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 or lot line adjustment that creates individual lots for which building permits may be issued without further subdivision.

"Fiscal Year" means the period starting on July 1 andending the followingJune 30.

"Indenture" means the indenture, fiscalagent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.

"Land Use Class" means any of the classes listed in Table 1.

"Lot" means a parcel created by a Final Subdivision on which a single family residential home can be constructed.

"Maximum Annual Special Tax" means the greatest amount of Special Tax, determined in accordance with Section III below, which may be levied in any Fiscal Year on any Assessor's Parcel.

"Non-Residential Property" means all Developed Property forwh ich a building permit(s) was issued fora non-residential use.

D-2 "Outstanding Bonds" meanall Bonds, which are deemed to be outstanding under theIndenture . "Property Owner Association Property" meansany Assessor's Parcel within the boundaries of CFD No. 2003-1 owned in fee, dedicated to or subject to an easement benefiting a property owner association, including any master or sub-association. "Proportionately" or "Proportionate" means, for Developed Property, that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Assessor's Parcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section IV below.

"Public Property" means any property within theboundaries of CFD No. 2003-1 the ownership of which is transferred to a public agency ofCFD No. 2003-1 and is used for rights-of-way or any other purpose and is uwned by, or irrevocably offered for dedication to the federal government, the State of California, the County, the City or any other public agency; provided however that any property owned by a public agency and leased to a private entity and subject to taxation under Section 53 340.1 of the Act shall be taxed andclassified in accordance with its use. "Residential Floor Area" means all of thesquare footage ofusable area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, or similar area. The determination of Residential Floor Area shall be made by reference to the building permit(s) issued forsuch Assessor's Parcel. "Residential Property"means all Assessor's Parcels of Developed Property forwhich a building permit has been issued forpurposes of constructing one or more residential dwelling units. "Resolution of Issuance" means the Resolution passed by the Council authorizing the issuance of bonds. "Special Tax" means any tax levied within CFD No. 2003-1 pursuant to theAct andthis Rate and Method of Apportionment of Special Tax. "Special Tax Obligation" means thetotal obligation of an Assessor's Parcel of Taxable Property to pay the Special Taxfor the remaining life of CFD No. 2003-1. "Special Tax Requirement" means that amount required in any Fiscal Ye ar to: (i) pay Debt Service on all Outstanding Bonds; (ii) pay periodic costs on the Outstanding Bonds, including but not limited to, credit enhancement and rebate payments on the Outstanding Bonds; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) accumulate funds to pay directly for acquisition or construction of facilities provided that the inclusion of such am0tmt does not cause the Special Tax to be levied on Undeveloped Property, and (vi) pay for reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in thepre vious Fiscal Year; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFO Administratorpursuant to theIndenture . "State" means the State of California. "Taxable Property" means all of theAssessor 's Parcels withinthe boundaries of, which are not exempt from the levy of the Special Tax pursuant to law or Section VIII below.

D-3 "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Ov.,nerAssoc iation Property within the boundaries of CFD No. 2003-1 that are not exempt from the levy of Special Tax pursuant to Section VIII below.

"Taxable Public Property" means all Assessor's Parcels of Public Pr operty that are not exempt fromthe levy of Special Tax pursuant to Section VIII below.

"Trustee" means the trustee or fiscalagent under the Indenture.

"Undeveloped Property" means, for each Fiscal Year, all Taxable Property within the boundaries of CFD No. 2003-1 not classified as Developed Property, Ta xable Property Ov.,ner Association Property, or Taxable Public Property.

II. CLASSIFICATION OF PARCELS

Each Fiscal Ye ar, all Taxable Property within the boundaries of CFD No. 2003-1 shall be classified as Developed Property, Taxable Property OwnerAssoci ation Property, Taxable Public Pr operty, or Undeveloped Property, and all such Ta xable Property shall be subject to the levy of Special Taxes in accordance with the rate and method of apportionment determined pursuant to Sections III and IV below. Assessor 's Parcels of Developed Property shall be classified as Residential Property or Non-Residential Property. Assessor 's Parcels of Residential Property shall be furtherclassified to its applicable Land Use Class based on its Residential Floor Area.

III. MAXIMUMSPECI AL TAX RATES

1. Developed Property

(a). Maximum Special Tax

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

(b). Assigned Special Tax

D-4 TABLE l Assigned Special Taxes forDeveloped Property CFD No. 2003-1 For Fiscal Ye ar 2003/04 Land Use Assigned Class Description Residential Floor Area Special Tax 1 Residential Property 2,399 sq. ft. or less $ 1,595.75 per unit

2 Residential Property 2,400 sq. ftto 2,599 sq. ft $ 1, 716.00 per unit

3 Residential Property 2,600 sq. ftto 2, 799 sq. ft $ 1, 782.20 per unit

4 Residential Property 2,800 sq. ftand above $ 1,849.20 per unit

5 Non-Residential Property NIA $ 5,530.00 per Acre

On July 151 of each Fiscal Ye ar, commencingJuly 1, 2004, the Assigned Special Tax shall increase by two-percent (2. 0%) of the amount in effect in theprior Fiscal Ye ar.

(c ). Multiple Land Use Classes

In some instances anAssessor 's Parcel of Developed Property may cont ain more than one Land Use Class. The Assigned Special Tax levied on an Assessor's Parcel shall be the sum of the Assigned Special Taxes for all Land Use Classes located on that Assessor's Parcel. The Maximum Special Tax that can be levied on an Assessor 's Parcel shall be the sum of the Maximum Special Taxes that can be levied for all Land Use Classes located on that Assessor's Parcel. For an Assessor's Parcel that contains both Residential Property and Non-Residential Property, theAcre age of such Assessor's Parcel shall be allocated to each type of property based on the amount of Acreage designated foreach Land Use Class as determined by reference to thesite plan approved forsuch Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final.

( d). Backup Special Tax

Each Fiscal Ye ar, each Assessor's Parcel of Residential Property shall be subject to a Backup Special Tax. The Backup Special Tax rate for Residential Property within a Final Subdivision shall be $1,821.32 forFisc al Ye ar 2003/04 per Lot. On July 1 51 of each Fiscal Ye ar Commencing July 1, 2004, the Backup Special Tax shall increase by two percent (2.00%) of the amount in effect in the prior Fiscal Ye ar.

If the Final Subdivision is modified, the rate per dwelling unit calculated according to the following formula:

B= ZxA

L

D-5 The terms above have the following meanings:

B = Backup Special Tax per Assessor's Parcel forthe applicable Fiscal Year

Z = Maximum Special Tax for Undeveloped Property for the applicable Fiscal Ye ar

A = Acreage of Taxable Property, excluding Taxable Public Property or Taxable Property Owner Association Property in such Final Subdivision that lie within the bom1daries of CFD No. 2003-1, as determined by the CFD Administrator pursuant to Section VIII

L = Total Assessor's Parcels of Taxable Property within the Final Subdivision that lie within the boundaries of CFD No. 2003-1

If a Final Subdivision includes Assessor Parcels forwh ich building permits for both residential and non-residential construction may be issued, then the Backup Special Tax for each Assessor's Parcel of Residential Property within such Final Subdivision area shall be computed by the CFD Administrator exclusive of the allocable portion of total Acreage of Taxable Property attributable to Assessor Parcels for which building permits for non-residential construction may be issued.

Notwithstanding the foregoing, if Assessor Parcels of Residential Property are subsequently changed or modifiedby recordation of a Final Subdivision, then the Backup Special Tax shall be recalculated to equal the amom1t of the Backup Special Tax that would have been generated if such change did not take place.

2. Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property.

The Maximum Special Tax for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be $5,530 per Acre for Fiscal Year 2003-2004. On July 1 st of each Fiscal Year Commencing July 1, 2004, the Maximum Special Tax forTaxabl e Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall increase by two percent (2.00%) of the amount in effect in the prior Fiscal Year.

IV. APPORTIONMENT OF SPECIALTAX

For each Fiscal Year the Council shall determine the Special Tax Requirement and levy the Special Tax, until theamount of Special Taxes equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Ye ar as follows:

First: The Special Tax shall be levied proportionately on each Assessor's Parcel of Developed Property in an amom1t up to 100% of the applicable Assigned Special Tax as necessary to satisfy the Special Tax Requirement;

Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied proportionately on each Assessor's Parcel of Undeveloped Propertyup to 100% of the Maximum Special Tax;

D-6 Third: If additional monies are needed to satisfythe Special tax Requirement afterthe firsttwo steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through theappli cation of the Backup Special Ta x shall be increased in equal percentages from the Assigned Special Tax up to 100% of the Maxim.um. Special Tax for each such Assessor 's Parcel;

Fourth: If additional monies are needed to satisfythe Special Tax Requirement afterthe first three steps have been completed, then the Special Tax shall be levied on each Assessor's Parcel of Ta xable Property Owner Association Property or Taxable Public Property at up to 100% of the Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property.

Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which an occupancy perm.it for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2003-1, except for those Residential Properties whose owners are also delinquent or in default on their Special Tax payments for one or more other properties withinCFD No. 2003-1 .

V. MANNEROF COLLECTION

Collection of the Special Tax shall be by the County in the same manner as ordinary ad valorem property taxes are collected and the Special Taxshall be subject to the same penalties and the same lien priority in the case of delinquency as ad valorem taxes; provided, however, that the Council may provide in the Indenture or in the Resolution of Issuance for (i) other means of collecting the Special Tax, including direct billings thereof to the property owners; and (ii) judicial foreclosure of delinquent Special Ta xes.

VI. DISCHARGE OF SPECIALTAX OBLI GATION

The Special Ta x for any Assessor's Parcel may be prepaid and permanentlysatisfied or prepaid in part, as described herein, provided that a prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within the CFD. An owner of an Assessor 's Parcel intending to prepay the Special Tax shall provide the CFD Administrator with written notice of intentto prepay. Within60 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor 's Parcel and the date throughwhich the am.aun t of such prepayment shall be valid.

Prepayment in Full

The "Prepayment" shall be an amount equal to the sum of (1) Principal, (2) Premium, (3) Defeasance, and (4) Fees minus the Reserve Fund Credit, where the terms "Principal," "Premium," "Defeasance," "Fees," and "Reserve Fund Credit," have the following meanings:

"Principal" means the principal am.aunt of Bonds to be redeemed from the proceeds of such Prepayment andequals thequ otient derived by dividing (a) the applicable Maximum Special Tax for the applicable Assessor's Parcel by (b) the projected aggregate Maximum Special Taxes as determined by the CFD Administrator (and excluding from (b) any Special Taxes for Assessor's Parcels which have fully prepaid the Special Tax), and multiplying the quotient by the principal amount of Bonds outstanding as of the first interest and/or principal payment date following the current Fiscal Ye ar.

"Premium" means an amount equal to the Principal multiplied by the applicable redemption premium, if any, forthe Bonds so redeemed with the proceeds of any such Prepayment.

"Defeasance" means an amount equal to the amolUlt needed to pay interest on the Principal to be redeemed until the earliest redemption date as determined by the CFD Administrator for the outstanding Bonds less the amount that is estimated by the CFD Administrator to be received fromthe reinvestment of the difference of the Prepayment and the Fees. Credit shall also be given for any Special Tax heretofore paid and which will not be needed forpurpo ses of funding the currentFisc al Year's Special Tax Requirement.

"Fees" equal the fees and expenses of CFD No. 2003-1 related to the Prepayment.

"ReserveFund Credit" shall equal the lesser of (i) the expected reduction in the applicable reserve fund requirement (as defined in the Indenture), if any, following the redemption of Bonds from proceeds of the prepayment or (ii) the amount derived by subtracting the new reserve fund requirement in effect after the redemption of Bonds from the balance in the reserve fund (as such term is defined in the Indenture) on the prepayment date, but in no event shall such amountbe less than zero.

The sum of the amounts calculated in the preceding steps shall be paid to CFO No. 2003-1 and shall be used to pay and redeem Bonds in accordance with the Indenture and to pay the Fees. Upon receipt of such Prepayment by CFO No. 2003-1, the obligation to pay the Special Tax for such Assessor's Parcel shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter on such Assessor's Parcel, and the CFO Administrator shall cause notice of cancellation of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the Prepayment.

Notwithstanding the foregoing, no prepayment shall be allowed unless the amount of Special Taxes that may be levied pursuant to this Rate and Method of Apportionment after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses, based on the average annual Administrative Expenses to date, and (ii) one hundredten percent (110%) of themaximum annual debt service forthe Bonds, taking into account the Bonds to remain outstanding after such prepayment.

VII. TERM OF "SPECIALTAX "

The Special Tax shall be levied annually for a periodnot to exceed the 40 years commencing with Fiscal Year 2003-2004, providedho wever that Special Taxes willcease to be levied in an earlier Fiscal Yearif the CFO Administrator has determinedthat all required Debt Servicepayments on all outstanding Bonds have been paid.

D-8 VIII. EXEMPTIONS

No Special Tax shall be levied on up to 6.56 Acres of Property Owner Association Property or Public Property. Tax-exempt status will be assigned by the CFO Administrator in the chronological order in which property becomes Property OwnerAssociation Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its status as a property exempt fromthe levyof Special Taxes will be revoked.

Property Owner Association Property or Public Property that is not exempt from Special Taxes under this section shall be subject to the levyof the Special Tax and shall be taxed as part of the fourth step in Section IV above, at up to 100% of the applicable Maximum Special Tax for Taxable Property OwnerAs sociation Property or Taxable Public Property.

D-9 [THIS PAGE INTENTIONALLY LEFT BLANK] APPEND IX E FORM OF CONTINUING DISC LOSURE AGREEMENTS CONTINUING DISCLOSUREAGREEMENT

(Community Facilities District No. 2003-1 (Chaparral Ridge)of the City of Perris) This Continuing Disclosure Agreement (the"Dis closure Agreement"), dated as of July 1, 2003, is executed and delivered by theCommunity Facilities District No. 2003-1 (ChaparralRidge) of the City of Perris (the "District") and MuniFinancial as Dissemination Agent (the "Dissemination Agent"), in connection with the issuance of the $3 ,060,000 Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris Special Ta x Revenue Bonds, 2003 Series A (the "Bonds"). The Bonds are being issued pursuant to provisions of a Fiscal Agent Agreement, dated as of July 1, 2003, by and between the District and Wells Fargo Bank, National Association, as Fiscal Agent (the "Fiscal Agent Agreement"). The District and the Dissemination Agent covenant andagr ee as follows:

SECTION 1. Pumose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the Beneficial Owners of the Bonds andin order to assist thePa rticipating Underwriter in complying withS.E .C. Rule 15c2-12(b)(5).

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

"Annual Report" shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 ofthis Disclosure Agreement.

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

"Disclosure Representative" shall mean the City Manager of the City or his or her designee, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time.

"Dissemination Agent" shall mean MuniFinancial, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agentdesignated in writing by the District.

"Listed Events" shall mean anyof the events listed in Section S(a) of this Disclosure Agreement.

"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission are set forth in the SEC website located at http://www .sec.gov/consumer/nrmsir.htm.

"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply withthe Rule in connection withoff ering of the Bonds.

"Repository" shall mean each National Repositoryand each State Repository.

"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same maybe amended fromtime to time.

E-1 "State" shall mean theState of California.

"State Repository" shall mean any public or private repositoryor entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository.

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to, not later than February 15 of each year, commencing February 15, 2004, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. TheAnnual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement. If the City's fiscal year changes, it shall give notice of such change in the same manner as fora Listed Event under Section 5(f) here of.

(b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the District shall provide the Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the first sentence of this subsection (b ). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report.

( c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository or to the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the formattached as ExhibitA.

(d) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and

(ii) to the extent information is known to it, file a report with the District and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.

SECTION 4. Content of Annual Reports. The District's Annual Report shall contain or include by referencethe following (as of June 30 next preceding the Annual Report date):

(a) The principal amount of the Bonds outstanding.

(b) The balance of the Reserve Account and the Reserve Requirement.

( c) The balance of the Improvement Fund and the Escrow Fund.

(d) A table showing value-to-lien ratios (either individually of in categories such as "'below 3:1," "3:1 to 4:1," "4:1 to 5:1," etc.) for all parcels subject to special taxes in the District based on the ratio of assessed valuation of such parcels to all overlapping direct debt.

( e) The status of the payment of special taxes for the properties within the District which were due and payable during the preceding fiscalyear, including as to delinquent parcels:

( 1) the number of parcels delinquent in the payment of special taxes; E-2 (2) the aggregate amolUlt of thedelinquent sp ecial taxes; (3) as to any parcel for which thedelinquent special taxes represents more than 5% of the aggregate special taxes within the District; (4) the assessor's parcel number; (5) the identity of the owner(s) of such parcel based on the Assessor's Roll or ColUltydelin quency report received by theCity, wh ichever is more current; (6) the aggregate amolUlt of delinquent property taxes, assessments (both fixed lien and annual) and sp ecial taxes and the accrued penalties and interest on such aggregate amount; and (7) the assessmentdelinquency rate for such preceding fiscalyear.

(f) The status of any judicial foreclosure proceedings initiated by the District as a result of the delinquency in the payment of special taxes and the summary of the results of foreclosure sales, if available. (g) As to any parcel for which the annual special tax levy represents more than 5% of the aggregate special tax levy withinthe District: (1) names of the owners of such parcels as shown on the Assessor's Roll or County delinquency report received by the City, whichever is more current; (2) percentage of thespecial taxlevy allocated to such parcels; (3) Developed Property or Undeveloped Property status (as such terms are definedin the RMA) of such parcels;

(4 ) significant amendments to applicable District granted land use entitlements; (5) status of any significant conditions of approval of development imposed by the Districtas to any undeveloped parcel; and ( 6) status of any significant legislative, administrative or judicial challenges to the development of any undeveloped parcels or to the use or continuing use of any parcel knownto theDistrict. (h) The audited financial statements for the City for the preceding fiscal year (or if not available at thetime of filing, the unaudited financial statements). The audited fm ancial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, thatthe City may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. (i) The principal amount of prepayments of thespecial tax with respect to the District forthe preceding fiscalyear. Any or all of the items listed above may be included by specificreference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a fm al official statement, it must be available fromthe MWlicipal Securities Rulemaking Board. The District shall clearly identifyeach such other document so includedby reference.

E-3 SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies;

(2) non-payment related defaults; (3) modifications to rights of Bondholders;

(4) optional, contingent or unscheduled bond calls; (5) defeasances;

(6) rating changes; (7) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; (8) unscheduled draws on the debt servicereserves reflectingfinancial difficulties;

(9) unscheduleddraws on credit enhancements reflectingfinancial difficulties; and (10) substitution of credit or liquidity providers, or their failure to perform. (b) The Disclosure Representative shall, within one (1) Business Day of obtaining actual knowledge of the occurrence of any of the Listed Events, or as soon as reasonably practicable thereafter, promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f)and to the Bondholders.

( c) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable federal securities laws.

( d) If the District has determinedthat knowledge of theoccurrence of a Listed Event would be material under applicable federal securities laws, the District shall promptly notifythe Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuantto subsection (f).

(e) If in response to a request under subsection (b), the District determines that the Listed Event would not be material under applicable federal securities laws, the District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f). (f) If the Dissemination Agent has been instructed by the District to report theoccurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository or the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Fiscal Agent Agreement.

E-4 SECTION 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manneras fora Listed Event under Section 5(f). SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying outits obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be MuniFinancial. The Dissemination Agent may resign by providing thirty days written notice to the District. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the District. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any reportnot provided to it by theDistrict in a timely manner and in a form suitable for filing.

SECTION 8. Amendment; Waiver. Notwithstanding any other prov1s10n of this Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the District) provided, the Dissemination Agent shall not be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or changein the identity, nature or status of an obligated person with respect to theBonds, or the typeof business conducted; (b) Theundert aking, as amended or taking into account such waiver, would, in the opinion of nationally recognizedbond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into accol.Ult any amendments or interpretations of the Rule, as well as any change in circumstances; and

( c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Fiscal Agent Agreement foramendments to the Fiscal Agent Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of theHolders or BeneficialOwners of the Bonds. Inthe event of any amendment or waiver of a provision of this Disclosure Agreement, theDistrict shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason forthe amendment or waiver and its impact on the type ( or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent theDis trict from disseminating anyother info rmation, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Agreement to update such information or include it in any futureAnnual Report or notice of occurrenceof a Listed Event.

E-5 SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Holder or BeneficialOwner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District or Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Defaultunder the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Article VIII of the Fiscal Agent Agreement pertaining to the Fiscal Agent is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent Agreement and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Fiscal Agent thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they 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 be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Bondholders, or any other party. The Dissemination Agent shall not have any liability to the Bondholders or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Agreement. The obligations of the Districtunder this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the District: Community Facilities District No. 2003-1 (Chaparral Ridge)of the City of Perris c/o City of Perris 101 North "D" Street Perris, California92570 Attn: City Manager

To the Dissemination Agent: MuniFinancial 27368 Via Industria, Suite 110 Temecula, California92 590 Attn: Disclosure Group Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriterand Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

E-6 SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

C01\1MUNITY FACILITIES DISTRICT NO. 2003-1 (CHAPARRAL RIDGE) OF THE CITY OF PERRIS

Mayor, on behalf of the District

MUNIFINANCIAL as Dissemination Agent

By ------Authorized Representative

E-7 EXHIBIT A

NOTICE TO REPOSITORIES OF F AIL URE TO FILE ANNUAL REPORT

Name of Obligated Party: Commrmity Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris

Name of Bond Issue: Commrmity Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris Special Tax Revenue Bonds, 2003 Series A

Date oflssuance: July 24, 2003

NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of July 1, 2003, with respect to the Bonds. [The District anticipates that the Annual Report will be filed by ------.]

Dated: ------

MUNIFINANCIAL,as Dissemination Agent on behalf of District

cc: Issuer Property Owner

E-8 CONTINUING(Property DISCLOSURE Owner) AGREEMENT This Continuing Disclosure Agreement(the "Disclosure Agreement"), dated as of July 1, 2003, is executed and delivered by Richmond American Homes of California, Inc., a Colorado corporation (the "Property Owner") and MuniFinancial as Dissemination Agent (the "Dissemination Agent"), in connection with the issuance of the $3,060,000 Community Facilities District No. 2003-1 (Chaparral Ridge) of the City ofPerri s Special Tax Revenue Bonds, 2003 Series A (the "Bonds"). TheBonds are being issued pursuant to provisions of a Fiscal Agent Agreement, dated as of July 1, 2003, by and between the Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris (the "District" or "Issuer") and Wells Fargo Bank, National Association, as Fiscal Agent (the "Fiscal Agent Agreement"). The PropertyOwner and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of theDisclosure Agreement. This DisclosureAgreement is being executed and delivered by the Property Ownerand the Dissemination Agent for the benefit of the BeneficialOwners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2- 12(b)(5). SECTION 2. Defmitions. In addition to the definitions set forth in theFi scal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized termsshall have thefollowing meanin gs: "Affiliate" of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, fiveperce nt (5%) or more of theoutstanding voting securities of such other Person, (b) any Person whose outstandingvoting securities of five percent( 5%) or more are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and ( c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; forpurposes hereof , control meansthe power to exercise a controllinginfluence over the management or policies of a Person, unless such power is solely theres ult of an officialposition with such Person. "Annual Report" shall mean any Annual Report provided by the Major Owner pursuant to, and as described in, Sections 3 and 4 of this DisclosureAgreement. "Beneficial Owner" shall mean any personwh ich (a) has thepower, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds throughnominees, depositories or otherinterm ediaries), or (b) is treated as the owner of any Bonds forfederal income tax purposes. "Disclosure Representative" shall mean John Sasaki, Regional Vice President of Finance of the Property Owner or his designee, or such other officer or employee as the Property Owner shall designate in writingto the Dissemination Agent fromtime to time. "Dissemination Agent" shall meanMuniFinan cial, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agentde signated in writing by the Property Owner and which has filedwith theDis tricta written acceptance of such designation. "District" shall mean CommunityFacilities Di strict No. 2003-1 (Chaparral Ridge) of the City of Perris. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "Major Owner" shall mean an owner (including all Affiliates of such owner) of land in the District responsible in theaggre gate for 20% or more of the annual special taxes levied in the District.

E-9 "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository forpur poses of the Rule. The National Repositories currently approved by the Securities and Exchange Commission are set forth in the SEC website located at http://www.sec.gov/consumer/nnnsir.htm.

"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

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

"Property" means all real property owned by Property Owner withinthe District.

"Repository" shall mean each National Repositoryand each State Repository.

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

"State" shall mean the State of California.

"State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository.

SECTION 3. Provision of Annual Re.ports.

(a) Property Owner shall, or, upon written direction of the District, shall cause the Dissemination Agent to, not later than February 15 in each year, commencing February 15, 2004, provide to each Repository and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement with a copy to the Issuer. Not later than February 1 in each year, commencing February 1, 2004, Property Owner shall provide the Annual Report to the Dissemination Agent. Property Owner shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Issuer to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent and the Issuer may conclusively rely upon such certification of Property Owner and shall have no duty or obligation to review such Annual Report. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement. If Property Owner's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f).

(b) If the Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository or to the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the date forproviding the Annual Report the name and address of each National Repositoryand the State Repository, if any; and

(ii) to the extent information is known to it, file a report with the Issuer and the Property Owner certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.

E-10 SECTION 4. Content of Annual Reports. The Property Owner's Annual Report shall contain or include by reference the following: (a) Relating to the Property, a summary of the Property Owner's development activity on the Property as of the preceding January 1 consisting of the following: (A)number of acres/lots ownedby the Property Owner or its Affiliates as of such date, (B) progress of construction activities on the Property, and (C) number of acres/lots sold by Property Owner or its Affiliatesto end users or builders as of such date. (b) Any material changes in the information relating to the Property Owner and/or the Property contained in the Official Statement under the caption "THEDI STRICT - The Property Owner." ( c) A description of the status of any pending land purchase contracts with regard to the Property (otherthan with individual home buyers). ( d) A description of any change in the legal structure of the Property Owner and/or the financial condition of the Property Owner that wouldmaterially interfere with its ability to complete the development plan forthe Property described in the Official Statement under the caption "THE DISTRICT - The Development Plan" or to pay its portion of the annual special taxes levied within the District (the "Special Taxes").

( e) A description of any previously nndisclosed material amendment to the land use entitlement forthe Property.

(f) An update of the status of any previously reported Listed Event described in Section 5 hereof. (g) A statement as to whether or not the Property Owner and all of its Affiliates paid, prior to their becoming delinquent, all Special Taxes levied on theProperty and if such Property Owner or any of such Affiliates is delinquent in the payment of such Special Taxes, a statement identifyingeach entity that is so delinquent, specifyingthe amount of each such delinquency anddescribing any plans to resolve such delinquency. (h) A description of any material changes inthe fm ancing planof the Property Owneror the development plan described in the Official Statement under the captions "THE DISTRICT - The Development Plan" and "- The Financing Plan" andthe causes or rationale for such changes. Any or all of the items listed above may be includedby specific reference to other documents, including official statements of debt issues of the Property Owneror related entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a fm al official statement, it must be available from the Municipal Securities Rulemaking Board. The PropertyOwner shal l clearly identify each such otherdocu ment so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuantto theprovisions of this Section 5, the Property Owner shall give, or cause to be given, notice of the occurrence of any of the following events with respect to theBonds, if material. Such notice shall be given within 30 days of the date the Property Owner obtains actual knowledge of the occurrence of any such event:

1. bankruptcy or insolvency proceedings commenced by or against Property Owner or Affiliate thereof that would materially interfere with the Property Owner's ability to complete the development plan or to pay its Special Taxes; 2. failure to pay any taxes, special taxes or assessments due with respect to the Property;

E-11 3. filing of a lawsuit against Property Owner or Affiliate thereof seeking damages, or a judgment which, if decided adversely to Property Owner or Affiliate thereof, could have a significant impact on the Property Owner's ability to pay Special Taxes or to sell or develop the Property;

4. any conveyance by the Property Owner of property to an entity that is not an Affiliate of such Property Owner, the result of which conveyance is to cause the transferee to become a Major Owner and the related assumption of any obligation by a Major Owner pursuant to Section 6;

5. any denial or terminationof credit, any denial or terminationof, or default under, any line of credit or loan or any other loss of a source of funds that would have a material adverse affect on the Property Owner's most recently disclosed financing plan or the ability of the Property Owner or any Affiliate thereofto pay Special Taxes when due;

6. any significant amendments to land use entitlements forthe Property ; 7. any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Property;

8. any previously undisclosed legislative, administrative or judicial challenges to development on the Property;

(b) The Disclosure Representative shall, within one (1) Business Day of obtaining actual knowledge of the occurrence of any of the Listed Events, or as soon as reasonably practicable thereafter, promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) and to the Bondholders.

(c) Whenever the Property Owner obtains actual knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable federal securities laws.

(d) If the PropertyOwner has determined that knowledge of the occurrence of a Listed Event would be material under applicable fe deral securities laws, the Property Owner shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f).

(e) If in response to a request under subsection (b), the Property Owner determines that the Listed Event would not be material under applicable federal securities laws, the Property Owner shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f).

(f) If the Dissemination Agent has been instructed by the Property Owner to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository or the Repositories.

E-12 SECTION 6. Duration of Reporting Obligation. (a) All of the Property Owner's obligations hereunder shall commence on such date the Property is responsible for payment of 20% or more of the Special Taxes and shall terminate (except as provided in Section 11) upon the earlier to occur of (i) the legal defeasance, prior redemption or payment in full of all the Bonds, (ii) so long as the Bonds are outstanding, at such time as the Property is no longer responsible for payment of 20% or more of the Special Taxes or (iii) the date on which all Special Taxes levied on the Property are paid or prepaid in full. Upon the occurrence of any such termination or suspensionprior to the final maturity of the Bonds, theProperty Owner shall give notice of such termination or suspension in the same manneras for a Listed Event under Section 5.

(b) If a portion of the Property is conveyed by Property Owner to a Person that, upon such conveyance, will be a Major Owner, the obligations of Property Owner hereunder with respect to such property owned by such Major Owner and its Affiliates shall be assumed by such Major Owner or by an Affiliate thereof and the Property Owner's obligations hereunder will be terminated. In order to effect such an assumption, such Major Owner or Affiliate shall enterinto a continuing disclosure agreement in substantially thesame formas this Disclosure Agreement. If, upon such conveyance, such Major Owner or Affiliatethereof does not enter into a continuing disclosure agreement in substantially the same form as this Disclosure Agreement, the Property Owner's obligations hereunder shall continue until such a continuing disclosure agreement is executed. The Property Owner shall provide a copy of the executed continuing disclosure agreementto the District. SECTION 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist it in carryingout its obligations under thisDi sclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner forthe content of any notice or report prepared by the Property Owner pursuantto this DisclosureAgreement. The initial Dissemination Agent shall be MuniFinancial. The Dissemination Agent may resign by providing thirty days written notice to the Property Owner and the Issuer. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by theProperty Owner in a timely manner and in aform suitable for filing.

SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Property Owner and the DisseminationAgent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Property Owner) provided, the Dissemination Agent shall not be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it 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 theidentity, nature or status of an obligated person with respect to the Bonds, or thetype of business conducted; (b) The undertaking, as amended or takinginto account such waiver, would, in the opinion of nationally recognized bond counsel, have complied withthe requirements of the Rule at the time of the original issuance of the Bonds, after taking into accountany amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either(i) is approved by theHolders of the Bonds in thesame manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or BeneficialOwners of the Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Property Owner shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason forthe amendment or waiver and its impact on thetype (or, in the case E-13 of a change of accounting principles, on the presentation) of financial informationor operating data being presented by the Property Owner.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Property Owner from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Property Owner chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Property Owner shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the Property Owner or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Holder 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 PropertyOwner or Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Property Owner or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Article VIII of the Fiscal Agent Agreement pertaimng to the Fiscal Agent is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent Agreement and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Fiscal Agent thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents ( each, an "Indemnified Party"), harmless against any loss, expense and liabilities which they may incurari sing out of or in the re asonable exercise or performance of its powers and duties hereunder, including thereasonable costs and expenses (including attorneys fees)of defendingagainst any claim of liability, but excluding losses, expenses, costs of defense or liabilities due to such Indemnified Party's negligence or willful misconduct. The DisseminationAgent 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 forthe Property Owner, the Bondholders, or any other party. Neither the Property Owner or the Dissemination Agent shall have anylia bility to the Bondholders or any other party for any monetary damages or financial liability of any kind wh atsoever related to or arising fromthis Agreement. The obligations of the Property Owner under this Section shall survive resignationor removal of the Dissemination Agent andpayment of the Bonds.

SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the Issuer: Community Facilities DistrictNo. 2003-1 (Chaparral Ridge) of the City of Perris c/o City of Perris 101 North "D" Street Perris, California 92570 Attn: City Manager Phone : (909) 943-6100 Facsimile: (909) 657-1087

E-14 To the Dissemination Agent: MuniFinancial 27368 Via lndustria, Suite 110 Temecula, California 92590 Attn: DisclosureGroup Phone: (909) 587-3570 Facsimile: (909) 587-3510

To the PropertyOwn er: Richmond AmericanHom es of California, Inc. 16845 Von KarmanAvenue, Suite 100 Irvine, California92606 Attn: Jon Sasaki,Regional Vice President of Finance Phone: (949) 756-7373 Facsimile: (949) 253-6615

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. This DisclosureAgreement shall inure solely to the benefit of the Issuer, the Property Owner, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners fromtime to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be anoriginal and all of which shall constitute but one andthe same instrument. RICHMOND AMERICANHOMES OF CALIFORNIA,INC.

By Robert T. Shiota, Regional President

By

Jon Sasaki, Regional Vice President of Finance

MUNIFINANCIAL as Dissemination Agent

By Authorized Officer

E-15 EXHIBITA

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party: Richmond American Homes of California, Inc.

Name of Bond Issue: Community Facilities District No. 2003-1 (Chaparral Ridge) of the City ofPerris Special Tax Revenue Bonds, 2003 Series A

Date of Issuance: July 24, 2003

NOTICE IS HEREBYGIVEN that the Property Owner has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of July 1, 2003, with respect to the Bonds. [The Property Owner anticipates that the Annual Report will be filed by .]

Dated: ------

MUNIFINANCIAL, as Dissemination Agent, on behalf of Property Owner

cc: Issuer Property Owner

E-16 APPENDIX F FORM OF BOND COUNSEL OPINION Date of Delivery

Community FacilitiesDistrict No. 2003-1 (Chaparral Ridge) of theCity of Perris 101 North"D" Street Perris, CA 92570-1998

Re: $3,060,000 Community Facilities District No. 2003-1 (Chaparral Ridge) of theCity of Perris Special Tax Revenue Bonds, 2003 Series A

Ladies and Gentlemen:

We have actedas bond counsel in connectionwith the issuance by CommunityFaciliti es District No. 2003-1 (Chaparral Ridge) of the City of Perris (the "District'') of $3,060,000 Community Facilities District No. 2003-1 (Chaparral Ridge) of the City of Perris Special Tax Revenue Bonds, 2003 Series A (the "Bonds") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (constituting Sections 53311 et seq. of the Government Code of the State of California) (the " Act''), and a Fiscal Agent Agreement, dated as of July 1, 2003, by and between the District and Wells Fargo Bank, National Association (the "Fiscal Agent Agreement''). We examined the Act and such certified proceedings and other papers we deem necessary to render thisopinion.

As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Fiscal Agent Agreement and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify such facts by independent investigation.

Based upon the foregoing, we are of theopin ion, under existing law, as follows:

1. The District is a community facilities district duly organized and validly existing under the laws of theState ofCal ifornia.

2. The Cityof Perris is duly created and validly existing as a public body, corporate and politic, with the power, on behalf of the District, to adopt the resolution authorizing the issuance of the Bonds, enter into the Fiscal Agent Agreement, and perform the agreements on its part contained thereinand issue the Bonds.

3. The Fiscal Agent Agreement has been duly approved by the District and constitutes a valid and bindingobligation of theDistrict enforceable upon theDistrict.

4. Pursuantto theAct, theFiscal Agent Agreement creates a valid lien on thefunds pledged by theFiscal Agent Agreement for securityof theBonds.

F-1 5. The Bonds have been duly authorized, executed and delivered by the District and are valid and binding special obligations of the District, payable solely from the sources provided therefor in the Fiscal Agent Agreement.

6. 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 imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that such interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding otherfederal taxconsequences arising withrespect to the Bonds.

7. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.

The rights of theowners of the Bonds and theenfo rceability of theBonds and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to theexercise of judicial discretion inappropr iate cases.

We bring to your attention the fact that our legal opinions are an expression of professional judgment and are not a guarantee of a result. Our engagement with respectto this matter has terminated as of the date hereof, and we do not undertake to advise you of any matters that may come to our attention subsequent to the date hereof thatmay affectour legal opinions expressed herein.

Very trulyyours,

F-2