NEW ISSUE NOT RATED

In the opinion of Rutan & Tucker LLP, Costa Mesa, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "LEGAL MATTERS - Tax Exemption." $2,580,000 COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT 2005 SPECIAL TAX BONDS Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the "Bonds") are being issued under the Mello-Roos Community Facilities Act of 1982 (the "Act") and a Fiscal Agent Agreement, dated as of June 1, 2005, by and between the Community Facilities District No. 2003-4 of the Menifee Union School District (the "Community Facilities District") and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"). The Board of Education (the "Board") of the Menifee Union School District (the "School District"), acting as legislative body of the Community Facilities District, and the eligible landowner voters in the Community Facilities District, have authorized the issuance of bonds in an aggregate principal amount not to exceed $4,000,000. The Bonds are the only series of bonds to be issued under this authorization. See "THE BONDS -Authority for Issuance." Security and Sources of Payment. The Bonds are payable from proceeds of Net Special Taxes (as defined herein) levied on property within the Community Facilities District according to the rate and method of apportionment of special tax approved by the Board and the eligible landowner voters in the Community Facilities District. The Bonds are secured by a first pledge of all revenues derived from the Net Special Taxes and the moneys deposited in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See "SECURITY FOR THE BONDS." Use of Proceeds. The Bonds are being issued to (i) finance the acquisition and construction of certain school facilities and improvements to be owned and operated by the School District of benefit to the property in the Community Facilities District, (ii) fund a reserve fund for the Bonds, (iii) fund capitalized interest on the Bonds through September 1, 2006, (iv) pay certain administrative expenses of the Community Facilities District, and (v) pay the costs of issuing the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS." Bond Terms. Interest on the Bonds is payable on March 1, 2006 and semiannually thereafter on each September 1 and March 1. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("OTC"), New York, New York. OTC will act as securities depository for the Bonds. See "THE BONDS -General Bond Terms" and "APPENDIX E -OTC and the Book-Entry Only System." Redemption. The Bonds are subject to optional redemption and mandatory sinking fund redemption before maturity. See "THE BONDS - Redemption." THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT, THE STATE OF CALIFORNIA (THE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE SPECIAL TAXES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXES AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. MATURITY SCHEDULE (see inside cover) This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the Bonds involves risks which may not be appropriate for some investors. See "BONDOWNERS' RISKS" for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds.

The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Rutan & Tucker LLP, Costa Mesa, California, Bond Counsel, and subject to certain other conditions. Jones Hall, A Professional Law Corporation, San Francisco, California is acting as Disclosure Counsel. Certain legal matters will be passed on for the School District and the Community Facilities District by Rutan & Tucker LLP, special counsel to the Community Facilities District, and for the Property Owner by its counsel Pillsbury WinthropShaw Pittman LLP, Century City, California. It is anticipated that the Bonds, in book-entryform, will be available for delivery on or aboutJuly 14, 2005.

STONE &YOUNGBERG LLC

The date of this Official Statement is: June 28, 2005 MATURITY SCHEDULE

$1,270,000 Serial Bonds (Base CUSIPt: 586810)

Maturity Principal Interest (September 1) Amount Rate Yield Price CU SI Pt 2007 $ 45,000 3.050% 3.050% 100.000% MJ9 2008 45,000 3.300 3.300 100.000 MK6 2009 50,000 3.650 3.650 100.000 ML4 2010 50,000 3.850 3.850 100.000 MM2 2011 50,000 4.000 4.000 100.000 MNO 2012 55,000 4.150 4.150 100.000 MPS 2013 55,000 4.250 4.250 100.000 MQ3 2014 60,000 4.350 4.350 100.000 MR1 2015 60,000 4.450 4.450 100.000 MS9 2016 65,000 4.550 4.550 100.000 MT7 2017 65,000 4.650 4.650 100.000 MU4 2018 70,000 4.750 4.750 100.000 MV2 2019 75,000 4.850 4.850 100.000 MWO 2020 75,000 4.875 4.900 99.729 MX8 2021 80,000 4.875 4.950 99.167 MY6 2022 85,000 5.000 5.000 100.000 MZ3 2023 90,000 5.050 5.050 100.000 NA7 2024 95,000 5.000 5.080 99.022 NBS 2025 100,000 5.100 5.100 100.000 NC3

$575,000 5.125% Term Bond due September 1, 2030, Price: 99.643% CUSIPt No. 586810 ND1

$735,000 5.200% Term Bond due September 1, 2035, Price: 100.000% CUSIPt No. 586810 NE9

t Copyright 2005, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the Community Facilities District, the School District nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

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

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

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

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

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

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

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

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

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

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

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

BOARD OF EDUCATION

Rita Peters, President Victor Giardinelli, Clerk Phoeba A. Irey, Member Chester W. Morrison, Member Frederick Allen Twyman, Ill, Member

SCHOOL DISTRICT STAFF

Gary Cringan, Ed.D., Superintendent Daniel J. Wood, Assistant Superintendent, Business Services Pamela Gillette, Director of Fiscal Services Bruce Shaw, Director of Facilities

BOND COUNSEL/DISTRICT SPECIAL COUNSEL

Rutan & Tucker LLP Costa Mesa, California

DISCLOSURE COUNSEL

Jones Hall, A Professional Law Corporation San Francisco, California

APPRAISER

Bruce W. Hull & Associates, Inc. Ventura, California

SPECIAL TAX CONSULTANT and CFD ADMINISTRATOR

David Taussig & Associates, Inc. Newport Beach, California

FISCAL AGENT

U.S. Bank National Association Los Angeles, California Menifee Union School District (Riverside County, California) R,egtonal Location · ap ( Page intentional I y I eft blank.) Community Facilities DistrictNo. 2003-4 (FaircrestI Lennar Homes) Menifee Union School District Menifee, California

Bruce W. Hull & Associates, Inc. Aerial Photo - Air Views - 5/20/05 ( Page intentional I y I eft blank.) TABLE OF CONTENTS

INTRODUCTION Direct and Overlapping Governmental ESTIMATED SOURCES AND USES Obligations 31 OF FUNDS 4 Estimated Tax Burden on Single Family Home 35 FACILITIES TO BE FINANCED WITH PROPERTY OWNERSHIP AND PROPOSED PROCEEDS OF THE BONDS 5 DEVELOPMENT 36 Facilities 5 Lennar Homes 36 SB 50 Agreement 5 Environmental Conditions 39 THE BONDS 7 Proposed Development 40 General Bond Terms 7 BOND OWNERS' RISKS 43 Authority for Issuance 7 Limited Obligation Of the Community Facilities Debt Service Schedule 10 District to Pay Debt Service 43 Redemption 11 Levy and Collection of the Special Tax 43 No Issuance of Parity Bonds 12 Payment of Special Tax is not a Personal Registration, Transfer and Exchange 12 Obligation of the Property Owner 44 SECURITY FOR THE BONDS 14 Appraised Values 44 General 14 Property Values and Property Development 45 Special Taxes 14 Concentration of Property Ownership 47 Rate and Method 15 Other Possible Claims Upon the Value of Covenant to Foreclose 19 Taxable Property 48 Letter of Credit or Cash Deposit 20 Exempt Properties 48 Letter of Credit Bank 22 Depletion of Reserve Fund 49 Compliance with Letter of Credit Requirement 23 Bankruptcy and Foreclosure Delays 49 Special Tax Fund 23 Disclosure to Future Purchasers 51 Bond Fund 24 No Acceleration Provisions 52 Reserve Fund 25 Loss of Tax Exemption 52 Investment of Moneys in Funds 25 Voter Initiatives 52 THE SCHOOL DISTRICT 26 LEGAL MATTERS 53 General Information 26 Legal Opinions 53 Administration and Enrollment 26 Tax Exemption 53 THE COMMUNITY FACILITIES DISTRICT 28 No Litigation 54 General 28 CONTINUING DISCLOSURE 54 Estimated Maximum Special Tax Proceeds NO RATINGS 55 and Debt Service Coverage 28 UNDERWRITING 55 Appraised Property Value 28 PROFESSIONAL FEES 56 Appraised Value to Burden Ratio 30

APPENDIX A - General Information About the Menifee Area and Riverside County APPENDIX B - Rate and Method of Apportionment for Community Facilities District No. 2003-4 of Menifee Union School District APPENDIX C - Summary Appraisal Report APPENDIX D - Summary of Fiscal Agent Agreement APPENDIX E - OTC and the Book-Entry Only System APPENDIX F - Form of Issuer Continuing Disclosure Certificate APPENDIX G - Form of Property Owner Disclosure Certificate APPENDIX H - Form of Opinion of Bond Counsel APPENDIX I - Community Facilities District Boundary Map ( Page intentional I y I eft blank.) OFFICIAL STATEMENT

$2,580,000 COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT 2005 SPECIAL TAX BONDS

INTRODUCTION

This Official Statement, including the cover page and attached appendices, is provided to furnish information regarding the bonds captioned above (the "Bonds") to be issued by Community Facilities District No. 2003-4 of the Menifee Union School District (the "Community Facilities District").

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

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

The School District. The Menifee Union School District (the "School District") is located in the southwestern portion of Riverside County (the "County") in the community of Menifee. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged as a single school district. The School District currently operates five elementary schools and two middle schools. The School District has 6,565 students enrolled for Fiscal Year 2004-05. See "THE SCHOOL DISTRICT."

Property Ownership. The current owner of the taxable property within the Community Facilities District is Lennar Homes of California, Inc., a California corporation (the "Property Owner" or "Lennar Homes").

Lennar Homes is in the process of developing the property in the Community Facilities District as 228 detached single-family homes. For detailed information about Lennar Homes, current land uses and proposed development plans for the property in the Community Facilities District, see "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT."

The Community Facilities District. The Community Facilities District was formed and established by the School District on December 14, 2004, under the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), following a public hearing conducted by the Board of Education of the School District (the "Board"), as legislative body of the Community Facilities District, and a landowner election at which the qualified electors of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved the levy of special taxes.

The Community Facilities District was also formed pursuant to an SB 50 Financing Agreement dated as of November 13, 2003, by and between the School District and the predecessors-in-interest to Lennar Homes (consisting of DRL, LLC, a California limited liability company and Creekside Villas, LLC, a California limited liability company, as tenants in common), as amended by a First Amendment to SB 50 Financing Agreement dated as of November 9, 2004, by and between the School District and Lennar Homes, as further amended by a Second Amendment to SB 50 Financing Agreement dated as of May 10, 2005, by and between the School District and Lennar Homes (as amended, the "SB 50 Agreement").

See "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS."

Authority for Issuance of the Bonds. The Bonds are issued under the Act, certain resolutions adopted by the Board and a Fiscal Agent Agreement, dated as of June 1, 2005 (the "Fiscal Agent Agreement"), by and between the Community Facilities District and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"). See "THE BONDS - Authority for Issuance."

Purpose of the Bonds. Proceeds of the Bonds will be used primarily to (i) finance the acquisition and construction of certain school facilities and improvements to be owned and operated by the School District in satisfaction of the obligation of the Property Owner to pay school facilities fees under the SB 50 Agreement.

Bond proceeds will also fund a reserve fund for the Bonds, fund capitalized interest on the Bonds through September 1, 2006, pay certain administrative expenses of the Community Facilities District, and pay the costs of issuing the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS."

Security and Sources of Payment for the Bonds. The Bonds are secured by and payable from a first pledge of the proceeds of the special taxes levied on the property in the Community Facilities District (the "Net Special Taxes") in accordance with the Rate and Method of Apportionment for Community Facilities District No. 2003-4 of Menifee Union School District (the "Rate and Method"). The Bonds will be additionally secured by all moneys deposited in the Bond Fund, in the Reserve Fund and (until disbursed as provided in the Fiscal Agent Agreement) in the Special Tax Fund. See "SECURITY FOR THE BONDS."

In addition, the Property Owner is required to provide an irrevocable standby letter of credit (a "Letter of Credit") in favor of the Fiscal Agent, or to make a cash deposit (a "Cash Deposit") with the Fiscal Agent, to secure payment of Special Taxes levied against its property in the Community Facilities District for a limited period. See "SECURITY FOR THE BONDS - Letter of Credit."

The Community Facilities District has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against parcels with delinquent installments of the Special Tax under certain circumstances. For a more detailed description of the foreclosure covenant see "SECURITY FOR THE BONDS - Covenant to Foreclose."

Appraisal. An appraisal of the property within the Community Facilities District dated May 31, 2005 (the "Appraisal"), was prepared by Bruce W. Hull & Associates, Inc. of Ventura, California (the "Appraiser") in connection with issuance of the Bonds. The purpose of the appraisal was to ascertain the market value of the fee simple estate for the taxable property in the Community Facilities District as of a May 15, 2005 date of value. Subject to the assumptions contained in the Appraisal, the Appraiser estimated that the fee simple interest in

2 the property within the Community Facilities District, subject to the lien of the Special Taxes, had an estimated aggregate value of $23, 150,000. See "THE COMMUNITY FACILITIES DISTRICT - Appraised Property Value" and "APPENDIX C - Summary Appraisal Report" for further information on the Appraisal.

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

Professionals Involved in the Offering. The following professionals are participating in this financing:

• U. S. Bank National Association, Los Angeles, California, will serve as the fiscal agent, paying agent, registrar, authentication and transfer agent for the Bonds and will perform the functions required of it under the Fiscal Agent Agreement.

• Rutan & Tucker LLP, Costa Mesa, California is serving as Bond Counsel to the Community Facilities District and as special counsel to the Community Facilities District and the School District.

• Jones Hall, A Professional Law Corporation, San Francisco, California, is acting as Disclosure Counsel to the Community Facilities District.

• The appraisal work was done by Bruce W. Hull & Associates, Inc., Ventura, California.

• David Taussig & Associates, Inc., Newport Beach, California, acted as special tax consultant to the Community Facilities District and will act as administrator to the Community Facilities District and dissemination agent for the Community Facilities District under the Issuer Continuing Disclosure Certificate described below.

Pillsbury Winthrop Shaw Pittman LLP, Century City, California, served as counsel to Lennar Homes.

3 ESTIMATED SOURCES AND USES OF FUNDS

The proceeds from the sale of the Bonds will be deposited into the following funds established by the Community Facilities District under the Fiscal Agent Agreement:

SOURCES Principal Amount of Bonds $2,580,000.00 Less: Original Issue Discount (3,851.50) Less: Underwriter's Discount (64,500.00) Total Sources $2,511,648.50

USES Deposit into Capitalized Interest Subaccount of Bond Fund [1] $ 141,703.83 Deposit into Reserve Fund [2] 173,220.00 Deposit into Costs of Issuance Fund [3] 160,234.00 Deposit into Improvement Fund [4] 2,006,490.67 Deposit into Administrative Expense Fund 30,000.00 Total Uses $2,511,648.50

[1] Represents interest on the Bonds through September 1, 2006, to be deposited in the Capitalized Interest Subaccount. [2] Equal to the Reserve Requirement with respect to the Bonds as of their date of delivery. [3] Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel, the cost of printing the final Official Statement, fees and expenses of the Fiscal Agent, reimbursement of developer advances, and the fees of the Special Tax Consultant. [4] Will be used to pay the costs of School Facilities, as defined below. See "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS" below.

4 FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS

Facilities

Under the Resolution of Intention adopted by the Community Facilities District on November 9, 2004, and the Community Facilities District Report dated December 14, 2004, the Community Facilities District is authorized to finance School Facilities, as defined and described below (collectively, the "Facilities"):

School Facilities. "School Facilities" include the planning, constructing, leasing or purchasing of elementary and middle school sites and buildings, as well as furniture, technology and equipment with a useful life of at least five years, together with all other authorized school facilities with a useful life of at least five years, including (among other facilities) administrative and central support facilities, interim housing, and transportation facilities needed by the School District to serve the student population to be generated as a result of development of the property within the Community Facilities District. The School Facilities will be owned and operated by the School District.

The School Facilities will be funded with a portion of the proceeds of the Bonds as payment of the Property Owner's obligations to pay school fees under the SB 50 Agreement (described below). The Bonds are anticipated to provide approximately $2,006,491 for School Facilities, representing all of the Property Owner's required school mitigation fees under the SB 50 Agreement.

The Property Owner has previously paid a portion of the school fees owed with respect to the property in the Community Facilities District in order to obtain certificates of compliance necessary to pull building permits. Under the SB 50 Agreement, these prepaid school fees will be reimbursed using a portion of the proceeds of the Bonds.

SB 50 Agreement

General. Under SB 50 (California Government Code Sections 65995-65998) a property owner is subject to certain fee requirements (known as "Alternative Level 2 Fees," currently $2.26 per square foot, and "Alternative Level 3 Fees," currently $4.52 per square foot) to mitigate the need for additional school facilities resulting from property development. The SB 50 Agreement establishes a means for financing the Property Owner's school impact fee obligations under SB 50, which must be paid as a precondition to the development of the property in the Community Facilities District.

Under the SB 50 Agreement, the Property Owner is required to advance funds to the School District to finance the costs relating to formation of the Community Facilities District. All property owner advances expended by the School District will be repaid from the proceeds of the Bonds (but only with the proceeds of the Bonds).

The SB 50 Agreement further requires the Property Owner to provide an irrevocable standby letter of credit or cash deposit to secure the payment of Special Taxes levied on property owned by the Property Owner in the Community Facilities District for a limited period. See "SECURITY FOR THE BONDS - Letter of Credit or Cash Deposit."

5 This section contains only a brief summary of the SB 50 Agreement. Potential purchasers of the Bonds are encouraged to review the entire SB 50 Agreement, which is available from the School District.

School Fee Amount. Under the SB 50 Agreement the school impact fee amount (the "Mitigation Payment") is set at $7,344 for any single-family residential unit as of January 1, 2005. The current total Mitigation Payment is $1,674,432 based on the construction of 228 single-family residential units.

The SB 50 Agreement establishes a system of credits whereby the Property Owner will receive credits equal to the construction proceeds attributable to School Facilities funded by the Bonds, and the Property Owner's obligations to pay the school mitigation fees will be satisfied only to the extent of such construction proceeds.

Issuance of the Bonds. The Community Facilities District was formed under the SB 50 Agreement, which provides that the Community Facilities District will issue a single series of Bonds (if certain conditions are met) to finance all or a portion of the Property Owner's school impact fee obligations.

Full Mitigation. The SB 50 Agreement provides that, so long as the Property Owner is not in default under the SB 50 Agreement, the mitigation obligations will be in lieu of any other fees, exactions, conditions or impositions that the School District may impose on the Property Owner or the property under existing or future laws for the purpose of financing school facilities of the District or any other purpose, other than a School District-wide special tax or general obligation bond, or School Facilities Improvement District bond authorization imposed and authorized in accordance with applicable law. Under the SB 50 Agreement, the School District agrees that it will not seek any additional mitigation from the Property Owner, including specifically any Alternative Level 3 Fees authorized under SB 50.

Waiver of Credits and Fair Share Reductions. The SB 50 Agreement provides that the Property Owner waives all past, present and future credit against, or fair share reduction in, Mitigation Payments based upon State matching funding provided to the School District, or the proceeds from a School District-wide special tax or general obligation bond authorization or School Facilities Improvement District bond authorization for school facilities.

6 THE BONDS

General Bond Terms

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

Interest. The Bonds will bear interest at the annual rates set forth on the cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2006 (each, an "Interest Payment Date"). Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months.

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

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

Authority for Issuance

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

Resolutions of Intention: On November 9, 2004, the Board adopted Resolution No. 2004-05/45 stating its intention to establish the Community Facilities District and to authorize the levy of a special tax therein. On the same day the Board adopted Resolution No. 2004-05/46 stating its intention to incur bonded indebtedness in an amount not to exceed $4,000,000 in the aggregate within the Community Facilities District for the purpose of financing the Facilities. (See "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS.")

7 Resolution of Formation: Immediately following a noticed public hearing on December 14, 2004, the Board adopted Resolution No. 2004-05/50 (the "Resolution of Formation"), which established the Community Facilities District and authorized the levy of a special tax within the Community Facilities District.

Resolution of Necessity: On December 14, 2004, the Board adopted Resolution No. 2004-05/51 declaring the necessity to incur bonded indebtedness in an aggregate amount not to exceed $4,000,000 within the Community Facilities District and submitting that proposition to the qualified electors of the Community Facilities District.

Resolution Calling Election: On December 14, 2004, the Board adopted Resolution No. 2004-05/52 calling an election by the landowners within the Community Facilities District for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit.

Landowner Election and Declaration of Results: On December 14, 2004, an election was held within the Community Facilities District in which the qualified electors approved a ballot proposition authorizing the issuance of up to $4,000,000 in bonds to finance the acquisition and construction of the Facilities, the levy of a special tax and the establishment of an appropriations limit for the Community Facilities District. On December 14, 2004, the Board adopted Resolution No. 2004-05/53, under which the Board approved the canvass of the votes and declared the Community Facilities District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit.

Notice of Special Tax Lien: A Notice of Special Tax Lien was recorded in the real property records of Riverside County on December 28, 2004, as Document No. 2004- 1026274.

Ordinance Levying Special Taxes: On January 11, 2005, the Board adopted Ordinance No. 2004-05/05 levying the Special Tax within the Community Facilities District.

Resolution Authorizing Issuance of the Bonds: On June 14, 2005, the Board adopted a resolution approving issuance of the Bonds for the Community Facilities District in an amount not to exceed $3,000,000.

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

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

8 The Goals and Policies also require a debt service reserve fund and declare that bonds may not be issued if delinquencies for the collection of taxes and assessments are greater than 1 O percent on the date of issuance of the bonds.

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

The 2002 amendment to the Goals and Policies added the requirement that debt service on community facilities district bonds be generally level and not escalate over the term of the bonds.

The School District and the Community Facilities District have determined that issuance of the Bonds conforms with the School District's Goals and Policies.

9 Debt Service Schedule

The following table presents the annual Debt Service on the Bonds (including sinking fund redemptions), assuming there are no optional redemptions.

Year Ending Total SeQtember 1 PrinciQal Interest [11 Debt Service 2006 $ 141,703.83 $ 141,703.83 2007 $ 45,000 125,340.00 170,340.00 2008 45,000 123,967.50 168,967.50 2009 50,000 122,482.50 172,482.50 2010 50,000 120,657.50 170,657.50 2011 50,000 118,732.50 168,732.50 2012 55,000 116,732.50 171,732.50 2013 55,000 114,450.00 169,450.00 2014 60,000 112,112.50 172, 112.50 2015 60,000 109,502.50 169,502.50 2016 65,000 106,832.50 171,832.50 2017 65,000 103,875.00 168,875.00 2018 70,000 100,852.50 170,852.50 2019 75,000 97,527.50 172,527.50 2020 75,000 93,890.00 168,890.00 2021 80,000 90,233.76 170,233.76 2022 85,000 86,333.76 171,333.76 2023 90,000 82,083.76 172,083.76 2024 95,000 77,538.76 172,538.76 2025 100,000 72,788.76 172,788.76 2026 105,000 67,688.76 172,688.76 2027 110,000 62,307.50 172,307.50 2028 115,000 56,670.00 171,670.00 2029 120,000 50,776.26 170,776.26 2030 125,000 44,626.26 169,626.26 2031 135,000 38,220.00 173,220.00 2032 140,000 31,200.00 171,200.00 2033 145,000 23,920.00 168,920.00 2034 155,000 16,380.00 171,380.00 2035 1601000 81320.00 1681320.00 Total: $2,580,000 $2,517,746.41 $5,097,746.41

[11 The interest that will accrue through September 1, 2006, will be capitalized with the proceeds of the Bonds.

10 Redemption

Optional Redemption. The Bonds are subject to optional call and redemption prior to maturity, as a whole or in part, pro rata among maturities and by lot within a maturity, on any Interest Payment Date on or after March 1, 2006, from funds derived by the Community Facilities District from any source, including without limitation prepayments of the Special Tax deposited in the Special Tax Prepayments Subaccount (as defined in the Fiscal Agent Agreement) available to redeem Bonds under the Fiscal Agent Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed) as set forth below, together with accrued interest thereon to the date fixed for redemption:

Redemption Redemption Date Price March 1, 2006 through March 1, 2014 102% September 1, 2014 and any Interest Payment Date thereafter 100%

Mandatory Sinking Payment Redemption. The Bonds maturing on September 1, 2030, are subject to mandatory sinking payment redemption in part on September 1, 2026, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

Sinking Fund Redemption Date (September 1) Sinking Payments 2026 $105,000 2027 110,000 2028 115,000 2029 120,000 2030 (maturity) 125,000

The Bonds maturing on September 1, 2035, are subject to mandatory sinking payment redemption in part on September 1, 2031, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

Sinking Fund Redemption Date (September 1) Sinking Payments 2031 $135,000 2032 140,000 2033 145,000 2034 155,000 2035 (maturity) 160,000

The sinking payment amounts set forth above will be reduced as a result of any prior partial redemption of the Bonds pursuant to an optional redemption or mandatory redemption from Special Tax prepayments.

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

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

Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Bonds so called for redemption are deposited in the Bond Fund, the Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue on those Bonds on or after the redemption date specified in the redemption notice.

No Issuance of Parity Bonds

The Community Facilities District has covenanted in the Fiscal Agent Agreement that it will not issue any bonds or place any other charge or lien on any of the Net Special Taxes or other amounts or funds pledged to the Bonds superior to or on a parity with the pledge and lien created for the benefit of the Bonds.

Registration, Transfer and Exchange

The following provisions regarding the exchange and transfer of the Bonds apply only during any period in which the Bonds are not subject to DTC's book-entry system. While the Bonds are subject to DTC's book-entry system, their exchange and transfer will be effected through OTC and the Parlicipants and will be subject to the procedures, rules and requirements established by OTC. See "A PPENDIX E - OTC and the Book-Entry Only System. "

Registration. The Fiscal Agent will keep or cause to be kept, at its Principal Office, sufficient books for the registration and transfer of the Bonds (the "Bond Register"). The Bond Register will show the series number, date, amount, rate of interest and last known Owner of each Bond and will at all times be open to inspection by the Community Facilities District during regular business hours upon reasonable notice. Upon presentation for this purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, the ownership of the Bonds on the Bond Register.

The Community Facilities District and the Fiscal Agent will treat the owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all

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

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

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

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

Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange will be paid by the Community Facilities District. The Fiscal Agent will collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange.

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

13 SECURITY FOR THE BONDS

General

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

• all revenues derived from the Net Special Taxes,

• the Letter of Credit (but only prior to its expiration) or the Cash Deposit, and

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

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

"Net Special Taxes" is defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes received by the Community Facilities District, including any scheduled payments, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, but excluding (i) any penalties or costs of collecting delinquent Special Taxes collected in connection with delinquent Special Taxes, and (ii) the initial $30,000 that will be deposited in the Administrative Expense Fund each year.

Special Taxes

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

Under the Act and the Fiscal Agent Agreement, the Community Facilities District will levy the Special Taxes by August 1 O of each year in an amount required for the following:

• the payment of principal of and interest on any outstanding Bonds becoming due and payable during the ensuing year,

• any necessary replenishment or expenditure of the Reserve Fund, and

• an amount estimated to be sufficient to pay the Administrative Expenses during the ensuing year.

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

Because the Special Tax levy is limited to the Maximum Special Tax rates set forlh in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay Debt Service on the Bonds.

Rate and Method

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

The following is a synopsis of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method, including its attachments, which is attached as "APPENDIX B - Rate and Method of Apportionment for Community Facilities District No. 2003-4 of Menifee Union School District." The meaning of the defined terms used in this section are as set forth in APPENDIX B. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as APPENDIX B.

Minimum Annual Special Tax Requirement. Annually, at the time of levying the Special Tax for the Community Facilities District, the Board will determine the minimum amount of money to be levied on Taxable Property in the Community Facilities District (the "Minimum Annual Special Tax Requirement"), which will be the amount required in any Fiscal Year to pay the following:

the debt service or the periodic costs on all outstanding Bonds,

Administrative Expenses of the Community Facilities District (as further described in the Rate and Method),

the costs associated with the release of funds from an escrow account, if any, and

any amount required to establish or replenish any reserve funds established in association with the Bonds, less any amount available to pay debt service or other periodic costs on the Bonds under any applicable bond indenture, fiscal agent agreement or trust agreement.

Developed and Undeveloped Property; Exempt Property. All Assessor's Parcels within the Community Facilities District will be classified for each Fiscal Year as Taxable Property or Exempt Property, and each Assessor's Parcel of Taxable Property will be further classified as Developed Property or Undeveloped Property, all as defined below. In addition,

15 each Assessor's Parcel will be assigned to a Special Tax class based on the Building Square Footage of the Unit on that Assessor's Parcel.

"Developed Property" means all Assessor's Parcels of Taxable Property for which Building Permits were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor's Parcels were created on or before January 1 of the prior Fiscal Year and that each such Assessor's Parcel is associated with a Lot, as determined reasonably by the Board.

"Undeveloped Property'' means all Assessors Parcels of Taxable Property that are not classified as Developed Property.

"Taxable Property" means all Assessor's Parcels that are not Exempt Property (as defined below).

"Exempt Property'' is defined to include the following:

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

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

(iii) Assessor's Parcels used exclusively by a homeowners' association,

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

(v) Assessor's Parcels developed or expected to be developed exclusively for non-residential use, including any use directly servicing any non­ residential property, such as parking, as reasonably determined by the Board, and

(vi) any other Assessor's Parcels at the reasonable discretion of the Board.

However, property may not be classified as Exempt Property if that classification would reduce the sum of all Taxable Property to less than 37.1 O acres of Acreage. Assessor's Parcels that cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property to 37.1 O acres of Acreage will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

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

Developed Property. The Maximum Special Tax is the greater of (i) the applicable Assigned Annual Special Tax, or (ii) the applicable Backup Annual Special Tax.

16 • Assigned Annual Special Tax. The Assigned Annual Special Tax for each Assessor's Parcel of Developed Property is determined by reference to Table 1 in the Rate and Method, and varies from $882.54 per Unit to $1,055.80 per Unit, based on the number of Building Square Feet per Unit.

• Backup Annual Special Tax. The Backup Annual Special Tax for a Lot within a Final Map is determined by multiplying the Acreage of Taxable Property in the Final Map by $5,954.19, and dividing the result by the number of Lots in the Final Map.

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

Undeveloped Property. The Maximum Special Tax is the applicable Assigned Annual Special Tax, which is $5,954.19 per acre of Acreage.

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

Step One: The Board will levy an Annual Special Tax on each Assessor's Parcel of Developed Property in an amount equal to the Assigned Annual Special Tax applicable to that Assessor's Parcel.

Step Two: If the sum of the amounts collected in step one is insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Board will Proportionately levy an Annual Special Tax on each Assessor's Parcel of Undeveloped Property up to the Assigned Annual Special Tax applicable to each Assessor's Parcel of Undeveloped Property to satisfy the Minimum Annual Special Tax Requirement.

Step Three: If the sum of the amounts collected in steps one and two is insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Board will Proportionately levy an Annual Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is derived by application of the Backup Annual Special Tax, up to the Maximum Special Tax applicable to each Assessor's Parcel of Developed Property, to satisfy the Minimum Annual Special Tax Requirement.

Full Prepayment of Annual Special Taxes. The Annual Special Tax obligation of an Assessor's Parcel of Developed Property may be prepaid in full, and the Annual Special Tax obligation of an Assessor's Parcel of Undeveloped Property for which a Building Permit has been issued may be prepaid in full, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

The property owner requesting prepayment must pay all delinquent Special Taxes, interest and penalties owing on the Assessor's Parcel (if any) on which prepayment is being made.

No prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property, net of Administrative Expenses, is at least 1 .1 times the regularly scheduled annual interest and principal payments on all

17 currently outstanding Bonds in each future Fiscal Year, and that such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Board. These determinations will include identifying all Assessor's Parcels that are expected to become Exempt Property.

The Prepayment Amount is generally calculated as the present value of the current and future Special Taxes applicable to the parcel being prepaid (defined generally as the present value of any Special Tax for the current Fiscal Year not yet received by the Community Facilities District, plus the expected Annual Special Tax applicable to such Assessor's Parcel in each remaining Fiscal Year until the termination date specified in the Rate and Method, using as the discount rate (i) the arbitrage yield on the Bonds or (ii) the most recently published Bond Index prior to the issuance of the Bonds), less a credit for the corresponding reduction in the Reserve Requirement for the Bonds, plus the fees and expenses of the Community Facilities District associated with the prepayment, all as set forth in further detail in APPENDIX B.

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

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

Partial prepayment must occur prior to the issuance of the first Building Permit for the construction of a production Unit on a Lot within a Final Map area, and the partial prepayment of each Annual Special Tax obligation must be collected for all Assessor's Parcels prior to the issuance of the first Building Permit with respect to each such Assessor Parcel.

No partial prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, is at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year.

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

Claims. Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Board not later than 12 months after having paid the first installment of the Special Tax that is disputed. A representative(s) of the Community Facilities District is required to promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the claim. If the representative's decision requires that the Special Tax for an Assessor's Parcel be modified or changed in favor of the property owner, a cash refund will not be made (except for the last year of levy), but an adjustment will be made to the Annual Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s).

18 Duration of Special Tax Levy. The Annual Special Taxes will be levied against Taxable Property in the Community Facilities District beginning with Fiscal Year 2005-06. The Rate and Method stipulates that Annual Special Taxes will be levied for a period of 33 Fiscal Years after the Bonds have been issued, provided that Annual Special Taxes may not be levied after Fiscal Year 2040-41.

Covenant to Foreclose

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

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

Such judicial foreclosure action is not mandatory. However, the Community Facilities District has agreed in the Fiscal Agent Agreement that, on or about February 15 and June 15 of each Fiscal Year, an Authorized Officer is obligated to compare the amount of Special Taxes to be collected on the December 1 O and April 1 O installments of the secured property tax bills to the amount of Special Taxes actually received by the Community Facilities District in those installments, and if delinquencies have occurred (regardless of whether payments have been covered by the Letter of Credit or Cash Deposit), proceed as follows:

Individual Delinquencies. If the Authorized Officer determines that any single parcel subject to the Special Tax in the Community Facilities District is delinquent in the payment of Special Taxes in the aggregate amount of $5,000 or more, then the Authorized Officer will send or cause to be sent a notice of delinquency (and a demand for immediate payment) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Community Facilities District within 90 days of such determination.

Aggregate Delinquencies. If the Authorized Officer determines that the total amount of delinquent Special Tax for the prior Fiscal Year for the entire Community Facilities District (including total individual delinquencies) exceeds 5% of the total Special Tax due and payable for the prior Fiscal Year, the Community Facilities District has covenanted in the Fiscal Agent Agreement to notify or cause to be notified the property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and to commence foreclosure proceedings within 90 days of such determination against each parcel of land in the Community Facilities District with a Special Tax delinquency.

Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax

19 installment. The Mello-Roos Law does not require the Community Facilities District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

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

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

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

Letter of Credit or Cash Deposit

General. Under the SB 50 Agreement (see "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS - SB 50 Agreement") and the Fiscal Agent Agreement, the Property Owner is required, as a condition precedent to the issuance of the Bonds, to provide an irrevocable standby letter of credit (the "Letter of Credit") or a cash deposit (a "Cash Deposit") to secure payment of Special Taxes levied on its Taxable Property in the Community Facilities District. The Letter of Credit, if used, will identify the Fiscal Agent as beneficiary; the Cash Deposit, if used, will be transferred to the Fiscal Agent for deposit into the Letter of Credit Fund.

Stated Amount and Initial Term. During the time in which a Letter of Credit or Cash Deposit is in effect and until changed through the procedures set forth in the Fiscal Agent Agreement, the "Stated Amount" of the Letter of Credit or Cash Deposit must equal the estimated amount of Special Taxes to be levied in the next Fiscal Year on property owned by the Property Owner at the time the Letter of Credit is issued.

Duration and Conditions of Release. Each Letter of Credit or Cash Deposit must be in effect so long as individual homeowners own fewer than 60% of the lots in the Community Facilities District.

20 On or before each July 1, commencing July 1, 2006, the Community Facilities District will determine the following:

(i) the number of lots then owned by individual homeowners in the Community Facilities District, and

(ii) if fewer than 60% of the lots are owned by individual homeowners,

(A) the number of such lots owned by individual homeowners, and

(B) the Community Facilities District will certify to the Fiscal Agent the Stated Amount of the Letter of Credit or Cash Deposit required to be in effect based upon the Special Taxes that may be levied in the current Fiscal Year on property owned by the Property Owner and direct the Fiscal Agent to complete and submit the appropriate certificate to the Letter of Credit Bank or release the appropriate amount of the Cash Deposit.

The Property Owner may at any time submit written evidence to the Community Facilities District that 60% or more of the lots in the Community Facilities District are owned by individual homeowners and the Community Facilities District will promptly investigate the Property Owner's claim. If following such investigation, the Community Facilities District determines, either by such investigation or its own independent investigation at any time, that 60% or more lots in the Community Facilities District are owned by individual homeowners, then it will so certify in writing to the Fiscal Agent and direct the Fiscal Agent to release the Letter of Credit to the Letter of Credit Bank or release the Cash Deposit to the Property Owner.

Annual Renewal. Until released by the Fiscal Agent, the Property Owner will maintain its Letter of Credit and provide evidence to the Community Facilities District at least 15 days prior to the stated termination date of the outstanding Letter of Credit (here, the "Renewal Date") that the Letter of Credit will be renewed, or a new Letter of Credit will be posted in lieu of the outstanding Letter of Credit, or a Cash Deposit will be made, all in the amount of the Stated Amount calculated as of the Renewal Date.

If the Fiscal Agent does not receive by the Renewal Date (i) an irrevocable written commitment from a Letter of Credit Bank to renew the current Letter of Credit or to replace the current Letter of Credit, (ii) a Letter of Credit to replace the current Letter of Credit, or (iii) a Cash Deposit to replace a prior Letter of Credit, the Fiscal Agent will upon the written direction of an Authorized Officer immediately, with no further authorization or instruction, draw upon the Letter of Credit in the full Stated Amount. The Fiscal Agent will deposit the proceeds of such draw into the Letter of Credit Fund for use as described in the Fiscal Agent Agreement.

Failure by the Property Owner to maintain and renew the Letter of Credit is not an event of default under the Fiscal Agent Agreement.

Draws on Letter of Credit. No later than five days before each Interest Payment Date, the Fiscal Agent is required to determine whether amounts on deposit in the Bond Fund and those amounts on deposit in the Special Tax Fund that will be deposited into the Bond Fund on that Interest Payment Date will be sufficient to make the next payment of principal of and interest on the Bonds, and to notify the Community Facilities District of any deficiency. If amounts in the Bond Fund will be insufficient to pay principal of and interest on the Bonds, and the shortfall is attributable to the Property Owner's delinquency in the payment of Special Taxes

21 for the property owned by it, the Fiscal Agent will, upon written direction of an Authorized Officer (prior to any withdrawals from the Reserve Fund), draw upon the Letter of Credit in an amount no greater than the delinquent Special Taxes levied on property owned by the Property Owner.

The Fiscal Agent will deposit the proceeds of any such draw upon a Letter of Credit into the Letter of Credit Fund (established under the Fiscal Agent Agreement) and, on the day preceding the Interest Payment Date, and prior to any transfers from the Reserve Fund, transfer such amounts from the Letter of Credit Fund to the Bond Fund.

Reimbursement of Letter of Credit Bank. The Community Facilities District has no obligation to reimburse any Letter of Credit Bank (or its designee, which may be the Property Owner) for any draw on its Letter of Credit except from (i) any proceeds of the draw on the Letter of Credit not required to pay Debt Service on the Bonds on the Interest Payment Date for which the draw was made, and (ii) delinquent Special Taxes subsequently received by the Community Facilities District with respect to the property owned by the Property Owner.

The obligations of the Letter of Credit Bank under its Letter of Credit are not contingent upon reimbursement for any draws thereon from any source.

Final Release of Funds in Letter of Credit Fund. The Fiscal Agent will immediately return to the Property Owner all amounts that remain on deposit in the Letter of Credit Fund on any July 1 if the following conditions are met:

(i) 60% or more lots in the Community Facilities District are owned by individual homeowners,

(ii) such moneys are not required to pay Debt Service on the Bonds on the following Interest Payment Date as a result of delinquencies in the payment of Special Taxes by the Property Owner, and

(iii) the Property Owner is not delinquent on Special Taxes.

Enforcement. If a Letter of Credit Bank wrongfully refuses to honor any drawing made on its Letter of Credit, the Community Facilities District, on behalf of the Owners of the Bonds, is required to immediately bring an action and pursue any remedy available at law or in equity for the purpose of compelling that Letter of Credit Bank to honor such drawing and to enforce the provisions of its Letter of Credit.

Letter of Credit Bank

The Fiscal Agent Agreement defines the Letter of Credit Bank as the issuer of any Letter of Credit from time to time and the respective successors and assigns of the business thereof and any surviving, resulting or transferee banking association or corporation with or into which it may be consolidated or merged or to which it may transfer all of its banking business. The Letter of Credit Bank must have a minimum Moody's long-term rating of "A" and short term rating of "P-1" or otherwise be acceptable to the Community Facilities District.

22 Compliance with Letter of Credit Requirement

Lennar Homes intends to initially satisfy the Letter of Credit requirement with a Letter of Credit in the full Stated Amount to be issued by Bank of America, NT&SA ("BofA") prior to the closing date. However, no assurance can be given that the Lennar Homes will not satisfy the Letter of Credit requirement with a Cash Deposit or with a Letter of Credit issued by a different bank, or that Lennar Homes will not substitute a Cash Deposit or a Letter of Credit issued by a different bank after the closing date.

BofA is listed on the New York Stock Exchange under the trading symbol "BAC." Information about BofA is contained in reports filed with the Securities and Exchange Commission and the Federal Deposit Insurance Corporation. Additional information regarding BofA is available on the Internet at www.bankofamerica.com. This Internet address is included for reference only, and the information on this Internet site is not a parl of this Official Statement or incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on this Internet site.

Special Tax Fund

Deposits. Under the Fiscal Agent Agreement, all Special Taxes received by the Community Facilities District will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent on behalf of the Community Facilities District; provided that any proceeds of Special Tax Prepayments will be transferred by an Authorized Officer to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Subaccount established under the Fiscal Agent Agreement.

The Fiscal Agent will hold moneys in the Special Tax Fund in trust for the benefit of the Community Facilities District and the owners of the Bonds. Pending disbursement, moneys in the Special Tax Fund will be subject to a lien in favor of the Bond owners and the Community Facilities District.

Disbursements. Moneys in the Special Tax Fund will be disbursed as needed to pay the obligations of the Community Facilities District in the following priority:

(i) the amount or portion thereof, not exceeding $30,000 that an Authorized Officer directs the Fiscal Agent to deposit in the Administrative Expense Fund for payment of Administrative Expenses,

(ii) amounts required to be deposited into the Bond Fund in order to pay Debt Service on the Bonds on the next Interest Payment Date,

(iii) amounts required to replenish the Reserve Fund to the Reserve Requirement (as defined below),

(iv) amounts required to reimburse the Letter of Credit Bank, if any (but only from amounts of delinquent Special Taxes deposited into the Special Tax Fund), and

(v) any remaining amounts required to pay Administrative Expenses (in an amount not exceeding the amount levied for such purpose).

23 At any time following the deposit of Special Taxes in an amount sufficient to make payment of all of the deposits listed above for the current Bond Year (as that term is defined in the Fiscal Agent Agreement), an Authorized Officer may direct the Fiscal Agent to transfer any excess amounts remaining in the Special Tax Fund to the Improvement Fund to be used for any lawful purpose under the Act. In the absence of written direction from an Authorized Officer, all amounts remaining in the Special Tax Fund on the first day of the succeeding Bond Year will be retained in the Special Tax Fund and applied to the succeeding Bond Year's Annual Debt Service; provided however, that such amounts will not be invested at a yield in excess of the yield on the Bonds.

Investment. Moneys in the Special Tax Fund will be invested and deposited by the Authorized Officer as described in "Investment of Moneys in Funds" below. Interest earnings and profits resulting from such investment and deposit will be retained in the Special Tax Fund to be used for the purposes of the Special Tax Fund.

Bond Fund

The Fiscal Agent will hold the Bond Fund in trust for the benefit of the Bond owners. Within the Bond Fund the Fiscal Agent will create and hold the Capitalized Interest Subaccount, into which the portion of Bond proceeds representing capitalized interest will be deposited, and the Special Tax Prepayments Subaccount, into which prepayments of the Special Taxes will be deposited.

On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the owners of the Bonds the principal, interest and any premium then due and payable on the Bonds, including any amounts due on the Bonds by reason of the mandatory sinking payments or a redemption of the Bonds.

If amounts in the Bond Fund are insufficient for the purposes set forth in the preceding paragraph, the Fiscal Agent will first draw on the Letter of Credit or Cash Deposit in the amount of such deficiency (upon the written direction of an Authorized Officer of the Community Facilities District, and only to the extent that the deficiency is attributable to a Property Owner's delinquency in the payment of Special Taxes for the property owned by it or its successors-in­ interest (other than individual homeowners)) and, to the extent of other deficiencies, or if the Letter of Credit is dishonored, or the Letter of Credit or Cash Deposit is no longer in effect, withdraw the deficiency from the Reserve Fund.

If, after all transfers from the Letter of Credit or Cash Deposit and the Reserve Fund, there are insufficient funds in the Bond Fund to pay the amounts required on the next Interest Payment Date, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of mandatory sinking payments, and then to payment of principal due on the Bonds by reason of mandatory sinking payments. Any mandatory sinking payment not made as scheduled will be added to the mandatory sinking payment to be made on the next sinking fund redemption date.

The Community Facilities District has covenanted in the Fiscal Agent Agreement to increase the levy of the Special Taxes in the next Fiscal Year (subject to the maximum amount authorized by the Rate and Method) in accordance with the procedures set forth in the Act for the purpose of curing Bond Fund deficiencies.

24 Reserve Fund

In order to further secure the payment of principal of and interest on the Bonds, certain proceeds of the Bonds will be deposited into the Reserve Fund in an amount equal to the Reserve Requirement (see "ESTIMATED SOURCES AND USES OF FUNDS"). Reserve Requirement is defined in the Fiscal Agent Agreement to mean, as of any date of calculation, an amount equal to the least of the following:

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

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

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

If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed and the original principal of the Bonds) will be applied to the redemption of the Bonds.

Moneys in the Reserve Fund will be invested and deposited as described in "Investment of Moneys in Funds" below. Interest earnings and profits resulting from investment in excess of the Reserve Requirement may be used for purposes of paying any rebate liability due to the federal government, at the written direction of an Authorized Officer, and amounts not so used will be transferred to the Bond Fund.

See "APPENDIX D - Summary of Fiscal Agent Agreement" for a description of the timing, purpose and manner of disbursements from the Reserve Fund.

Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Authorized Investments, as directed by an Authorized Officer, that mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. See "APPENDIX D - Summary of Fiscal Agent Agreement" for a definition of "Authorized Investments."

25 THE SCHOOL DISTRICT

The following information relating to the School District is included only for the purpose of supplying general information regarding the School District. Neither the faith and credit nor the taxing power of the School District has been pledged to payment of the Bonds, and the Bonds will not be payable fro m any of the School District's revenues or assets.

General Information

The School District is located in the southwestern portion of the County in the community of Menifee. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged as a single school district. The School District now covers approximately 60 square miles, and includes parts of the cities of Murrieta, Lake Elsinore and Perris, and certain unincorporated areas of the County. The administration headquarters of the School District are located at 30205 Menifee Road, Menifee, California. See "APPENDIX A - General Information About the Menifee Area and Riverside County."

The School District currently operates five elementary schools and two middle schools and plans to open an additional elementary school in Fiscal Year 2004-05. The School District has 6,565 students enrolled for Fiscal Year 2004-05.

Administration and Enrollment

The School District is governed by the Board. The five Board members are elected to two and four-year terms in elections held every two years. If a vacancy arises during any term, the vacancy is filled by election or appointment by the Board. In May 2003 the terms of the current board members were extended by 12 months under a County decision allowing school districts to align school board elections with even-year presidential and gubernatorial elections.

The names and terms of the current Board members are set forth below.

Name Office Term Ex�i res Rita Peters President November 2006 Victor Giardinelli Clerk November 2008 Phoeba A. Irey Member November 2008 Chester W. Morrison Member November 2006 Frederick Allen Twyman, Ill Member November 2008

26 The table below sets forth official enrollment figures for Fiscal Year 1994-95 through 2004-05, as well as projections for Fiscal Years 2005-06 through 2007-08, all as reported to the State of California Department of Education.

Menifee Union School District Student Enrollment

Fiscal Year Student Enrollment Percentage Increase Historical [1 J 1994-95 3,854 N/A 1995-96 4,025 4.44% 1996-97 4,204 4.45 1997-98 4,409 4.88 1998-99 4,523 2.59 1999-00 4,675 3.36 2000-01 4,820 3.10 2001-02 5,015 4.05 2002-03 5,415 7.98 2003-04 5,919 9.31 2004-05 6,502 9.85

Projected [21 2005-06 7,022 8.00 2006-07 7,433 5.85 2007-08 7,816 5.15

[1] Represent CBEDS (California Basic Educational Data System) calculations. [2] Projections based on CBEDS (California Basic Educational Data System) calculations. Source: California Department of Education and the School District.

27 THE COMMUNITY FACILITIES DISTRICT

General

Description and Location. The Community Facilities District is located in the southwestern portion of the County, in an unincorporated area known as Menifee, which is south of Sun City and Quail Valley and east of Canyon Lake and Lake Elsinore.

The Community Facilities District is located along both the north and south side of Lazy Creek Road, east of Evans Road and Brookfield Drive and west of Bradley Road, and generally between Newport Road to the south and the Salt Creek Channel to the immediate north. Interstate 215 lies generally to the east. Surrounding land uses include residential development to the north and west of the site, commercial buildings fronting Bradley Road to the east, and several new housing developments south of Newport Road.

All of the taxable property in the Community Facilities District is being developed for residential use as single-family detached homes.

See "APPENDIX A - General Information About the Menifee Area and Riverside County" for certain demographic information on the Menifee area and the County. The boundary map of the Community Facilities District is attached as APPENDIX I.

Gross and Anticipated Net Taxable Acres. The property in the Community Facilities District currently contains approximately 52.87 gross acres, of which approximately 42.60 net acres are proposed for development as Taxable Property. Gross acreage includes property that is expected to be separately parcelized, developed and conveyed to the County, public agencies or homeowner associations as public roads, open space parcels, drainage and stormwater detention areas, and other exempt uses. Before this property is conveyed, it will be taxable as Undeveloped Property pursuant to the Rate and Method (to the extent not classified as Exempt Property under the Rate and Method). This property will become exempt from the Special Taxes as of the January 1 following the date that such property has been conveyed to the County, a public agency or a homeowner association, which is expected to occur after final tract maps are recorded for each development.

Estimated Maximum Special Tax Proceeds and Debt Service Coverage

The Rate and Method is structured to produce Special Tax revenues from the Assigned Annual Special Tax and the Maximum Special Tax which, when applied to the projected debt service on the Bonds, is anticipated to result in a debt service coverage ratio of 110% for the life of the Bonds.

Appraised Property Value

The Appraisal. The Appraisal was prepared by Bruce W. Hull & Associates, Inc. of Ventura, California (the "Appraiser") to ascertain the market value of the fee simple estate of the 228 single family detached homes and lots in the Community Facilities District as of a May 15, 2005 date of value. The Appraisal was intended to comply with the reporting requirements set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice for a Summary Appraisal Report, and with the appraisal standard proposed by the California Debt and Investment Advisory Commission.

28 Basis for Appraisal and Assumptions. The property rights appraised were of a fee simple interest subject to easements of record, and the lien of the Special Taxes.

The Appraisal was based on certain assumptions and limiting conditions set forth in APPENDIX C, including the assumption that all of the improvements and benefits to the property to be funded by the Bonds are completed and have accrued to the property. In this case, the Appraiser assumed that the proceeds of the Bonds would fund $1,674,432 for School Facilities. (See "FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS" for the Community Facilities District's current estimate of the amount of Bond proceeds to be used for these purposes.)

The Appraiser also assumed (a) that the condemnation proceedings for an adjacent parcel progresses in a timely manner and does not hinder or thwart development of the property (see "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development"), and (b) that the cost information it received from the Property Owner is accurate and complete.

As of the May 15, 2005 date of value, the property in the Community Facilities District was under development, with mass grading completed and utility construction underway, and six model homes under construction.

Value Estimate. The Appraiser estimated that, as of the May 15, 2005 date of value, the fee simple interest in the property within the Community Facilities District (subject to easements of record, the lien of the Perris Union High School District Community Facilities District No. 92-1 (see "- Direct and Overlapping Governmental Obligations" below), and to the lien of the Special Taxes) had a market value of $23,150,000.

Valuation Methods. The Appraiser estimated the value of the property in the Community Facilities District based on the sales comparison approach, in which market value is estimated by comparing properties similar to the subject property that have recently been sold, are listed for sale, or are under contract. The estimate of value for the property was achieved using the sales prices of comparable finished lots in the Menifee area that were listed or had sold within the prior 14 months.

A discounted cash flow analysis was not used.

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

29 Appraised Value to Burden Ratio

The table below shows the projected value to burden ratio for the property in the Community Facilities District based on the appraised values set forth in the Appraisal, and the lien represented by the principal amount of the Bonds.

No assurance can be given that the amounts shown in this table will conform to those ultimately realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes.

Table 1 Appraised Values and Value to Burden Ratio

Projected Total Principal Number Appraised Projected Amount of Value to of Homes Value r11 Special Taxes r21 Bonds Lien f3J 228 $23, 150,000 $220,780.12 $2,580,000 8.97:1

[1] Market value estimated by the Appraiser as of May 15, 2005. [2] Projected Special Taxes are based on product mix information provided by the Property Owner. [3] Average value to lien per lot; actual value to lien per lot may vary. Source: David Taussig & Associates, Inc., and the Appraiser.

30 Direct and Overlapping Governmental Obligations

Contained within the boundaries of the Community Facilities District are certain overlapping local agencies providing public services and assessing property taxes, assessments, special taxes and other charges on the property in the Community Facilities District. Many of these local agencies have outstanding debt.

The direct and overlapping obligations affecting the property in the Community Facilities District as of June 9, 2005, are shown in the following table. The table was prepared by National Tax Data, Inc., and is included for general information purposes only. The School District has not reviewed this report for completeness or accuracy and makes no representation in connection therewith.

31 Table 2 Direct and Overlapping Governmental Obligations

MENIFEE UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2003-4

I. Assessed Value 2004-2005 Secured Roll Assessed Value $2,739,295 II. Secured Property Taxes Total Description on Tax Bill Type Parcels Total Levy % Applicable Parcels Levy Basic Levy PROP13 752,870 1 ,260, 163,576. 10 0.00400% 18 $50,380.00 County of Riverside Flood Control (Santa Ana) FLOOD 280,873 1,938,106.86 0.00025% $4.92 County of Riverside Service Area No. 145 (Park & Recreation) CSA 5,206 172,033.22 0.01557% $26.78 County of Riverside Service Area No. 145 (Street Lights) CSA 5,648 354,767.00 0.29428% 18 $1,044.00 County of Riverside Service Area No. 152 (Street Sweeping) CSA 40,500 663,622.26 0.00300% $19.92 Eastern Municipal Water District ID No. U-1 Debt Service GO 16,889 106,855.66 0.18852% 18 $201.44 Eastern Municipal Water District Standby Charge STANDBY 199,425 4,341,931.56 0.01354% 18 $587.76 Menifee Union School District Debt Service 2002 GO 26, 163 609,529.97 0.13433% 18 $818.81 Metropolitan Water District of Southern California Debt Service GO 195,749 4,817, 154.88 0.00606% 18 $292.10 Metropolitan Water District of Southern California Standby Charge STANDBY 198,247 2,753,481.64 0.01227% 17 $337.80 Perris Union High School District CFO No. 92-1 CFO 8,502 763,834.48 0.00171% $13.08 Perris Union High School District Debt 1999 GO 49,459 761 ,686.58 0.07883% 18 $600.41 Riverside Co Flood Control and Water Conservation AD No. 4-5 (1) 1915 932 341 ,628.74 2.27595% 3 $7,775.30 2004-2005 TOTAL PROPERTY TAX LIABILITY $62,102.32 TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2004-2005 ASSESSED VALUATION 2.27% Ill. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Menifee Union School District CFO No. 2003-4 (2) CFO TBD TBD 100.00000% 18 TBD Perris Union High School District CFO No. 92-1 CFO $0 $0 0.00171% $0 Riverside Co Flood Control and Water Conservation AD No. 4-5 (1) 1915 $4,941 ,042 $2,265,000 2.27595% 3 $51,550 TOTAL LAND SECURED BOND INDEBTEDNESS (3) $51,550 IV. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Eastern Municipal Water District ID No. U-1 Debt Service GO $3,000,000 $350,000 0.10254% 18 $359 Menifee Union School District Debt Service 2002 GO $9,429,203 $9,314,203 0.07303% 18 $6,802 Metropolitan Water District of Southern California Debt Service GO $850,000,000 $447,475,000 0.00019% 18 $829 Perris Union High School District Debt 1999 GO $15,999,882 $14,578,498 0.04287% 18 $6,250 TOTAL GENERAL OBLIGA TION BOND INDEBTEDNESS (3) $14,240 TOTAL OF ALL OUTSTANDING AND OVERLAPPING BONDED DEBT $65,790

(1) A Notice of Discharge of Assessment Lien for this lien was recorded with the County on June 3, 2005, as Document No. 2005-0443529, verifying that this assessment lien applicable to the property has been discharged. (2) Excludes Mello-Roos bonds to be sold. (3) Additional bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced fiscal year. Source: National Tax Data, Inc.

32 A further discussion of certain direct and overlapping governmental assessments affecting various portions of the Community Facilities District is set forth below.

Eastern Municipal Water District Standby Combined Charge. This assessment is fixed unless there is a vote to increase the assessment. This pay-as-you-go assessment is used for maintenance and operations of water and sewer lines and transportation of water from Northern California to Southern California. All parcels within the Community Facilities District are subject to varying charges per parcel upon its development. Parcels within the Improvement Area E will be charged $11.00 per parcel per year, up to an acre, and $11.00 per acre, for any parcel larger than an acre.

Metropolitan Water District ("MWD") Standby East. This assessment is fixed unless there is a vote to increase the assessment. This annual assessment, formed in Fiscal Year 1992-93, is used for capital improvements that include the State Water Project, Colorado River aqueducts, Diamond Valley Lake, and other water storage facilities. The assessment levied for Fiscal Year 2004-05 is $6.94 per parcel, up to an acre.

County of Riverside Service Area ("CSA") No. 145 Street Lights and Park & Recreation. A park and recreation assessment of $58.00 per unit is levied on all developed property within the Community Facilities District. The revenue raised by this special assessment is used to finance the operation, maintenance, and servicing of public parks, recreational facilities, community service programs, and landscaping incurred by the County. In addition, properties within the Community Facilities District is subject to a maximum street lighting assessment of $46.44 per unit to pay for streetlight maintenance, night lighting, and energy costs. Therefore, the total CSA No. 145 assessments are projected to be $104.44 per unit in Fiscal Year 2004-05.

County Service Area ("CSA'1 No. 152 Street Sweeping. This service area pays for the maintenance of roads and streets in the entire County. The assessment is levied on a per­ parcel basis and is paid once a year. The majority of the levy covers the cost of street sweeping. Land use classification for property located within CSA No. 152 is based on land use codes applied by the County Assessor's Office ("developed property" is determined by the completion of a structure on an Assessor's Parcel). The CSA No. 152 assessment is $40.00 per parcel in Fiscal Year 2004-05.

Santa Ana National Pollutant Discharge Elimination System ("NPDES") Flood Control Stormwater/Cleanwater. This assessment is fixed unless there is a vote to increase the assessment. This pay-as-you-go assessment is used for educational purposes such as increasing awareness for the best management of storm drains. The assessment rate is calculated by multiplying the Benefit Assessment Unit ("BAU") rate of $3. 75 per BAU by the BAU for that land use category. The BAU is computed based upon the parcel's size (acreage) and its land use classification. One BAU is 1/6 of an acre. A single-family residence on a 7,200 square foot lot is defined as one BAU as well. The BAUs for other types of land use are calculated in proportion to the amount of runoff generated by a single family residence on a 7,200 square foot lot. The rates for Fiscal Year 2004-05 are listed below.

33 Assessment Land Use CategorY BAU/Acre [email protected]/BA U Single Family Residential (SFR) 6* $22.50/acre Apartments/Mobile Homes, 9 $33.75/acre Churches and Schools Commercial/Industrial 12 $45.00/acre Golf Courses 0.10 $0.37/acre Undeveloped Portions of Parcels 0.05 $0.19/acre Agricultural/Vacant Undeveloped 0.05 $0.19/acre

* 1 BAU per single-family residence, assuming six equally sized residential parcels per acre

Perris Union High School District Community Facilities District No. 92-1. This CFO, which was formed by the Perris Union High School District, encompasses nearly all of the School District boundaries and was formed to assist in the funding of Paloma Valley High School. The special tax for CFO No. 92-1 is levied only on developed property. The special tax levied for Fiscal Year 2004-05 is $226.32 per single family detached unit and $123.12 per single family attached unit. Each Fiscal Year, the special tax is subject to a 2.00% increase of the amount in effect the prior Fiscal Year. The special tax revenues are currently pledged to the repayment of debt service on certificates of participation issued by the Perris Union High School District in 1993. If special tax revenues are insufficient to cover the lease payments, Perris Union High School District uses other revenue streams including its general fund to make up the remainder of the lease payments.

Proposed Eastern Municipal Water District CFD 2004-34. Property within the Community Facilities District is projected to be subject to a proposed community facilities district that is in the process of being formed by EMWD, anticipated to be known as CFO 2004-34. As currently proposed, the special tax levied by the proposed CFO No. 2004-34 will pay the debt service on bonds, the proceeds of which will be used to pay for (i) sewer and water improvements needed by EMWD to provide services to the property, (ii) water and sewer capacity and connection fee programs of EMWD facilities, and (iii) storm drain improvements to be owned by the County. The EMWD facilities would include the installation of water and sewer lines, sewer treatment plants, disposal ponds, pumping plants, lift stations, and water reservoirs currently required by EMWD. The amount of the special tax to be levied in each fiscal year is projected to commence in fiscal year 2006-07. The proposed assigned special tax for each parcel of developed property is shown in the table below.

Assigned Special Taxable Tax Land Use CategorY Unit Residential Floor Area Per Taxable Unit 1. Single Family Property D/U � 2,701 Sq. Ft. $2,525 2. Single Family Property D/U :::; 2,700 Sq. Ft. $2,415 3. Multifamily Residential Property Acre N/A $14,841 4. Non-Residential Property Acre N/A $14,841

34 Estimated Tax Burden on Single Family Home

The following table sets forth the estimated total tax burden on a single family home of less than 2,700 building square feet (a home size selected as a conservative representative of the proposed homes to be constructed in the Community Facilities District), based on estimated tax rates for Fiscal Year 2004-05.

Table 3 Estimated Fiscal Year 2004-05 Tax Rates (Single Family Residences of less than 2,700 square feet)

Percent of Projected ASSESSED VALUATION AND PROPERTY TAXES Total AV Amount Estimated Sales Price [1] $389,990 Homeowner's Exemption (7,000) Assessed Value [2] $382,990

AD VAL OREM PROPERTY TAXES General Purpose 1.00000% $3,829.90 Ad Valorem Tax Overrides Perris Union High School District G.O. Bond 0.01192 45.65 MWD East Debt Service (1301999) 0.00580 22.21 Eastern Municipal Water Improvement District U-1 0.00400 15.31 Menifee Union School District GO Bond 0.01625 62.23 Total Ad Valorem Property Taxes and Overrides 1.03797 3,975.30

ASSESSMENTS, SPECIAL TAXES AND PARCEL CHARGES Menifee Union School District CFO No. 2003-4 882.54 Eastern Municipal Water District Standby Charge [3] 11.00 Metropolitan Water District Standby East 6.94 County Service Area No. 145 Park and Recreation 58.00 County Service Area No. 145 Street Lights 46.44 County Service Area No. 152 Street Sweeping 40.00 Santa Ana NPDES Flood Control Stormwater/Cleanwater 3.75 Proposed Eastern Municipal Water District CFO No. 2004-34 [4] 2,415.00 Perris Union High School District CFO No. 92-1 226.32 Total Assessments and Parcel Charges $3,689.99

PROJECTED TOTAL PROPERTY TAXES $7,665.29

Projected Total Effective Tax Rate (as % of Sales Price) 1.97% [1] Estimated sales price for the Property Owner's lowest single family detached unit base home price, which contains 2,559 building square feet. [2] Assessed value reflects estimated total assessed value net of homeowner's exemption. [3] Assumes that the property will be subject to all standby assessment charges by EMWD. [4] Projected to be formed; amount is preliminaryand subject to change. Source: David Taussig & Associates, Inc.

35 PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT

The information about the Property Owner contained in this Official Statement has been provided by representatives of the Property Owner and has not been independently confirmed or verified by the Underwriter, the School District or the Community Facilities District. Neither the Underwriter, the School District nor the Community Facilities District make any representation as to the accuracy or adequacy of this information. There may be material adverse changes in this information after the date of this Official Statement.

Lennar Homes

Ownership Structure. Lennar Homes is Lennar Homes of California, Inc., a California corporation, based in Mission Viejo, California that has been in the business of developing residential real estate communities in California since 1995.

Lennar Homes is a wholly-owned subsidiary of Lennar Homes Inc., a Florida corporation, which is a wholly-owned subsidiary of Lennar Corporation, a Delaware corporation ("Lennar Corp."), with headquarters in Miami, Florida.

Lennar Corp., founded in 1954 and publicly traded under the symbol "LEN" since 1971, is one of the nation's largest home builders, operating under a number of brand names, including Lennar Homes, US Home, and Greystone Homes in Southern California. Lennar Homes develops residential communities both within the Lennar family of builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an interest. As of November 30, 2004 (Lennar Corp. 's year end), Lennar Corp. employed 11,796 employees, of which 7, 918 are in the homebuilding operations and 3,878 are in financial services. As of the same date, Lennar Corp. (i) owned 87,740 homesites nationwide, and controlled an additional 167,327 homesites nationwide, and (ii) delivered 36,204 homes through consolidated and unconsolidated entities.

The Internet site for Lennar Homes and Lennar Corp. is www.lennar.com. This Internet address is included for reference only, and the information on this Internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement.

Development Experience. The Corona Division of Lennar Homes (which is responsible for the development of the Emerson Lane neighborhood within the Community Facilities District) completed and closed on the sale of 77 4 homes in fiscal year 2004, and anticipates completing and closing on 954 homes in fiscal year 2005. A representative sampling of projects recently or currently under active development in southern California by the Corona Division of Lennar Homes is summarized in the table below.

36 Number of Inland Empire Project Units Location Status Provenance 118 Corona Sold Out EntradaNentana 330 East Highlands Sold Out Autumnwood 97 Fontana Sold Out Remington 123 Fontana Sold Out Volterra 110 Lake Elsinore Sold Out Vellagio 54 Lake Elsinore Sold Out Magnolia 73 Murrieta Sold Out Mariposa 61 Murrieta Sold Out Auburn Village 82 Murrieta Sold Out Rockhurst 113 Rancho Cucamonga Sold Out Camargo 67 Temecula Sold Out Canterbury 107 Temecula Sold Out Eastridge 96 Temecula Sold Out Vintage 119 Temecula Sold Out Crowne Hill 114 Temecula Sold Out Bayberry at Greer Ranch 63 Murrieta Active Chatham at Harveston 78 Temecula Active Clayton Ranch 144 Wildomar Active Alderbrook at Murrieta Oaks 129 Murrieta Active Rosewood at Sun Ranch 120 Sun City Active Lumiera at Northstar Ranch 85 Murrieta Active Griffith Place at Northstar Ranch 88 Murrieta Active Solaris at Northstar Ranch 70 Murrieta Active Palmetto at Oak Valley 79 Beaumont Active Kendelwood 115 Hemet Active The Temecula Division of Lennar Homes (which is responsible for the development of the Arbor Lane neighborhood within the Community Facilities District) completed and closed on the sale of 872 homes in fiscal year 2004, and anticipates completing and closing on 950 homes in fiscal year 2005. A representative sampling of projects recently or currently under active development in southern California by the Temecula Division of Lennar Homes is summarized in the table below.

Inland Empire Project Number of Units Location Status Estancia 90 Moreno Valley Closed Rancho La Laguna 97 Lake Elsinore Closed C.H. - Nottingham 118 Temecula Closed C.H. - Astoria 112 Temecula Closed C.H. - Fairmont 112 Temecula Closed Garden Glen 51 Chino Current Montelena 91 Murrieta Current Meadowbrook 21 1 San Jacinto Current Cottonwood Ranch 136 San Jacinto Current Sausalito 109 Murrieta Current Cimmaron 157 San Jacinto New Augusta 79 Beaumont New

37 History of Property Tax Payments; Loan Defaults; Bankruptcy. An officer of Lennar Homes will certify to his actual knowledge to the following representations at the Closing:

Neither Lennar Homes nor any of its affiliates over which it exercises managerial control has ever defaulted to any material extent in the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in California within the past five years.

Neither Lennar Homes nor any of its affiliates over which it exercises managerial control is currently in default on any loans, lines of credit or other obligation, the result of which could materially adversely affect the development of the property in the Community Facilities District.

Lennar Homes is solvent and no proceedings are pending (based upon service of process received by Lennar Homes) or threatened in which Lennar Homes may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of its respective debts or obligations, or granted an extension of time to pay its respective debts or a reorganization or readjustment of its respective debts.

There is no litigation or administrative proceeding of any nature pending (in which Lennar Homes has been served), or threatened against Lennar Homes which, if successful, would materially adversely affect the ability of Lennar Homes to complete the development and sale of its property within the Community Facilities District, or to pay the Special Taxes or ordinary ad valorem property tax obligations when due on its property within the Community Facilities District, or which challenges or questions the validity or enforceability of the Bonds, the Resolution of Issuance, the Fiscal Agent Agreement, the Property Owner Continuing Disclosure Certificate or the Bond Purchase Contract.

Lennar Homes is not aware of any material failures to comply with previous continuing disclosure undertakings by it or its affiliates to provide periodic continuing disclosure reports or notices of material events in California within the past five years. This representation is qualified by the following:

Lennar Homes has numerous affiliates consisting of various entities that are developing or have been involved in the development of numerous different projects in states throughout the country over the last 5 years. It is possible that some of such affiliates have been in default at one time or another in compliance with continuing disclosure covenant undertaken in connection with an issuance of community facilities district or assessment district bonds. The officer executing the certificate in connection with the issuance of the Bonds will certify that, to his actual knowledge, the current affiliates have not defaulted during the last five years with respect to community facilities districts or assessment districts in California, except that in connection with covenants relating to a 1998 financing for a project in the City of Temecula by the Winchester Hills Financing Authority Community Facilities District No. 98-1 (Winchester Hills) in which Lennar Homes was involved as the administrative member of the major landowner. Lennar Homes, as the administrative member, filed audited financial statements for each fiscal year through its 1999 fiscal year (the report filed in May 2000) but did not file the report due for the 2000 fiscal year and did not include financial information regarding the development of the property owned by Lennar Communities in the 1999 report. In connection with covenants relating to a 2001 financing for a project in the City of Murrieta by Community Facilities District No. 2000-1 of the Murrieta Valley Unified

38 School District, continuing disclosure reports due on September 15, 2002 were not provided on a timely basis. Greystone Homes, as successor to Pacific Century Homes, filed the continuing disclosure report with the dissemination agent on May 15, 2003. Lennar Homes is reviewing and updating its system for filing reports and expects to satisfy Lennar Homes' obligations with regard to disclosure in the future.

Environmental Conditions

CEQA Review. In January 2003 the County approved a Mitigated Negative Declaration under the California Environmental Quality Act ("CEQA") in connection with development approvals for the property in the Community Facilities District (including a zoning change and the approval of Tentative Tract Map 30040). No additional discretionary approvals are required for the proposed development in the Community Facilities District that would require additional environmental review under CEQA.

Hazardous Substances. SID Geotechnical, Inc. of Riverside, California, prepared a Phase I Preliminary Environmental Site Assessment dated September 24, 2003, for the property in the Community Facilities District. The assessment concluded that the likelihood of hazardous waste or petroleum contamination existing on, or migrating onto, the property is considered low.

Seismic Conditions. GeoSoils, Inc. of Murrieta, California, prepared a Geotechnical Feasibility Review dated March 19, 2004, for the property in the Community Facilities District, which updated a Preliminary Soil Investigation Report prepared by SID Geotechnical, Inc., or Riverside, California, dated December 11, 2000, for the property. The GeoSoils report concluded that the site appears suitable for residential development from a geotechnical viewpoint. The report noted that no faults were observed on the site, and the site is not within a fault special studies zone. The closest known active fault is the Elsinore Fault zone, located approximately 8 miles to the west. The report also concluded that the potential for liquefaction was considered low, but recommended further exploratory borings to better identify the earth materials.

Flood Hazard. Five lots located in the northernmost portion of the property in the Community Facilities District are currently located within "Flood Zone B" on maps maintained by the Federal Emergency Management Agency ("FEMA"). Under FEMA guidelines, "Flood Zone B" is defined to include areas outside the 100-year floodplains, areas of 100-year sheet flow flooding where average depths are less than 1 foot, areas of 100-year stream flooding where the contributing drainage area is less than 1 square mile, or areas protected from the 100-year flood by levees. Relevant FEMA maps place these five lots outside the 100-year floodplain. Under FEMA guidelines, flood insurance is not required for property within Flood Zone B.

Jurisdictional Wetlands and Streambeds. The development of the property in the Community Facilities District will involve impacts to wetlands and streambeds that constitute "jurisdictional waters" under federal and state laws and regulations:

A Department of the Army Nationwide Permit Authorization dated March 11, 2004, issued by the U.S. Army Corps of Engineers under Section 404 of the Clean Water Act, with a stated expiration date of March 11, 2006.

A Water Quality Standards Technically Conditioned Certification issued by the California Regional Water Quality Control Board dated March 1, 2004, under Section 401 of the Clean Water Act. The permit does not have an expiration date.

39 An Agreement Regarding Proposed Stream or Lake Alteration Agreement issued by the California Department of Fish and Game under Section 1603 of the California Fish and Game Code, effective as of April 27, 2004, with a stated expiration date of January 1, 2005.

The Property Owner has represented that all site work affecting streambeds and wetlands authorized under these permits has been completed, and that all mitigation measures required by these permits have been or will be complied with.

Proposed Development

No assurances can be made that Lennar Homes will have the resources, willingness and ability to successfully complete development activities on its properly within the Community Facilities District as currently planned. No representation is made as to the ability (financial or otherwise) of Lennar Homes to complete its properly development as currently planned.

General. All of the taxable property in the Community Facilities District is currently in the process of being developed as 228 detached single-family homes in 2 residential neighborhoods to be known as "Emerson Lane" and "Arbor Lane."

The Property Owner acquired its property in the Community Facilities District in July 2004.

Entitlement Status. The project is being developed in accordance with Tract Map 30040, as set forth below:

No. of Tentative Map Final Map Tract No. Lots Approval Approval 30040-1 81 Jan. 2003 June 2005 30040-2 34 Jan. 2003 June 2005 30040-3 32 Jan. 2003 July 2005 30040-4 39 Jan. 2003 July 2005 30040-5 42 Jan. 2003 Aug. 2005 228

Utilities. It is expected that utility services for the property in the Community Facilities District will be provided by the following:

• Water: Eastern Municipal Water District • Sanitary sewer: Eastern Municipal Water District • Stormwater drainage: Riverside County Flood Control • Electricity: Southern California Edison

Infrastructure Development. All grading on the property in the Community Facilities District was completed in April 2005, and the Property Owner anticipates that all off-site infrastructure improvements will be completed by October 2005.

40 A portion of the off-site infrastructure improvements serving the property in the Community Facilities District consisting of water, sewer and storm drain improvements, is being financed through a community facilities district in the process of being formed by Eastern Municipal Water District. See "- Direct and Overlapping Governmental Obligations" above.

As of May 15, 2005, the Appraiser estimated that the total cost to complete the property in the Community Facilities District to "finished lot" condition was as follows:

Total Finished Lot Costs: $15,322,304 Less Costs Beyond "Finished Lot" costs: (584,720) Less Costs Constructed as of May 15, 2005 (2,015,707) Less Estimated Costs to be Funded with Bond Proceeds: (1,674,432) Remaining Costs to Complete: $11,047,445

Condemnation Action. The construction of certain street improvements on Tract 30040-5, which were required as a condition of final Tract Map approval, are dependent on the condemnation of a portion of an adjacent parcel. A condemnation action is in the process of being approved by the County, and it is anticipated that the action will be filed with the Superior Court in due course, and that an order for immediate possession will be obtained that will permit the construction of these street improvements prior to the conclusion of the condemnation proceedings, which are anticipated to take approximately 6 months. The Property Owner has represented that the conditions of Tract Map approval requiring these street improvements will be waived if the condemnation action does not result in a final judgment.

Home Development. The Property Owner's anticipated construction schedule and unit mix for its property in the Community Facilities District are set forth below. No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined below, or that the Properly Owner's home construction and sale plans or base prices will not change after the date of this Official Statement.

41 Proposed Construction and Sales Schedule

First Home Number Begin Home Open Model Sale Last Home Tract of Units Construction Homes Closings Sale Closings 30040-1 81 June 2005 N/A Nov. 2005 Nov. 2006 30040-2 34 June 2005 6/05 Nov. 2005 Nov. 2006 30040-3 32 May 2006 6/05 Nov. 2006 Feb. 2007 30040-4 39 July 2005 N/A Dec. 2005 Nov. 2006 30040-5 42 Oct. 2005 N/A April 2006 Aug. 2006

Proposed Unit Mix

Number No. of Model Approx. Anticipated Tract of Units Types Sg uare Footage Base Prices 30040-1 81 3 2,559 to 3,399 $389,990 to $423,990 30040-2 34 3 2,391 to 3,322 $395,990 to $435,990 30040-3 32 3 2,559 to 3,399 $389,990 to $423,990 30040-4 39 3 2,391 to 3,322 $395,990 to $435,990 30040-5 42 3 2,391 to 3,322 $395,990 to $435,990

Site Development and Home Construction Financing Plan. The Property Owner has financed the cost of land acquisition, infrastructure improvements and home construction costs through internal corporate financing.

The Property Owner intends to use internal corporate financing, together with home sale proceeds, to finance all carrying costs for the property (including property taxes and the Special Taxes) until full sell-out of the single-family homes within the Community Facilities District.

However, if and to the extent this source of financing is inadequate to pay the cost to complete the planned development of the property, the property may not be developed as planned. There can be no assurance of the willingness or ability of the corporate parent of the Property Owner to make such funds available in the future, or the ability of the Property Owner to obtain financing fro m other sources. There is no legal obligation to Bond holders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes.

42 BOND OWNERS' RISKS

The purchase of the Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision.

Limited Obligation of the Community Facilities District to Pay Debt Service

The Community Facilities District has no obligation to pay principal of and interest on the Bonds if Special Tax collections are delinquent, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. The Community Facilities District is not obligated to advance funds to pay debt service on the Bonds.

Levy and Collection of the Special Tax

The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the Community Facilities District. The annual levy of the Special Tax is subject to the Maximum Annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds.

Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.

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

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

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

Development of a parcel of Taxable Property more rapidly than development of other parcels of Taxable Property, thereby resulting in the application of development factors in the Special Tax formula to the parcel and resulting in an increased tax burden on the parcel of Taxable Property.

43 Development of other parcels of Taxable Property less rapidly than expected, thereby resulting in delay in application of development factors in the Special Tax formula to the other parcels of Taxable Property and resulting in an increased tax burden on the parcel of Taxable Property.

Except as set forth above under "SECURITY FOR THE BONDS - Special Taxes" and Rate and Method," the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE BONDS - Covenant to Foreclose" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.

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

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

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

Appraised Values

The Appraisal summarized in APPENDIX C estimates the market value of the taxable property within the Community Facilities District. This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal. The Community Facilities District has not sought the present opinion of any other appraiser of the value of the taxed parcels. A different present opinion of value might be rendered by a different appraiser.

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

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

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

44 Property Values and Property Development

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

Neither the Community Facilities District nor the School District has evaluated development risks. Since these are largely business risks of the type that the property owner customarily evaluates individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the Community Facilities District is issuing the Bonds without regard to any such evaluation. Thus, the creation of the Community Facilities District and the issuance of the Bonds in no way implies that the Community Facilities District or the School District has evaluated these risks or the reasonableness of these risks. On the contrary, the Board has made no such evaluation and is undertaking acquisition and construction of the Facilities even though these risks may be serious and may ultimately halt or slow the progress of land development and forestall the realization of Taxable Property values in the event of delinquency and foreclosure.

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

Land Development. Land values are influenced by the level of development in the area in many respects.

First, undeveloped or partially developed land is generally less valuable than developed land and provides less security to the owners of the Bonds should it be necessary for the Community Facilities District to foreclose on undeveloped or partially developed property due to the nonpayment of Special Taxes.

Second, failure to complete development on a timely basis could adversely affect the land values of those parcels that have been completed. Lower land values would result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. See "THE COMMUNITY FACILITIES DISTRICT - Appraised Value to Burden Ratios." No assurance can be given that the proposed development within the Community Facilities District will be completed, and in assessing the investment quality of the Bonds, prospective purchasers should evaluate the risks of noncompletion.

Risks of Real Estate Investment Generally. Continuing development of land within the Community Facilities District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of the individual property

45 owner, water or electricity shortages, and other similar factors. Development in the Community Facilities District may also be affected by development in surrounding areas, which may compete with the Community Facilities District. In addition, land development operations are subject to comprehensive federal, state and local regulations, including environmental, land use, zoning and building requirements. There can be no assurance that proposed land development operations within the Community Facilities District will not be adversely affected by future government policies, including, but not limited to, governmental policies to restrict or control development, or future growth control initiatives. There can be no assurance that land development operations within the Community Facilities District will not be adversely affected by these risks.

Natural Disasters. The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The areas in and surrounding the Community Facilities District, like those in much of California, may be subject to unpredictable seismic activity. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Environmental Conditions."

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

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

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

The appraised values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the Community Facilities District is not aware that the owner or operator of

46 any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the Community Facilities District is not aware of them.

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

Endangered and Threatened Species. It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered species by the United States Fish & Wildlife Service under the Federal Endangered Species Act or by the California Fish & Game Commission under the California Endangered Species Act without a permit. Although the property owners believe that no federally listed endangered or threatened species would be affected by the proposed development within the Community Facilities District, the discovery of an endangered plant or animal could delay development of vacant property in the Community Facilities District or reduce the value of undeveloped property. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Environmental Conditions."

Concentration of Property Ownership

As of the date of issuance of the Bonds, the Property Owner is the sole owner of Taxable Property in the Community Facilities District, whose property is currently responsible for payment of all of the Special Taxes. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT."

Failure of any owner of property in the Community Facilities District to pay installments of the Special Tax when due could result in the depletion of the Reserve Fund prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax and, consequently, an insufficiency of Special Tax proceeds to meet obligations under the Fiscal Agent Agreement. In that event, there could be a delay or failure in payments of the principal of and interest on the Bonds.

The Property Owner is required to provide and maintain the Letter of Credit or Cash Deposit as partial security for the payment of principal of and interest on the Bonds for a limited period. However, the Stated Amount of the Letter of Credit or Cash Deposit will only equal the Special Taxes levied in any fiscal year on the property within the Community Facilities District owned by the Property Owner (and not owned by individual homeowners). Also, the Letter of Credit will terminate, or the Cash Deposit will be released, when individual homeowners own 60% or more of the single family lots in the Community Facilities District. See "SECURITY FOR THE BONDS - Letter of Credit or Cash Deposit."

47 Other Possible Claims Upon the Value of Taxable Property

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

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

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

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

Exempt Properties

Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the Community Facilities District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See "SECURITY FOR THE BONDS - Rate and Method." In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax.

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

48 Depletion of Reserve Fund

The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. See "SECURITY FOR THE BONDS - Reserve Fund." Funds in the Reserve Fund may be used to pay principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within the Community Facilities District, and proceeds of draws on the Letter of Credit or Cash Deposit, if available. If funds in the Reserve Fund for the Bonds are depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid to the Bond holders pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within the Community Facilities District at the maximum Special Tax rates, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax.

Bankruptcy and Foreclosure Delays

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

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. To the extent that property in the Community Facilities District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Fund established for the Bonds could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would not be available in the Reserve Fund for transfer to the Bond Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.

Glasply Marine Industries. On July 30, 1992 the United States Court of Appeals for the Ninth Circuit issued an opinion in a bankruptcy case entitled In re Glasply Marine Industries, holding that ad valorem property taxes levied by a county in the State of Washington after the date that the property owner filed a petition for bankruptcy would not be entitled to priority over the claims of a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed subsequent to the filing of the bankruptcy petition were declared to be "administrative expenses" of the bankruptcy estate, payable after the claims of all secured creditors. As a result, the secured creditor was able to foreclose on the subject property and retain all the proceeds from the sale thereof except the amount of the pre-petition taxes. Pursuant to this holding, post­ petition taxes would be paid only as administrative expenses and only if a bankruptcy estate has

49 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 be subject only to current ad valorem taxes (i.e., not those accruing during the bankruptcy proceeding).

The G/asp/y decision is controlling precedent in bankruptcy court in the State of California. If G/asp/y were held to be applicable to Special Taxes, a bankruptcy petition filing would prevent the lien for Special Taxes levied in subsequent fiscal years from attaching so long as the property was part of the estate in bankruptcy, which could reduce the amount of Special Taxes available to pay debt service on the Bonds. However, G/asp/y speaks as to ad valorem property taxes, and not special taxes, and no case law exists with respect to how a bankruptcy court would treat the lien for special taxes levied after the filing of a petition in bankruptcy.

It should also be noted that on October 22, 1994, Congress enacted 11 U.S.C. § 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Under this law, if a bankruptcy petition is filed on or after October 22, 1994, the lien for ad valorem property taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bond owners should be aware that the potential effect of 11 U. S.C. § 362(b)(18) on the Special Taxes also depends upon whether a court were to determine that the Special Taxes should be treated like ad valorem property taxes for this purpose.

Property Owned by FDIC. In addition, the ability of the Community Facilities District to foreclose upon the lien on property for delinquent Special Taxes may be limited for properties in which the Federal Deposit Insurance Corporation (the "FDIC") has an interest. On November 26, 1996, the FDIC adopted a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "Policy Statement") (which superseded a prior statement issued by the FDIC and the Resolution Trust Corporation in 1991 ). The Policy Statement applies to the FDIC when it is liquidating assets in its corporate and receivership capacities. The Policy Statement provides, in part, that real property of the FDIC is subject to state and local real property taxes if those taxes are assessed according to the property's value, and that the FDIC is immune from ad valorem real property taxes assessed on other bases. The Policy Statement also provides that the FDIC will pay its proper tax obligations when they become due and will pay claims for delinquencies as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC interest in the property is appropriate. It further provides that the FDIC will pay claims for interest on delinquent property taxes owned at the rate provided under state law, but only to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay for any fines or penalties and will not pay nor recognize liens for such amounts. The Policy Statement also provides that if any property 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. No property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, a lien for taxes and interest may attach, but the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent.

With respect to challenges to assessments, the Policy Statement provides: "The [FDIC] is only liable for state and local taxes which are based on the value of the property during the period for which the tax is imposed, notwithstanding the failure of any person, including prior record owners, to challenge an assessment under the procedures available under state law. In the exercise of its business judgment, the [FDIC] may challenge assessments which do not

50 conform with the statutory provisions, and during the challenge may pay tax claims based on the assessment level deemed appropriate, provided such payment will not prejudice the challenge. The [FDIC] will generally limit challenges to the current and immediately preceding taxable year and to the pursuit of previously filed tax protests. However, the [FDIC] may, in the exercise of its business judgment, challenge any prior taxes and assessments provided that (1) the [FDIC's] records (including appraisals, offers or bids received for the purchase of the property, etc.) indicate that the assessed value is clearly excessive, (2) a successful challenge will result in a substantial savings to the [FDIC], (3) the challenge will not unduly delay the sale of the property, and (4) there is a reasonable likelihood of a successful challenge."

The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee simple interest unless the amount of tax is fixed at the time the FDIC acquires its fee simple interest in the property, nor will the FDIC recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Because the Special Taxes are neither ad valorem taxes nor special assessments, and because they are levied under a special tax formula under which the amount of the Special Tax is determined each year, the Special Taxes appear to fall within the category of taxes the FDIC generally will not pay under the Policy Statement.

Following the County of Orange bankruptcy proceedings filed in December 1994, the FDIC filed claims against the County of Orange in the U. S. Bankruptcy Court and the Federal District Court which challenged special taxes that Orange County had levied on FDIC-owned property (and which the FDIC had paid) under the Act. The FDIC took a position similar to that outlined in the Policy Statement, to the effect that the FDIC, as a governmental entity, is exempt from special taxes under the Act. The Bankruptcy Court agreed, finding that the FDIC was not liable for post-receivership Mello-Roos taxes, and the Bankruptcy Appellate Panel affirmed. On appeal, the U. S. Court of Appeals for the Ninth Circuit, while not specifically asked to decide on the issue, stated in its decision filed on August 28, 2001, that "the FDIC, as a federal agency, is exempt from the Mello-Roos tax," and quoted Section 53340(c) of the Act in stating that '"properties or entities' of the federal government are exempt from the tax."

The Community Facilities District is unable to predict what effect the application of the Policy Statement, or the ultimate outcome of the County of Orange case, would have in case of a Special Tax delinquency on a parcel in which the FDIC has an interest. However, prohibiting the judicial foreclosure sale of a FDIC-owned parcel would likely reduce the number of or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the Community Facilities District will be unable to foreclose on parcels of land in the Community Facilities District owned by the FDIC. Such an outcome would cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment of the Bonds.

Disclosure to Future Purchasers

The Community Facilities District has recorded a notice of the Special Tax lien in the Office of the Riverside County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in the Community Facilities District or the lending of money secured by property in the Community Facilities District. The Act and the Goals and Policies require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil

51 Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

No Acceleration Provisions

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

Loss of Tax Exemption

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

Voter Initiatives

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

Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the Community Facilities District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter­ approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Bonds.

Proposition 218-Voter Approval for Local Government Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges.

The Special Taxes and each series of the Bonds were each authorized by not less than a two-thirds vote of the landowners within the Community Facilities District who constituted the qualified electors at the time of such voted authorization. The Community Facilities District

52 believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Act or Proposition 218.

Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative scrutiny before its impact on the Community Facilities District and its obligations can be determined. Certain provisions of Proposition 218 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot by predicted.

LEGAL MATTERS

Legal Opinions

The legal opinion of Rutan & Tucker LLP, Costa Mesa, California, Bond Counsel, approving the validity of the Bonds will be made available to purchasers at the time of original delivery and is attached as APPENDIX H. A copy of the legal opinion will be printed on the back of each Bond.

Jones Hall, A Professional Law Corporation, San Francisco, California is serving as Disclosure Counsel to the School District and the Community Facilities District. Rutan & Tucker LLP will also pass upon certain legal matters for the School District and the Community Facilities District as special counsel to these entities.

Tax Exemption

In the opinion of Rutan & Tucker LLP, Costa Mesa, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, 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 paragraph are subject to the condition that the Community Facilities District comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Community Facilities District has covenanted in the Fiscal Agent Agreement to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.

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

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

53 No Litigation

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

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

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

wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Bond Purchase Contract, or

which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Bonds, the Fiscal Agent Agreement, the Issuer Continuing Disclosure Certificate or the Bond Purchase Contract, or

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

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

CONTINUING DISCLOSURE

The Community Facilities District. The Community Facilities District has covenanted in a continuing disclosure certificate, the form of which is set forth in "APPENDIX F - Form of Issuer Continuing Disclosure Certificate" (the "Issuer Continuing Disclosure Certificate"), for the benefit of holders and beneficial owners of the Bonds, to provide certain financial information and operating data relating to the Community Facilities District and the Bonds by not later than six months after the end of the Community Facilities District's fiscal year, or December 31 of each year, beginning on December 31, 2005. The Issuer Continuing Disclosure Certificate also requires the Community Facilities District to provide notices of the occurrence of certain enumerated events, if material. The initial Dissemination Agent under the Issuer Continuing Disclosure Certificate will be David Taussig & Associates, Inc.

The covenants of the Community Facilities District in the Issuer Continuing Disclosure Certificate will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). A default under the Issuer Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Fiscal Agent Agreement, and the sole remedy under the Issuer Continuing Disclosure Certificate in the event of any failure of the Community Facilities District or the Dissemination Agent to comply will be an action to compel specific performance.

Neither the School District nor the Community Facilities District has ever failed to comply, in any material respect, with an undertaking under the Rule.

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

The Property Owner's obligations under its Property Owner Continuing Disclosure Certificate will terminate on the earlier of (i) legal defeasance, prior redemption or payment in full of all the Bonds, (ii) the date on which the Property Owner's property in the Community Facilities District is no longer responsible for 10% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to its property in the Community Facilities District.

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

NO RATINGS

The Bonds have not been rated by any securities rating agency.

UNDERWRITING

The Bonds are being purchased by the Stone & Youngberg LLC at a purchase price of $2,511,648.50 (being an amount equal to the par amount of the Bonds ($2,580,000.00), less an original issue discount of $3,851.50, and less an Underwriter's discount of $64,500.00).

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

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

55 PROFESSIONAL FEES

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

the Underwriter;

Jones Hall, A Professional Law Corporation, as Disclosure Counsel;

Rutan & Tucker LLP, as Bond Counsel;

a portion of the fees of David Taussig & Associates, Inc., as special tax consultant; and

U. S. Bank National Association, as Fiscal Agent for the Bonds.

EXECUTION

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

COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT

By: /s/ Gary Cringan Gary Cringan, Ed.D, Superintendent, Menifee Union School District, on behalf of Community Facilities District No. 2003-4 of the Menifee Union School District

56 APPENDIX A

GENERAL INFORMATION ABOUT RIVERSIDE COUNTY AND THE MENIFEE AREA

The following information is included only for the purpose of supplying general information regarding Riverside County and the Menifee community. This information is provided only for general informational purposes, and provides prospective investors limited information about Riverside County and its economic base. The Bonds are not a debt of the County, the State or any of its political subdivisions, and neither the County, the State nor any of its political subdivisions is liable therefor.

General

Menifee Union School District is located in Riverside County, California. Set forth below is certain demographic information in Riverside County that could affect the economic environment within which the District operates.

Community of Menifee

Menifee is an unincorporated area of Riverside County located in the south central portion of the County north of Murrieta, west of Hemet, east of Canyon Lake, southeast of Perris and adjacent to Sun City. Riverside County regulates and implements all planning, zoning and land use regulations governing Menifee.

History and Location of Riverside County

Riverside County, which encompasses 7,177 square miles, was organized in 1893 from territory in San Bernardino and San Diego Counties. Located in the southeastern portion of California, Riverside County is bordered on the north by San Bernardino County, on the east by the State of Arizona, on the South by San Diego and Imperial Counties and on the west by Orange and Los Angeles Counties. There are 24 incorporated cities in Riverside County.

Riverside County's varying topology includes desert, valley and mountain areas as well as gently rolling terrain. Three distinct geographical areas characterize Riverside County: the western valley area, the higher elevations of the mountains, and the deserts. The western valley, the San Jacinto mountains and the Cleveland National Forest experience the mild climate typical of Southern California. The eastern desert areas experience warmer and dryer weather conditions. Riverside County is the site for famous resorts, such as Palm Springs, as well as a leading area for inland water recreation. Nearly 20 lakes in Riverside County are open to the public. The dry summers and moderate to cool winters make it possible to enjoy these and other recreational and cultural facilities on a year-round basis.

Riverside County Population

According to the State Department of Finance, Demographic Research Unit, Riverside County's population was estimated at 1,887,000 as of January 1, 2005. The largest cities in Riverside County are the cities of Riverside, Moreno Valley, Corona, Hemet, Indio, Palm Springs, Murrieta, Temecula and Cathedral City. The areas of most rapid population growth continue to be those more populated and industrialized cities in the western and central regions

A-1 of Riverside County and the southwestern unincorporated region of Riverside County between Sun City and Temecula.

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

COUNTY OF RIVERSIDE Population Estimates

1 1 1980 ( ) 1990 ( ) 2001 2002 2003 2004 2005 Banning 14,020 20,570 23, 972 24, 659 25,696 27,672 27,954 Beaumont 6,818 9,685 11, 562 12,280 13, 962 16, 632 18,982 Blythe 6,805 8,428 20, 839 21,304 21,381 22,200 22,005 Calimesa 7,214 7,316 7,428 7,477 7,434 Canyon Lake 10, 164 10,410 10, 649 10, 847 10,912 Cathedral City 30,085 44, 111 45,698 47,908 49,452 50,632 Coachella 9,129 16,896 23,369 24,432 27, 123 28, 146 30, 764 Corona 37,791 76,095 129,797 134, 796 138,797 144,274 144, 070 Desert Hot 5,941 11,668 16, 781 16, 990 17,404 18,004 19,386 Springs Hemet 22,454 36,094 60,052 61, 869 63,017 64, 889 66,455 Indian Wells 1,394 2, 647 4,150 4,376 4,454 4,514 4, 781 Indio 21,611 36,793 50,464 52,507 55, 155 60, 175 66, 118 Lake Elsinore 5,982 18,285 30,045 31,250 33,469 35,989 38,045 La Quinta 11,215 26,097 28,894 30, 852 33, 104 36, 145 Moreno Valley 118,779 144,401 147,340 151,887 157,865 165,328 Murrieta 46,465 51,950 68,555 79,045 85, 102 Norco 19,732 23,302 24,497 25,026 25,516 25,861 26,703 Palm Desert 11,081 23,252 42, 099 43, 129 44,490 45,610 49,280 Palm Springs 32,359 40, 181 43,422 43, 981 44, 564 45,039 45,731 Perris 6,827 21,460 36,927 37,742 38,699 42,048 44, 594 Rancho Mirage 6,281 9,778 13, 849 14,431 15, 155 15,787 16,416 Riverside 170,591 226, 505 262,311 271,004 277,527 281,810 285,537 San Jacinto 7,098 16,210 24,627 25,447 26,381 27, 198 28,437 Temecula 27,099 61, 803 73, 164 75,996 78,841 81,397 Unincorporated 248,009 385,386 1, 159,018 1,209,995 1,266,065 1,322,479 1,372,208 County Total 633, 923 1,170,413 1,590,473 1,654,220 1,726,754 1,807,858 1, 877,000

( 1) From U.S. Census. Source: State Department of Finance estimates (as of January 1) .

A-2 Riverside County Employment

Riverside County and San Bernardino County comprise the Riverside-San Bernardino Metropolitan Statistical Area. The following table summarizes the civilian labor force, employment and unemployment in the Riverside-San Bernardino Metropolitan Statistical Area for the calendar years 2000 through 2004.

RIVERSIDE-SAN BERNARDINO Metropolitan Statistical Area Civilian Labor Force, Employment and Unemployment, Employment by Industry (Annual Averages)

2000 2001 2002 2003 2004 1 Civilian Labor Force ( l 1,508,000 1,562,300 1,639,700 1,688,300 1,650,500 Employment 1,430,800 1 ,484, 100 1,543,400 1,588,700 1 ,556, 100 Unemployment 77,200 78,200 96,300 99,600 94,400 Unemployment Rate 5.1% 5.0% 5.9% 5.9% 5.7% 2 Wage and Salaey Emi;2loyment: ( l Agriculture 21,700 20,900 20,300 20,300 18,800 Natural Resources and Mining 1,300 1,200 1,200 1,200 1,200 Construction 80, 100 88,400 90,900 99,000 110,800 Manufacturing 1 20, 100 118,600 115,400 116, 100 120,000 Wholesale Trade 38,300 41 ,600 41 ,900 43,500 44,400 Retail Trade 127,400 132,200 137,500 142,700 151 ,800 Transportation, Warehousing and Utilities 46,400 45,600 46,800 50, 100 54,300 Information 12,900 14,600 14,100 13,900 13,800 Finance and Insurance 20,600 22,900 23,500 25,700 27,800 Real Estate and Rental and Leasing 14,200 15,300 15,900 16,900 17,500 Professional and Business Services 97,000 101 ,700 106,800 115,400 125,200 Educational and Health Services 102,200 106,000 112,400 115,800 117,700 Leisure and Hospitality 100,800 104,400 107,200 109,000 115,200 Other Services 35,000 37, 100 38,100 38,400 38,800 Federal Government 18,200 16,900 16,900 17,000 17,100 State Government 24,600 25,800 26,600 26,600 26,600 Local Government 149,300 157,600 169,300 167,900 167,800 Total All Industries 1,010, 100 1,050,700 1,084,000 1,1 1 9,400 1,1 68,500

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

A-3 Largest Employers in Riverside County

The following table lists the largest employers within the County:

COUNTY OF RIVERSIDE Major Employers (As of 2004)

Employer Name No. of Employees Industry County of Riverside 17,236 Public Administration (Government) Stater Brothers Markets 5,600 Grocery Retailer Corona Norco Unified School District 5,000 Education Riverside Unified School District 4,000 Education Riverside Community College 3,350 Community College Moreno Valley Unified School District 3,162 Education Kaiser Permanente Medical Center 2,893 Health Maintenance Organization Fleetwood Enterprises 2,200 Manufacturer- RVs and manufactured housing Desert Sands Unified School District 2,084 Education Temecula Valley Unified School Dist. 2,146 Education Eisenhower Medical Center 1,972 Nonprofit community hospital Lake Elsinore Unified School District 1,950 Education Jurupa Unified School District 1,794 Education Riverside County Office of Education 1,790 Education Valley Health System 1,756 Health System

Source: The Business Press, 2004 Book of Lists.

A-4 Riverside County Effective Buying Income

"Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U. S. government definitions, the resultant figure is commonly known as "disposable personal income."

COUNTY OF RIVERSIDE Effective Buying Income For Calendar Years 1998 through 2003

Median Total Effective Household Buying Income Effective Buying Year Area (OOO'sOmitted) Income

1998 Riverside County $ 20,543,675 $33,089 California 551 ,999,317 37,091 United States 4,621,491 ,730 35,377

1999 Riverside County $ 22,453,426 $35,145 California 590,376,663 39,492 United States 4,877,786,658 37,233

2000 Riverside County $ 25, 144, 120 $39,293 California 652, 1 90,282 44,464 United States 5,230824,904 39, 129

2001 Riverside County $ 23,617,301 $37,480 California 650,521 ,407 43,532 United States 5,303,481 ,498 38,365

2002 Riverside County $ 25, 180,040 $38,691 California 647,879,427 42,484 United States 5,340,682,818 38,035

2003 Riverside County $ 27,623,743 $39,321 California 674,721,020 42,924 United States 5,466,880,008 38,201

Source: Sales & Marketing Management Survey of Buying Power.

A-5 Construction Trends

Provided below are the building permits and valuations for the County for calendar years 2000 through 2004.

COUNTY OF RIVERSIDE Total Building Permit Valuations (valuations in thousands)

2000 2001 2002 2003 2004 Permit Valuation New Single-family $2,519,841.4 $3,051, 190.4 $3,670,371.4 $4, 665,675.0 $4,997,513.2 New Multi-family 125,296.2 174,628.0 165,413. 0 406,483.0 404, 615.9 Res. Alterations/Additions 67,303. 7 70,849.7 87,842. 9 106,855.8 135, 176.6 Total Residential 2, 712, 441. 3 3,296,668.1 3, 923, 627.4 5,1 79,014. 5 6,537,305.6

New Commercial 393,509.9 287,068.6 297,963. 6 360,707.4 580,057.8 New Industrial 98,621.8 74,766.3 80,881.6 112, 706.6 203,311. 9 New Other 119,978.4 152,854.0 187,510. 6 261, 793.6 334, 001. 0 Com. Alterations/Additions 157,802.1 143,351.7 174,785.7 173, 165.5 222,495.5 Total Nonresidential 769,912.2 658,040. 6 741,141. 5 908,373.1 1,339,866.1

New Dwelling Units Single Family 13,630 16,556 20,591 25, 137 29,478 Multiple Family 1,780 2,458 2,073 5,224 4 748 TOTAL 15,410 19,014 22,664 30,361 34,226

Source: Construction Industry Research Board, Building Permit Summary.

A-6 Riverside County Commercial Activity

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

During the first quarter of 2004, total taxable transactions in Riverside County were reported to be $15,818,529,000, or 16.9% greater than total taxable transactions of $4,977,368,000 that were reported in Riverside County during the first quarter of 2003. Annual figures are not yet available for 2004.

COUNTY OF RIVERSIDE Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions 1998 13,408 $ 9,276,448,000 33,623 $13, 1 40,854,000 1999 14,676 10,685,724,000 34, 117 15,076,945,000 2000 15,771 12, 1 90,474,000 35, 153 16,979,449,000 2001 16,785 13, 173,281,000 36,292 18,231 ,555,000 2002 17,646 14,250,733,000 38,767 19,498,994,000 2003 18,300 16,030,952,000 40,833 21,709, 1 35,000

Source: State Board of Equalization.

A-7 Riverside County Agriculture

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

Riverside County Transportation

Easy access to job opportunities in Riverside County and nearby Los Angeles, Orange and San Diego Counties is important to Riverside County's employment picture. Several major freeways and highways provide access between Riverside County and all parts of Southern California. The Riverside Freeway (State Route 91) extends southwest through Corona and connects with the Orange County freeway network in Fullerton. Interstate 1 O traverses the width of Riverside County, the western-most portion of which links up with major cities and freeways in the eastern part of Los Angeles County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U. S. 60) provides an alternate (to Interstate 10) east-west link to Los Angeles County.

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

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

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

A-8 Riverside County Environmental Control Services

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

At the regional and local level, there are several water districts that were formed for the primary purpose of supplying supplemental water to the cities and agencies within their areas. The Rancho California Water District, the Coachella Valley Water District, the Western Municipal Water District and the Eastern Municipal Water District are the largest of these water districts in terms of area served. Riverside County is also served by the San Gorgonio Pass Water Agency, Desert Water Agency and Palo Verde Irrigation District.

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

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

Riverside County Education

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

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

A-9 ( Page intentional I y I eft blank.) APPENDIX B

RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF MENIFEE UNION SCHOOL DISTRICT ( Page intentional I y I eft blank.) RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACI LITIES DISTRI CT NO. 2003-4 OF MENIFEE UNI ON SCHOOL DISTRI CT The following sets forth the Rate and Method of Apportionment forthe levy and collection of Special Taxes of Menifee Union School District ("School District") in Community Facilities District ("CFD") No. 2003-4. An Annual Special Tax shall be levied on and collected in CFD No. 2003-4 each Fiscal Year in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property in CFD No. 2003-4, unless exempted by law or by the provisions hereof, shall be taxed forthe purposes, to the extent, and in the manner herein provided.

SECTION A DE FINITI ONS

The terms hereinafterset forthhave the following meanings:

"Acreage" means the number of acres of land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the Board may rely on the land area shown on the applicable final map, parcel map, condominium plan, or other recorded Countyparcel map.

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

"Administrative Expenses" means any ordinary and necessary expense incurred by the School District on behalf of CFD No. 2003-4 related to the determination of the amount of the levy of Special Taxes, the collection of Special Taxes including the reasonable expenses of collecting delinquencies, the administration of Bonds, the payment of salaries and benefits of any School District employee whose duties are directly related to the administration of CFD No. 2003-4, and costs otherwise incurred in order to carry out the authorized purposes of CFD No. 2003-4.

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

"Assessor's Parcel" means a lot or parcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number within the boundaries of CFD No. 2003-4.

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

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

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

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

RMA Final Page 1 of9 November 9, 2004 " Board" means the Governing Board of Menifee Union School District or its designee as the legislative body of CFD No. 2003-4.

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

" Bonds" means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, which obligation may be incurred by CFD No. 2003-4 or the School District.

" Bui ldi ng Permit" means a permit forthe construction of one or more Units issued by the County, or another public agency in the event the County no longer issues permits for the construction of Units within CFD No. 2003-4. For purposes of this definition, "Building Permit" shall not include permits for construction or installation of commercial/industrial structures, parking structures, retaining walls, utility improvements, or other such improvements not intended for human habitation.

" Bui ldi ng Square Footage" or " BSF" means the square footage of assessable internal living space of a Unit, exclusive of any carports, walkways, garages, overhangs, patios, enclosed patios, detached accessory structure, or other structures not used as living space, as determined by reference to the Building Permit for such Unit.

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

"County" means the Countyof Riverside, State of California.

"Developed Property" means all Assessor's Parcels of Taxable Property for which Building Permits were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor's Parcels were created on or beforeJanuary 1 of the prior Fiscal Year and that each such Assessor's Parcel is associated with a Lot, as determined reasonably by the Board.

"Exempt Property" means all Assessor's Parcels designated as being exempt fromSpecia l Taxes in Section J.

" Final Map" means a final tract map, parcel map, lot line adjustment, or functionally equivalent map or instrument that creates building sites, recorded in the County Officeof the Recorder.

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

" Lot" means an individual legal lot created by a Final Map forwhich a Building Permit could be issued.

RMA Final Page 2 of9 November 9, 2004 " M axi mum Special Tax" means the maximum Special Tax, determined in accordance with Section C, that can be levied by CFD No. 2003-4 in any Fiscal Year on any Assessor's Parcel.

" Minimum Annual Special Tax Requirement" means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds, (ii) Administrative Expenses of CFD No. 2003-4, (iii) the costs associated with the release of fundsfrom an escrow account, and (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, less (v) any amount available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement.

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

" Prepayment Amount" means the amount required to prepay the Annual Special Tax obligation in fullfor an Assessor's Parcel, as described in Section G.

" Prepayment Administrative Fees" means the fe es and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, costs of redeeming Bonds, and costs of recording any notices to evidence the prepayment and redemption of Bonds.

"Present Val ue of Taxes" means the present value of any Special Tax applicable to such Assessor's Parcel in the current Fiscal Year not yet received by the District for CFD No. 2003-4, plus the expected Annual Special Tax applicable to such Assessor's Parcel in each remaining Fiscal Year until the termination date specified in Section H, using as the discount rate (i) the Yield On The Bonds after Bond issuance or (ii) the most recently published Bond Index prior to Bond issuance.

"Proportionately" means that the ratio of the actual Annual Special Tax levy to the applicable Assigned Annual Special Tax is equal forall applicable Assessor's Parcels.

"Reserve Fund Credit" means, for each owner of an Assessor's Parcel wishing to prepay the Annual Special Tax obligation of such Assessor's Parcel, an amount equal to the reduction in the reserve requirement for the outstanding Bonds resulting from the redemption of Bonds with the applicable prepaid Special Taxes. In the event that a surety bond of other credit instrument satisfies the reserve requirement or the reserve requirement is under fundedat the time of the prepayment, no Reserve Credit shall be given.

"SpecialTax" means any of the special taxes authorized to be levied by CFD No. 2003-4 pursuant to the Act.

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

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

"Unit" means each separate residential dwelling unit which comprises an independent facility capable of conveyance separate fromad jacent residential dwelling units.

"Yield On The Bonds" means the arbitrage yield forthe last series of Bonds issued.

RMA Final Page 3 of9 November 9, 2004 SECTION B CLASSI FICATION OF ASSESSOR'S PARCELS

For each Fiscal Year, beginning with Fiscal Year 2005-06, each Assessor's Parcel within CFD No. 2003-4 shall be classifiedas Taxable Property or Exempt Property. Furthermore, each Assessor's Parcel of Taxable Propertyshall be classifiedas Developed Propertyor Undeveloped Property. For each Assessor's Parcel of Developed Property, it shall be assigned to a Special Tax class based on the BSF of the Unit as listed on the Building Permit(s) issued foreach Assessor's Parcel.

SECTION C MAXIMUM SPECIAL TAX ES

1. Developed Property

The Maximum Special Tax foreach Assessor's Parcel classified as Developed Property for any Fiscal Year shall be the amount determined by the greater of (i) the application of the Assigned Annual Special Tax or (ii) the application of the Backup Annual Special Tax.

2. Undeveloped Property

The Maximum Special Tax for each Assessor's Parcel classified as Undeveloped Property for any Fiscal Year shall be the amount determined by the application of the Assigned Annual Special Tax.

SECTION D ASSIGNED ANNUAL SPECIAL TAX ES

1. Developed Property

The Assigned Annual Special Tax in any Fiscal Year for each Assessor's Parcel of Developed Property shallbe the amount determined by reference to Table 1.

TAB LE 1

ASSIGNED ANNUAL SPECIAL TAX FOR DEVELOPED PROPE RTY Assi gned Annual Bui ldi ng Square Feet SpecialTax � 2,700 BSF $882.54 per Unit 2, 701 - 2,900 BSF $903.16 per Unit 2,901 - 3,100 BSF $923.78 per Unit 3,101 - 3,300 BSF $1,022.80 per Unit >3,300 BSF $1,055.80 per Unit

RMA Final Page 4 of9 November 9, 2004 2. Undeveloped Property

The Assigned Annual Special Tax rate in any Fiscal Year foran Assessor's Parcel classified as Undeveloped Property shall be $5,954.19 per acre of Acreage.

SECTION E BACKUP ANNUAL SPECIAL TAXES

Each Fiscal Year, each Assessor's Parcel of Developed Property shall be subject to a Backup Annual Special Tax. The Backup Annual Special Tax rate in any Fiscal Year for Developed Property within a Final Map shall be the rate per Lot calculated according to the followingformula:

UxA B � ------L

The terms above have the following meanings:

B Backup Annual Special Tax per Lot in each Fiscal Year u Assigned Annual Special Tax per acre of Acreage for Undeveloped Property A Acreage of Taxable Property in such Final Map, as determined by the Board pursuant to Section J L Lots in the Final Map

Notwithstanding the foregoing, if all or any portion of the Final Map( s) described in the preceding paragraph is subsequently changed or modified, then the Backup Annual Special Tax for each Assessor's Parcel of Developed Property in such Final Map area that is changed or modified shall be a rate per square footof Acreage calculated as follows:

1. Determine the total Backup Annual Special Taxes anticipated to apply to the changed or modifiedFi nal Map area prior to the change or modification.

2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Map area, as reasonably determined by the Board.

3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Annual Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property in such changed or modifiedFi nal Map area for all remaining Fiscal Years in which the Special Tax may be levied ..

SECTION F METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX

Commencing Fiscal Year 2005-06 and for each subsequent Fiscal Year, the Board shall levy Annual Special Taxes as follows:

RMA Final Page 5 of9 November 9, 2004 Step One: The Board shall levy an Annual Special Tax on each Assessor's Parcel of Developed Property in an amount equal to the Assigned Annual Special Tax applicable to each such Assessor's Parcel.

Step Two: If the sum of the amounts levied in step one is insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Board shall Proportionately levy an Annual Special Tax on each Assessor's Parcel of Undeveloped Property, up to the Maximum Special Tax applicable to each such Assessor's Parcel, to satisfy the Minimum Annual Special Tax Requirement.

Step Three: If the sum of the amounts levied in steps one and two is insufficientto satisfy the Minimum Annual Special Tax Requirement, then the Board shall Proportionately levy an Annual Special Tax on each Assessor's Parcel of Developed Propertywhose Maximum Special Tax is derived by application of the Backup Annual Special Tax, up to the Maximum Special Tax applicable to each such Assessor's Parcel, to satisfy the Minimum Annual Special Tax Requirement. SECTION G PREPAY MENT OF ANNUAL SPECIAL TAX ES

The Annual Special Tax obligation of an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property forwhich a Building Permit has been issued may be prepaid. An owner of an Assessor's Parcel intending to prepay the Annual Special Tax obligation shall provide CFD No. 2003-4 with written notice of intent to prepay. Within thirty(3 0) days of receipt of such written notice, the Board shall reasonably determine the Prepayment Amount of such Assessor's Parcel and shall notify such owner of such Prepayment Amount. In addition, any property owner prepaying his or her Annual Special Tax obligation must also pay all delinquent Special Taxes, interest and penalties owing on the Assessor's Parcel on which payment is being made, if any. The Prepayment Amount shall be calculated according to the following formula:

P =PVT -RFC + PAF

The terms above have the following meanings:

P Prepayment Amount PVT Present Value of Taxes RFC Reserve Fund Credit P AF Prepayment Administrative Fees

Notwithstanding the foregoing,no prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Board. Such determination shall include identifyingall Assessor's Parcels that are expected to become Exempt Property.

RMA Final Page 6 of9 November 9, 2004 SECTI ON H PARTIAL PREPAYMENT OF ANNUAL SPECIAL TAX ES

The Annual Special Tax obligation of an Assessor's Parcel may be partially prepaid at the times and under the conditions set forth in this section, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Annual Special Tax obligation would be prepaid.

1. Partial Prepayment Times and Conditions

Prior to the issuance of the firstBuilding Permit forthe construction of a production Unit on a Lot within a Final Map area, the owner of no less than all the Taxable Propertywithin such Final Map area may elect in writing to the Board to prepay a portion of the Annual Special Tax obligations for all the Assessor's Parcels within such Final Map area, as calculated in Section H.2. below. The partial prepayment of each Annual Special Tax obligation shall be collected prior to the issuance of the first Building Permit with respect to each Assessor's Parcel.

2. Partial Prepayment Amount

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

The terms above have the following meanings:

PP the Partial Prepayment Amount PG the Prepayment Amount calculated according to Section G F the percent by which the owner of the Assessor's Parcel 1s partially prepaying the Annual Special Tax obligation

3. Partial Prepayment Procedures and Limitations

With respect to any Assessor's Parcel that is partially prepaid, the Board shall indicate in the records of CFD No. 2003-4 that there has been a partial prepayment of the Annual Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act to indicate the partial prepayment of the Annual Special Tax obligation and the partial release of the Annual Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such prepaid portion of the Annual Special Tax shall cease. Additionally, the notice shall indicate that the Assigned Annual Special Tax and the Backup Annual Special Tax forthe Assessor's Parcels have been reduced by an amount equal to the percentage which was partially prepaid.

Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Annual Special Taxes that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year.

RMA Final Page 7 of9 November 9, 2004 SECTION I TERMI NATION OF SPECIAL TAX Annual Special Taxes shall be levied for a period of thirty-three (33) Fiscal Years afterBo nds have been issued, provided that Annual Special Taxes shall not be levied afterFis cal Year 2040-4 1.

SECTIONJ EXEMPTIONS

The Board shall classify as Exempt Property (i) Assessor's Parcels owned by the State of California, Federal or other local governments, (ii) Assessor's Parcels which are used as places of worship and are exempt from ad val orem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels used exclusively by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor's Parcels developed or expected to be developed exclusively for non-residential use, including any use directly servicing any non-residential property, such as parking, as reasonably determined by the Board, and (vi) any other Assessor's Parcels at the reasonable discretion of the Board, provided that no such classification would reduce the sum of all Taxable Propertyto less than 37.10 acres of Acreage. Notwithstanding the above, the Board shall not classifyan Assessor's Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 37.10 acres of Acreage. Assessor's Parcels which cannot be classifiedas Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 37.10 acres of Acreage will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

SECTION K CLAI MS

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Board not later than twelve months after having paid the first installment of the Special Tax that is disputed. In order to be considered sufficient, any claim of appeal must: (i) specifically identify the property by address and Assessor's Parcel Number; (ii) state the amount in dispute and whether it is the whole amount or any a portion of the Special Tax; (iii) state all grounds on which the property owner is disputing the amount or application of the Special Tax, including a reasonably detailed explanation as to why the amount or application of such Special Tax is incorrect; (iv) include all documentation, if any, in support of the claim; and (v) be verified under penalty of perjury by the person who paid the Special Tax or his or her guardian, executor or administrator. A representative(s) of CFD No. 2003-4 ("Representative") shall promptly review the claim, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the claim. The decisions of the Representative(s) shall be final and binding. If the Representative's decision requires that the Special Tax foran Assessor's Parcel be modifiedor changed in favor of the property owner, a cash refund shall not be made (except forthe last year of levy), but an adjustment shall be made to the Annual Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s) as the representative's decisions shall indicate.

RMA Final Page 8 of9 November 9, 2004 SECTION L MANNER OF COLLECTION

The Annual Special Tax shall be collected in the same manner and at the same time as ordinary ad valoremproperty taxes, provided, however, that CFD No. 2003-4 may collect Annual Special Taxes at a different time or in a differentmanner if necessary to meet its financial obligations.

J :\CLIENTS\MENIFEE.USD\MELLO\ConnanLei gh\RMA _ l .doc

RMA Final Page 9 of9 November 9, 2004 ( Page intentional I y I eft blank.) APPENDIX C

SUMMARY APPRAISAL REPORT ( Page intentional I y I eft blank.) SUMMARY APPRAISAL REPORT - COMPLETE APPRAISAL

COMMUNITY FACILITIES DISTRICT NO. 2003-4 MENIFEE UNION SCHOOL DISTRICT (Faircrest I Lennar Homes of California) Menifee, RiversideCounty, California (Appraiser's File No. 2005-178)

Prepared For MenifeeUnion School District 30205 MenifeeRoad Menifee,CA 92584

Prepared By Bruce W. Hull & Associates, Inc.

1056 E. Meta Street, Suite 202 115 E. Second Street, Suite 100 Ventura, California9300 1 Tustin, California92 780 (805) 641-3275 (714) 544-9978 (805) 641-3278 [Fax] (714) 544-9985 [Fax] BRUCE W. HULL & ASSOCIATES, INC. REAL ESTATE APPRAISERS & CONSULTANTS May 31, 2005

Mr. Daniel J. Wood, Assistant Superintendent Business Services Menifee Union School District 30205 MenifeeRoad Menifee, CA 92584

Reference: Community Facilities District No. 2003-4 Menifee Union School District {Faircrest I Lennar Homes of California) Menifee, California

Dear Mr. Wood:

At your request and authorization, we have prepared an appraisal of the above referenced property ("subject property") within the above-referenced Community Facilities District No. 2003-4 ("CFD No. 2003-4"). CFD No. 2003-4 encompasses a 228-lot community known as Faircrest consisting of two residential neighborhoods. The first neighborhood is being marketed as Emerson Lane at Faircrest and consists of 113 proposed homes. There are three model homes under construction. The second neighborhood is being marketed as Arbor Lane at Faircrest and consists of 115 proposed homes, also with three model homes under construction. The lots are currently under development. The builder of both projects is Lennar Homes of California, Inc.

We have valued the fee simple estate for the subject property subj ect to the CFO No. 2003-4 special tax lien. This report is written with the special assumption that the subject property is enhanced by the improvements and/or fee credits to be funded by the bonds issued by CFD No. 2003-4. We have estimated the total value forthe subject property to be:

TWENTY-THREE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS ($23,150,000)

This estimate of value is stated subject to the Assumptions and Limiting Conditions and the Appraiser's Certificationas of May 15, 2005.

This report is defined as a Summary Appraisal Report - Complete Appraisal, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USP AP), effective January 1, 2005, fora Summary Appraisal Report. As such, it presents only summary discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the appraiser's opinion of value. The report is also intended to comply with the appraisal standard set by California Debt Advisory Commission.

1056 E. Meta Street, Suite 202, Ventura, California 93001 - (805) 641-3275 - Facsimile (805) 641-3278 115 E. Meta Street, Suite 100, Tustin, California 92780 - (714) 544-9978 - Facsimile (714) 544-9985 Mr. Daniel Wood MenifeeUnion School District May 31, 2005 Page Two

Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser's file. The depth of discussion contained in this report is specific to the needs of the client. The appraiser is not responsible forunauth orized uses of this report.

The following narrative Summary Appraisal Report sets forth the data and analyses upon which our opinion of value is, in part, predicated.

Respectfullysubmitted,

BRUCE WI HULL & ASSOCIATES, INC.

. ull'.

BWH:KSS:dh · Attachment TABLE OF CONTENTS

Assumptions and Limiting Conditions ...... i Purpose of Appraisal...... 1 The Subject Property...... 1 Intended _Use of Report ...... 1 Definitions...... 2 Subject PropertyRights Appraised ...... 2 Effective· Date of Value .....� ...... 3 Date of Report ...... 3 Legal Description ...... 3 Appraisal Development and ReportingProcess ...... 4 County of Riverside ...... 6 Community of Menifee ...... 11 Immediate Surroundings ...... 12 Riverside County Housing Market ...... 13 Community Facilities District No. 2003-4 ...... 18 Subject Property Description ...... 19 Highest and Best Use Analysis ...... 24 Valuation Analysis and Conclusion ...... 28 Marketing and Exposure Time ...... 33 Appraisal Report Sutnm.ary...... 34 Appraiser's Certification ...... 35

ADDENDA Tract Maps 30040-1 through -5 Appraisers' Qualifications ASSUMPTIONS AND LIMITING CONDITIONS

1. This Summary Appraisal Report is intended to comply with the reporting requirements set forthunder Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice fora Summary Appraisal Report. As such, it might not include full discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the appraiser's opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser's file. The information contained in this report is specific to the needs of the client and forthe intended use stated in this report. The appraiser is not responsible forunaut horized use of this report. This Summary Appraisal Report is also intended to comply with the appraisal standards regulated by the California Debt and Investment Advisory Commission.

2. No responsibility is assumed forlega l or title considerations. Title to the subject property is assumed to be good and marketable unless otherwise stated in this report.

3. The subject property is appraised subject to the easements of record and the special tax lien of CFD No. 2003-4 and is assumed free and clear of any other liens or encumbrances.

4. Responsible ownership and competent subject property management are assumed unless otherwise stated in this report.

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

6. All engineering is assumed to be correct. Any plot plans and illustrative material in this report are included only to assist the reader in visualizing the subject property.

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

8. It is assumed that there is full compliance with all applicable fe deral, state, and local environmental regulations and laws unless otherwise stated in this report.

9. It is assumed that there is full compliance with all applicable zoning and use regulations and restrictions, unless non-conformity has been stated, defined, and considered in this appraisal report.

SummaryAp praisalReport - Complete Appraisal CommunityFa cilities District No. 2004-4 Menifee Un ifiedSchool District (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page i 10. It is assumed that all required licenses, certificates of occupancy, and other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed forany use on which the value estimates contained in this report are based.

11. Any sketch contained in this report may show approximate dimensions and is included only to assist the reader in visualizing the subject property. Maps and exhibits found in this report are provided forreader reference purposes only. No guarantee as to accuracy is expressed or implied unless otherwise stated in this report. No survey has been made forthe purpose of this report.

12. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the subject property described, and that no encroachment or trespass exists unless otherwise stated in this report.

13. The appraiser is not qualifiedto detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmationof the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert relating to asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials, which may affect the value of the subject property. The appraiser's value estimate is predicated on the assumption that there is no such material on or in the subject property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover such conditions. The appraiser's descriptions and comments are the result of routine observations made during the appraisal process.

14. Any proposed improvements are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.

15. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal, and such allocations are invalid if so used.

16. If this report is placed in the hands of anyone but the client, the client shall make such party aware of all the assumptions and limiting conditions of the assignment.

17. The Americans with Disabilities Act ("ADA") became effective on January 26, 1992. The appraiser has made no specific compliance survey and analysis of this subject property to determine whether it is in conformance with the various detailed requirements of the ADA. Nor is the appraiser a qualified expert regarding the requirements of the ADA It is possible that a compliance survey of the subject property, together with a detailed analysis of the requirements of the ADA, could reveal that the subject property is not in compliance with one or more of the requirements of the ADA SummaryAp praisalReport - Complete Appraisal CommunityFa cilities District No. 2004-4 Menifee Un ifiedSchool District (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page ii If so, this fact could have a negative effect upon the value of the subject property. Since the appraiser has no direct evidence relating to this issue, possible noncompliance with the requirements of ADA in estimating the value of the subject property has not been considered.

18. All the improvements and benefitsto the subject property,which are to be fundedby the proceeds of the CFD No. 2003-4 Special Tax Bonds are assumed to be completed and in place.

19. It is assumed there are no environmental concerns that would slow or thwart development of the subject property, and the soils are adequate to support the highest use conclusion.

20. This appraisal may not be conveyed to any person other than the client without the written consent of the appraiser. Permission is given forthis appraisal to be published as a part of the Official Statement or similar document forthe CFD No. 2003-4 Special Tax Bonds.

21. It is assumed that the condemnation proceedings fora small parcel needed forthe signal at Winterhawk and Newport Road progresses in a timely manner and does not hinder or thwart development of the subject project.

22. It is assumed that the cost information received from Lennar Homes of California, Inc. is accurate and complete.

SummaryAp praisalReport - Complete Appraisal CommunityFa cilities District No. 2004-4 Menifee UnifiedSchool District (Fa ircrest I Lennar Homes of California,Inc.) Bruce W. Hull & Associates, Inc. Page iii Community Facilities District No. 2003-4 (Faircrest I Lennar Homes) Menifee Union School District Menifee, California

Bruce W. Hull & Associates, Inc. Aerial Photo - Air Views - 5/20/05 PURPOSE.OF THE APPRAISAL

The purpose of this Summary Appraisal Report is to provide the appraiser's best estimate of market value of the fee simple estate subject to the CFD No. 2003-4 special tax lien for the subject property, consisting of two proposed residential neighborhoods located in the unincorporated community of Menifee, Riverside County, State of California. In the case at hand, the market value of the subject property will be estimated in its "as is" condition taking into consideration �he proceeds and lien of the CFD No. 2003-4 Special Tax Bonds.

THE SUBJECT PROPERTY

The subject property encompasses a community currently under development, which is known as Faircrest. There are going to be two neighborhoods within Faircrest; Arbor Lane at Faircrest and Emerson Lane at Faircrest. Lennar Homes of California, Inc. is the builder for both projects. Arbor Lane is proposed for 115 homes (to be located on Tracts 30040-2, -4 and -5) while Emerson Lane is proposed for 113 homes (to be located on Tracts 30040-1 and -3) for atotal of 228 homes within Faircrest. The lots have a minimum lot size of 7,200 square feet. The property is encompassed by Tentative Tract Map 30040 which will be recorded into fivephases. The property has been mass graded with most lots terraced and streets cut in. Utilities are currently being constructed. There are 6 model homes under construction (three in each neighborhood). The two projects are currently being marketed from two construction trailers located on site.

INTENDED USE OF THE REPORT

It is the appraiser's understanding that this Summary Appraisal Report is intended to assist the client, Menifee Union School District, in determining the feasibility of issuing special tax bonds secured by CFD No. 2003-4. It is the appraiser's understanding that there are no other intended users of this report.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion SchoolDistrict (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, In c. Page l DEFINITIONS

Market Value

The term "marketvalue" as used in this report is definedas :

''The most probable price that a sp ecified interest in real property is likely to bring under all the fo llowing conditions:

1. Consummation of a sale occurs as of a specifieddate. 2. An op en and competitive market exists fo r the property interest appraised. 3. Th e buyer and seller are each acting prudently and knowledgeably. 4. Th e price is not affected by undue stimulus. 5. Th e buyer and seller are typ ically motivated. 6. Th e buyer and seller are acting in what they consider their own best interest. 7. Ma rketing efforts were adequate and a reasonable time was allowed fo r exp osure in the open market. 8. Payment was made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. 9. Th e price represents the normal consideration fo r the propertyso ld, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. "1

Finished Lot

The term "finished lot" isdefined as:

uA parcel which has legal entitlements created by a recorded subdivision map, whose physical characteristics are a finegraded level pad with an infrastructure contiguous to each individual lot, asphalt paved roads, and the necessary utilities. Th is term assumes the payment of all applicable development fe es with the exception of building permit and plan check fe es. "

SUBJECTPROPERTY RIGHTS APPRAISED

The subject property rights being appraised are the fee simple interest subject to easements of record and the special tax lien of CFD No. 2003-4. The term "fee simple estate" is definedas :

1The Appraisal of Real Estate, 11th Edition (definition adopted by the Appraisal Institute in 1993). SummaryAp praisal Report - Complete Appraisal Community Facilities District No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, In c. Page 2 "Possession of a title in fe e establishing the interest in property known as the fe e simple estate - i.e., absolute ownership unencumbered by any other interest of estate, subject to the limitation imposed by the governmental powers of taxation, eminent domain, police power, and escheat. "2

EFFECTIVE DATE OF VALUE

The subject property is valued as of May 15, 2005.

DATE OF REPORT

The date of this report is May 31, 2005.

LEGAL DESCRIPTION

Tentative Tract Map 30040 within unincorporated Riverside County, California. A lengthy metes and bounds legal description has been retained in our files.

2 Appraisal of Real Estate, 11th Edition SummaryAp praisal Report - Complete Appraisal CommunityFa cilities District No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, Inc.) Bruce W Hull & Associates, Inc. Page 3 APPRAISAL DEVELOPMENT AND REPORTING PROCESS

The purpose of this Summary Appraisal Report is to provide the appraiser's best estimate of market value forthe subject property, which is being developed into two neighborhoods known as Emerson Lane and Arbor Lane at Faircrest, both by Lennar Homes of California, Inc. Emerson Lane is proposed for 113 single-family detached homes while Arbor Lane is proposed for 115 single-family detached homes. The valuation for the subject property will take into consideration the special tax lien for CFD No. 2003-4 and existing Perris Union High School District CFD No. 92-1, along with the improvements and/or fee credits and benefitsto be funded by the proceeds of the CFD No. 2003-4 Special Tax Bonds.

In appraising the subject property, the value estimate will be based on the highest and best use conclusion of subject property and will utilize the Sales Comparison Approach to value. First, a unit of value needs to be determined forthe subject property. In the subject marketplace, sales prices of single-familydetached lots are determined based on a finishedlot price. In the case at hand the lots are currently under development. Therefore, the remaining lot costs to develop the property to a finished lot condition need to be considered. In valuing the subject single-family detached lots, a finished lot value will firstbe determined using the Sales Comparison Approach. The remaining costs of development will then be deducted to arrive at an "as is" condition.

Due to the number of residential lots per neighborhood (typical number of lots for a neighborhood development), a land development Discounted Cash Flow Analysis will not be considered. In valuing the subject property, the value estimate will be based on the highest and best use conclusion using the Sales Comparison Approach. This approach is definedas :

u •••an appraisal procedure in which the market value estimate is predicated up on prices paid in actual market transactions and current listings, the fo rmer fee ing the lower limit of value in a static or advancing market (price wise), and fixing the higher limit in a declining market; and the latter fixing the higher limit in any market. It is a process of analyzing sales of similar, recently sold properties in order to derive an indication of the most probable sales price of the propertybeing appraised. "3

3 Real Estate Appraisal Terminology, Revised Edition, 1998 SummaryAp praisal Report - Complete Appraisal CommunityFacilities DistrictNo . 2003-4 Menifee Un ion Sc hool District (FaircrestI Lennar Ho mes of California, In c.) Bruce W. Hull & Associates, Inc. Page 4 In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject property that have recently sold, are listed for sale, or are under contract (i.e., for which purchase offers and a deposit have been recently submitted).

This appraisal will be presented in the following format.

• County of Riverside/MenifeeArea Description • Riverside County Housing Market • Description of Community Facilities District No. 2003-4 • Highest and Best Use Analysis • Subject property Descriptions • Valuation Analysis and Discussion followedby Value Conclusions • Appraisal Report Summary

The due diligence of this appraisal assignment included the following:

1. Compiled demographic information and relating that data to the subject property to determine a feasibility/demand analysis.

2. Gathered and analyzed information on the subject marketplace, including reviewing several real estate brokerage publications on historical and projected growth in the subject market, and researching the micro and macro economics within Riverside County and the Menifee area.

3. Inspected the subject property.

4. Interviewed representatives from the merchant builder to obtain available information on the subject property.

5. Reviewed cost estimates for the project as provided by the builder. In addition, costs that have been expended to date were reviewed.

6. Searched the area for relevant comparable land transactions, including sales and offerings, and interviewing the appropriate parties to ascertain pertinent information relating to each transaction.

7. Interviewed sales representatives and visiting the sales/model complex for both Emerson Lane and Arbor Lane in order to ascertain sales informationon the project.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union School District (Fa ircrest I Lennar Homesof California, Inc.) Bruce W Hull & Associates, Inc. Page 5 COUNTY OF RIVERSIDE

Location The subject property is located in an unincorporated area of the County of Riverside (the "County") within the community known as Menifee, in the southwestern portion of the County. The County encompasses approximately 7,300 square miles, which includes large expanses of undeveloped deserts, valleys, canyons, and mountains. The County is the major recipient of outward urban pressure from Orange and Los Angeles Counties, as well as northerly growth from San Diego County. Affordable familyhousing has been one of the principal assets of this community.

Transportation Four major freeways bisect the county. Interstate 15 travels in a northerly/southerly direction with access to Barstow and Nevada to the north and to San Diego to the south where it approaches the international border with Mexico. The 91 or Riverside Freeway travels in an easterly/westerly direction and provides access to Orange and Los Angeles Counties to the west and connects with Highway 60 and Interstate 215 to the north in San Bernardino County. Highway 60 provides access to Los Angeles to the west and to the east where it combines with Interstate 10, providing access to Arizona. Interstate 215 travels in a northerly/southerly direction in the County providing access that generally parallels Interstate 15 to the east.

Population The County has experienced an increasing growth pattern for several decades, with the population more than doubling between 1960 and 1980. Between 1980 and 1990, there was an increase in population of over 65 percent, with the largest numerical gains in the incorporated areas of Moreno Valley, Corona, and Riverside. The largest population percentage gains have been seen in the southwestern portion of the County, which consists primarily of recently incorporated or unincorporated communities. This area includes all of the greater Temecula Valley, such as the communities of Anza, Aguanga, Wildomar, Murrieta, Murrieta Hot Springs, and the Rancho California/Temecula area. It also includes the Menifee Valley area and the Elsinore/Canyon Lake area. SummaryAp praisal Report - Complete Appraisal Community FacilitiesDistrict No . 2003-4 Menifee Union SchoolDistrict (Fa ircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, In c. Page 6 Per the California Department of Finance, the population of the County as of July 1 , 2004 was 1,846,095. This represents an increase of 4.4 percent over the past year and an average annual percentage of approximately 3.7 percent over the previous 5 years.

Economy The Riverside, San Bernardino, Ontario Metropolitan Statistical Area ("MSA") has had a strong employment record over the past 14 years. The most significant gains were seen in the areas of construction, finance, insurance, real estate, services and retail trade. The least amount of growth was seen in agriculture and the wholesale trade. More than 250 manufacturing firms are located in the County.· Leading classes of manufactured products include aircraft parts, electronic components and systems, mobile homes, and aluminum mill machinery and products. The unemployment rate for the Riverside/San Bernardino MSA is estimated at 4.6% (per the Employment Development Department - December 2004), which reflects a slight decrease from December 2003 (5.2 percent), but a significant downturn from August 1995 (10 percent). Individually Riverside County has a 4.84% unemployment rate while San Bernardino County has a 4.5% unemployment rate. The current unemployment rate for the Riverside-San Bernardino MSA of 4.61 % compares favorably to the current Californiaunemployment rate of 5.44% and to the current U.S. unemployment rate of 5.1%. Below is a table depicting Riverside County in relationship to employment rates df the surrounding counties.

Jurisdiction Unemployment Rate Los Angeles County 5.74% Riverside County 4.84% San BernardinoCounty 4.5% Orange County 2.76% San Diego County 3.2%

Source: State of CaliforniaE.D.D.

SummaryAp praisal Report - Complete Appraisal Community FacilitiesDistrict No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, Inc. Page 7 Although the unemployment is higher than in Orange, San Diego and San Bernardino Counties, the County compares favorably to Los Angeles County, the State of Californiaand the national rate.

The tragedy of September 11, 2001 and furtherterrorist activities have also affected the economy within the United States. A recession, which began in mid-2001, was described as "mild", and economists stated that we are in an economic recovery mode, albeit a mild one. As the Iraq conflicterupted, the economy seemed to stay sluggish. In early 2004, as the major portion of the conflict ended, the economy went on a slight upturn, however, more recently the economy has leveled off. On a more micro level, within Southern California new home projects are considered to have excellent sales rates although there has been a slight slow down in recent months. Low interest rates appear to be keeping sales activity at good le_vels. This is evidenced by the actual sales rates of competing projects in the Menifeearea.

Government/Environmental The County is home to the Stephens Kangaroo Rat ("SKR"), which is listed on the endangered species list by the federal government. For the past eight years the County has had a Habitat Preserve Agency (the "Agency") in order to counter the extinction of this protected rodent. In 1995 the Agency was designated a success with enough habitat lands protected and thus, a reduction was made in the Agency. In order to obtain this degree of success the Agency required SKR acreage fees from developers in order to purchase conservation habitat acreage. Due to the success of the Agency, the degree of urgency is considerably less than in previous years.

New possible endangered species that are affecting the County area include the Coastal Sagebrush, which is the habitat forthe CaliforniaGnatcatcher. Due to the County's success with the SKR conservation, it is anticipated that, if needed, the County will perform the same function for similar endangered species.

The County has initiated a Multi-Species Habitat Conservation Plan. The County Board of Supervisors has approved a fee from $859 to $1,651 per residential unit and up to $5,620 per acre for commercial property. SummaryAp praisal Report - Complete Appraisal Community Facilities DistrictNo . 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homesof California, In c.) Bruce W. Hull & Associates, Inc. Page 8 The Pacific Legal Foundation ("PLF") has filed two lawsuits charging the federal government with flawed critical habitat designations for 42 California species. According to a press release by PLF on March 30, 2005, the "critical habitat" designations for more than 40 California species fail to meet the scientific and legal standards required under the federal Endangered Species Act. According to PLF, the two statewide challenges seek to compel the United States Fish and Wildlife Service ("FWS") to bring 42 critical habitat designations into compliance with the clear standards mandated by recent federalcourt decisions. PLF's first legal challenge would require FWS to fix the critical habitat designations for 27 species ( of which 21 are plants); the second suit would require the agency to correcthabitat areas for 15 vernal pool species (11 plants and 4 species of "fairyshrim p").

The Inland Empire Area received approximately 12 million dollars in federal grants in 2003 to buy habitat land for endangered species, including some sites the Pacific Legal Foundation lawsuit would target. It is the appraisers' understanding that if a property has been graded or has received grading permits, there will not be any further habitat issues. The subject property has been graded.

Education The subj ect area is served by the MenifeeUnion School District (the "District"), which currently operates five elementary schools and two middle schools. Most of the District's facilities were built after 1991. The District operates on a year round schedule. Higher education is available within an hour's drive, at University of California campuses at Riverside and San Diego and California StateUniversity campuses in San Bernardino, San Diego, San Marcos, Fullerton, and Pomona. The closest community college is Mt. San Jacinto College.

SummaryAp praisal Report - Complete Appraisal Community Facilities District No. 2003-4 Menifee Un ion SchoolDistrict (Fa ircrestI Lennar Homes of California, Inc.) Bruce W Hull & Associates, Inc. Page 9 Summary Residential growth in the Menifee/Temecula/Murrieta/Rancho California area during the late 1980s was explosive. The influence for this growth pattern was primarily commuters from Los Angeles, Orange, and San Diego Counties who were drawn to the area by its affordable housing and quiet country setting. As job growth declined during the recession of the early 1990s, fewer commuters came to the area, creating a significant downward pressure on real estate sales and prices. However, the growing economy over the latter half of the 1990s achieved and surpassed the previous real estate values in the Menifee area. Although current national economic conditions have been volatile in recent months (i.e., stock market, Iraq conflict, increasing oil prices), the subject area's economy is still considered good, with the new housing market in the area still positive. The desirability of the Menifee community suggests continuous growth in residential constructionand sales.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union School District (Fa ircrest I Lennar Homesof California, Inc.) Bruce W.Hull & Associates, Inc. Page JO COMMUNITY OF MENIFEE

The community of Menifee is located north of Murrieta, west of Hemet, east of Canyon Lake, southeast of Perris, and adjacent to Sun City in the southwestern portion of Riverside County. Menifee is in an unincorporated portion of Riverside County, which is the entity that regulates and implements all zoning and land use designations. The majority of the existing community of Menifee was located east of Interstate 215 between Menifee Lakes Country Club Golf Course and Mount San Jacinto Community College, Menifee Campus. However, Menifee is currently expanding to the east and south along with expanding west of Interstate 215, between the existing developments of Canyon Lake and Sun City.

The Menifee community is poised for growth due to the Diamond Valley Lake (formerly known as the Eastside Reservoir), which was dedicated on March 18, 2000. The initial fill was completed by the end of 2002. Diamond Valley Lake is located approximately 5 miles to the east of the existing Menifee developments. Diamond Valley Lake is a 13,000-acre site with a proposed 4,500-acre reservoir for boating and fishing (no swimming, water skiing or personal watercraft). The reservoir at completion will contain 800,000 acre-feet (260 billion gallons) of water. The Metropolitan Water District owns Diamond Valley Lake.

Land prices in the Menifeearea were historically lower than prices in the Murrieta and Temecula areas. In the past two years the price difference has narrowed between Murrieta and Temecula; however, there still appears to be a difference in Menifee. The price difference appears to be due to the Murrieta/Temecula area being along the Interstate 15 corridor, which commands a premium due to easier commuting. Menifee is located along the Interstate 215 corridor, which creates a slightly longer commute to employment centers.

In summary, the future growth of the Menifee area should be strong over the next few years. The opening of Diamond Valley Lake along with the land prices and the availability of land for development, combine to make Menifeea prime area forfuture growth .

SummaryAp praisal Report - Complete Appraisal Community Facilities District No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, Inc. Page 11 IMMEDIATE SURROUNDINGS

The subject property is located along both the north and south side of Lazy Creek Road, west of Bradley Road more generally west of Interstate 215 and north of Newport Road. The area is transitioning fromrural housing and -undeveloped lands to new residential development. There is residential development to the north and west of the site. Directly east of the subject property are commercial buildings fronting Bradley Road. South of Newport Road are several new housing developments.

Access to the subject property is considered to be good via Interstate 215 to Newport Road, west to Bradley Road and north to the subject property. Additional access is via Interstate 15 to Railroad Canyon Road, north to Newport Road (Railroad Canyon Road becomes Goetz Road prior to Newport Road) and east on Newport Road to Bradley Road. Shopping is available within one-eighth mile south at Newport Plaza at the northwest comer of Newport Road and Bradley Road.

There are several communities now under development in the Menifee area. These include Mapleton, a large master planned community located southeast of the subject in the City of Murrieta and Pacific Palms, a master planned community located on the west side of Interstate · 215 between Newport Avenue and Scott Road, south of the subject site. Within Menifee there are several communities in the construction and planning stages and lands being marketed to the builder community.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union School District (Faircrest I Lennar Homes of California, Inc.) Brnce W Hull & Associates, In c. Page l2 RIVERSIDE COUNTY HOUSING MARKET

In reviewing the County's housing market, a study of population and economic growth needs to be conducted.

As of July 1, 2004, the County had a population estimate of 1,846,095, which is a 4.4 percent increase from 2003 and an average annual percentage of approximately 3.7 percent over the previous 5 years. Originally, an influx of residents from Orange County looking for more affordable housing was instrumental in population increases in southern Riverside County. Current growth is from both Orange County and North San Diego County, where prices have increased and buyers are once again looking to outlying areas formore affordable housing.

The recession of the early 1990s impacted the Interstate 15 corridor, with a longer recovery period than in other areas of the Inland Empire (San Bernardino and Riverside Counties). The growth in the Inland Empire housing market was slower than expected during the recovery years of 1995 through 1997; however, the resurgence in land sales in the past eight years has caused an increase in population and subsequent homebuilding. The rate of housing appreciation was significant in 1998 and 1999 with a slowing in 2000 and 2001. During the years 2002, 2003 and the firsthalf of 2004 appreciation was rapid. The latter half of 2004 saw a "cooling off'in both sales and the rapid appreciation of the past few years. The Menifee/Murrieta/Temecula area is considered prime for businesses, with relatively inexpensive land costs (in comparison to surrounding counties) and a quality labor pool.

Economic growth in the Riverside-San Bernardino area has been strong, with over 51,400 new jobs added in 1999 and over 35,000 new jobs added in both the year 2000 and 2001 and 28,000 new jobs in 2002. Between January 2003 and January 2004 over 18,000 new jobs were added depicting a 1.8% growth rate. The year over total non-farm employment in the Riverside-San Bernardino (December 2003 to December 2004) area rose by 30,900 jobs, a growth rate of 2.8 percent per the State of California Economic Development Department. In contrast to the balance of Southern California,the Inland Empire has experienced over 16 years of employment growth despite the early 1990s recession and the job losses in the rest of the Southern California SummaryAppra isal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W. Hull & Associates, In c. Page 13 region. While job growth slowed to a low of 0.6 percent in 1993, it still showed a positive gain. In the latter part of the 1990s, the Inland Empire experienced several major economic events that facilitatedjo b growth, including the construction of the Ontario Mills Mall, the Ontario Airport expansion, the Ontario Convention Center, the California Speedway, the Diamond Valley Lake, the Temecula Mall, and a major expansion at the University of California, Riverside. Unemployment has dropped over one-half percent over the past year and while Riverside's rate is higher than some surrounding counties (Orange County at 2.7 percent and San Diego at 3.2 percent), the current rate of 4.8 percent in the Riverside/San Bernardino area is significantly lower than the area's 1995 high of 10.0 percent and compares favorably to both the state and the nation.

Home prices rose steadily between 2001 and mid-2004 in the County. Per The Meyers Group, a residential consulting group, the average new home price fora detached home in the County as of the end of the fourth quarter 2004 was $437,422. This represents a 35.4 percent increase over the same period one-year prior, when the average new home price was $323,036. Per The Meyers Group, the majority of new-home buyers in the County are move-up buyers. The double-digit appreciation over the past couple years is pricing first time homebuyers out of the detached home market, allowing formove-up buyers and causing a resurgence of attached homes in the area. According to an article in the LA Times Business Section on February 7, 2005 the Riverside County housing market is showing definite signs of slowing; however, the rate of appreciation over the past year (35.4 percent by The Meyers Group) is not sustainable on an annual basis in any real estate market. John Husing, an economist and industry consultant in Riverside, has stated that even with the slow down, housing prices will rise in double digits this year, however, closer to 10 percent.

The increasing home prices appear to have reached a leveling offperiod. Sales of new homes are still occurring, but, at a slower rate than in the past three or fouryears. The "cooling off' of the real estate market has created diverse opinions among economists. According to an article in the Press Enterprise (Real Estate Prices to Stay Up, Experts Say - December 9, 2004), panelists at an economic development summit insist that the Inland Empire housing market is not on a "bubble". They agree that home prices will still go up, just not exponentially as they have in the SummaryAp praisal Report - Complete Appraisal Community FacilitiesDistrict No. 2003-4 Menifee Un ion SchoolDistrict (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page 14 past two years. In an opposing viewpoint, the Anderson School of Business at UCLA says that the Inland region's economy is vulnerable if the nation's economy sours. Overall, the UCLA quarterly economic forecast called for a 1.6 percent increase in jobs statewide in 2005 and a healthy 4.8 percent jump in taxable sales predicted for 2004. However they state that there are lingering problems include the state's finances, a possible decline in real estate prices and the high cost of doing business in the state.

The County has historically been dominated by detached single-family product due to the low cost of land compared to surrounding counties, which draws commuters from higher-priced counties. The South County sub-market, which includes the areas of Murrieta, Temecula, Rancho California, Menifee, and Lake Elsinore, has experienced strong detached residential sales over the past eight years. Currently, this sub-market accounts for 25 percent of the new detached home sales within the County market over the past year. As of the end of the fourth quarter 2004, there have been 577 attached sales within South County over the past year, which is 68 percent of the total attached sales in the County of 850 units. This compares to 22,935 detached sales in the County and 5,392 detached sales in the South County sub-market during 2004.

Inventory levels for detached housing had been decreasing for eight years until 1999, when the County had 29 new projects for a total of 223 actively selling projects at year-end 1999. Since 1999 the number of active projects has slowly been rising. As of the end of the fourth quarter of 2004 there are 382 active projects, 108 of which are located in the South sub-market ( or 28 percent).

Based on detached new home activity in the South County sub-market during the fourthquarter of 2004, there were no new home sales in the base price range of under $300,000 (compared to 6.8 percent of all sales one year prior), while 3.8 percent were for homes sales within the price range of $300,000 to $349,999 (compared to 26 percent in the fourth quarter 2003). The $350,000 to $399,999 price range accounted for4.6 percent of total detached sales (compared to 36 percent in the fourthquarter 2003), while the $400,000 to $449,000 price range accounted for 16.9 percent (compared to 18 percent forthe fourth quarter 2003; however, a decrease from 26.2 SummaryAp praisal Report - Complete Appraisal CommunityFa cilities District No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W. Hull & Associates, Inc. Page 15 percent in second quarter 2004) while the $450,000 and up price range accounted for 74.6 percent (compared to 12.6 percent during the fourth quarter 2003). This shows the increasing of prices in the subj ect marketplace between the fourth quarter 2003 and the fourth quarter 2004. While statistics have not been released for the first month of 2005, surveys are showing a continuation of leveling off of appreciation with little to no increases in new home prices over the past two months. The last three years of rapid appreciation has provided equity formove-up buyers to purchase larger new homes. Coupled with the historically low interest rates of the past five years, move-up buyers have been a strong force in the real estate market. This could be leveling offas interest rates have risen slightly over the past fourmont hs.

The subject property is located in the Riverside County South sub-market, which has an average price of $493,162, an increase of 33.4 percent from the fourth quarter 2003 (per The Meyers Group). This figure is higher in comparison to the overall County average price of $437,422.

The inventory of new homes in the County marketplace increased between the fourth quarter of 2003 and the fourth quarter 2004, with a standing and speculative inventory of 1,301 detached units countywide (standing inventory and units under construction) compared to an inventory of 353 at the end of the fourth quarter 2003. Sales within the County during fourth quarter 2003 were 5,762 fordetached homes as compared to 4,007 sales during fourth quarter 2004. Based on the fourth quarter sales in 2004 of 4,007 detached units, the current inventory suggests about a four-week supply.

The subject sub-market had a 589-unit inventory of detached homes as of the end of the fourth quarter 2004 (standing inventory and units under construction) and an 83-unit inventory as of the end of the fourth quarter 2003. Based on the fourth quarter sales in 2004 for detached units of 626, this suggests an approximate 11-week supply. Sales of homes have seen a slowdown in comparison to the past two years when sales rates were excellent. Within the South County sub-market detached sales during the fourth quarter2003 were 1,362 while they were 626 within the fourth quarter 2004. New homes are still selling at a good rate although in the previous two years sales were excellent.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion SchoolDistrict (Faircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page 16 In summary, although there was a decline in sales numbers, overall a strong increase in sales prices in the 2004 in the subject market was observed. Between fourth quarter 2003 and fourth quarter 2004, an increase of over 29 percent was observed in both the County and the subject sub-market. Recent statistics (CaliforniaAssocia tion of Realtors) indicate that the January 2005 resale median price for Riverside/San Bernardino was $338,780, an increase of 3.5% from December, 2004.

Price still appears to be a major factor in attracting buyers to the South Riverside County marketplace. The attached product has reappeared in the subject marketplace to accommodate first-time buyers with new attached units selling very strong. The economic and population growth in the area suggest that demand for housing is still good even with other indicators indicating uncertainty (i.e. stock market volatility, terrorist activities, oil prices, volatility increasing interest rates). In conclusion, the subject area's growth is anticipated to create the need fornew housing projects in the area.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion SchoolDistrict (Faircrest I Lennar Homes of California, In c.) Bruce W. Hull & Associates, In c. Page 17 COMMUNITY FACILITIES DISTRICTNO. 2003-4

CFD No. 2003-4 was formed pursuant to the SB 50 Financing Agreement ("Agreement") between the MenifeeUnion School District ("School District"), DRL, LLC, a Californialimited liability company, and Creekside Villas, LLC, a California limited liability company (previous owners) as amended by a First Amendment to the SB 50 Financing Agreement between the School District and Lennar Homes of California (owner). The Agreement (as amended) establishes (i) mitigation amounts to be paid which partially offsets the facility impacts on the School District of development in CFD No. 2003-4 and (ii) terms forthe establishment of CFD No. 2003-4 and the issuance of Bonds by CFD No. 2003-4. The mitigation payment established in the Second Agreement is $7,344 per dwelling unit (subject to 2% increase each January 1 beginning January 1, 2006 (fora current rate of $7,344 per unit).

The proceeds of the bonds from CFD No. 2003-4 ("Bonds") will be used primarily for the following purposes:

The cost of financing the acqms1t10n, construction, expansion, improvement, or rehabilitation of authorized school facilities.

CFD No. 2003-4 is expected to issue one series of Bonds to finance the acquisition,construction, expansion, improvement, or rehabilitation of the authorized facilities. The total amount of construction proceeds to be generated fromthe Bonds was estimated at $1,674,432 at time of the CFD report (December 14, 2004). This amount is subject to change, depending on the date, number of units to be constructed, interest rates of the Bonds, the costs of issuance of the Bonds, and other factorsto be determined at the time the Bonds are issued. The costs associated with the issuance of the Bonds are not expected to exceed $558,382. The maximum authorized bonded indebtedness for CFD No. 2003-4 has been specified as an amount not to exceed $4,000,000.

The subject property contains 57.24 gross acres of land per the proposed final tract maps (52.87 acres within the CFD boundaries, the difference being street right of way).

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Un ion SchoolDistrict (Faircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, Inc. Page 18 SUBJECT PROPERTY DESCRIPTION

Location: Both sides of Lazy Creek Road, west of Bradley Road, Menifee, unincorporated Riverside County.

Legal Description: Lots 1 thru 228 of Tentative Tract Map 30040, unincorporated Riverside County, also known as a portion of Parcel 1 and Parcel 2 of Parcel Map 13105; PMB 72/80-81; Parcels 1, 2, 3 and 4 of PM 16605, PMB 133/42; Parcels 1,2, 3 and 4 of PM 16606 PMB 93/86; a portion of Parcels 7 and 10, PM 6252, PMB 17/3; and Parcels 3 and 4, PM 12764, PMB 64/97-98, all records of Riverside County, California being in Section 33, T5S, R3W, S.B.M.

Owner of Record: Lennar Homes of California,Inc.

Three-Year Sales History: Lennar Homes of California, Inc. purchased the subject property from Creekside Villas, LLC and DRL, LLC on July 2, 2004 for$18 ,044,744. Assessor's Parcel Nos.: 338-150-006 thru 009, 02 1 thru 024, 030, 035, 037 and 042; 338-170-001 thru 005, 016.

Property Taxes: Per the Riverside County Assessor's Officethe 2004-05 property taxes on the subject property total $74,453.42 which includes $12,351.10 of supplemental property taxes from the previous landowner's purchase. The tax rate is 1.04787 percent. It appears a supplemental tax bill will be forthcomingbased on the July 2, 2004 purchase price of $18,044, 744.

Size and Shape: The property is irregular in shape and contains 57.24 gross acres of land per the proposed final tract maps (referto previous section).

Zoning: Per the County of Riverside, the subject property is zoned R- 1 for single­ family dwellings with a 7 ,200 square foot minimum lot size. The General Plan shows the subject property within the Sun City/Menifee Valley Community Plan and is designated for Residential 2-5 dwelling units per acre.

Entitlements: The subject property has an approved tentative tract map. Tract Map 30040 divides the subject property into 228 usable single-family detached lots, each with a minimum lot size of 7 ,200 square feet. Tract Map 30040 is anticipated to be recorded in five phases with the first two phases anticipated to record in early June 2005.

There are condemnation proceedings underway for a small parcel that is needed for a traffic signal at Winter Hawk and Newport Road. It is the SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Ho mes of California, Inc.) Bruce W. Hull & Associates, In c. Page 19 appraiser's understanding that the county approvals have been obtained and that there are no conditions which would slow or thwart development of the proposed project.

Topography: The subject property is generally level at street grade. All of the property has been mass graded with some lots terraced and some streets cut in. Utility construction is also underway. Drainage will be in an engineered street drainage system. There will be a permanent detention basin on the site.

Soils Condition: We have reviewed a Geotechnical Feasibility Review for Tentative Tract Map 30040 prepared by GeoSoils, Inc. of Murrieta, California and dated March 19, 2004. In addition we have reviewed a Preliminary Soil Investigation Report on the property prepared by SID Geotechnical, Inc. or Riverside, California and dated December 11, 2000. The GeoSoils report refers to the SID report at times. Both reports concluded that the site appeared suitable for residential development from a geotechnical viewpoint. In addition, both reports gave conclusions and recommendations for the development of the site and the subsequent construction forthe proposed homes.

It is an assumption of this report that the soils are adequate to support the highest and best use conclusion and that all of the recommendation within the report were and will be adhered to during construction. The site has been mass graded with some lots terraced and some streets cut in.

Seismic Conditions: The subject property is not located within an Alquist-Priolo Earthquake Fault Zone.

Flood Information: The subject site is not located within a 100 year floodzone per FEMA Maps 0602452080C and 0602452090C. The majority of the property is designated within Flood Zone "C" ( outside of 100-year floodzone - no flood insurance required). A small portion of the northernmost portion of the subject property is located within Flood Zone B. Flood Zone B refers to areas outside the 100-year floodplains, areas of 100-year sheet flow flooding where average depths are less than 1 foot, areas of 100-year stream floodingwhere the contributing drainage area is less than 1 square mile, or areas protected fromthe 100-year floodby levees. According to FEMA floodinsurance is not mandatory forareas in Zone B.

Environmental Concerns: We have reviewed a Preliminary Phase I Environmental Site Assessment Report for Tract Map 30040 prepared by SID Geotechnical, Inc. of Riverside, Californiaand dated September 24, 2003. The report concludes that based on the findings of the environmental assessment, the likelihood SummaryAp praisalReport - Complete Appraisal CommunityFa cilities District No. 2003-4 Menifee Un ion School District (Fa ircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page 20 of hazardous waste or petroleum product contamination existing on, or migrating onto the subject site is considered low.

This appraisal assumes that there are no environmental issues that would slow or thwart development of the site. Easements/ Encumbrances: We have reviewed 5 preliminary title reports fromNorth American Title Company covering the property, one for each of the proposed final maps. The reports and their exceptions are as follows.

Report No. 7003031-27 dated October 27, 2004 (Tract 30040-1) Item Nos. A, B and E pertain to property taxes including supplemental taxes on the property. Item No. C refers to County of Riverside AD 4-5 (Flood Control) with the amount not shown in the report. Item No. D refers to a Notice of Special Tax Lien for Perris Union High School District. Item No. 1 is in regards to water rights. Item Nos. 2, 3, 4 and 5 pertain to easements. Item No. 6 refers to C C & R's on the property. Item No. 7 pertains to the subject SB 50 Financing Agreement.

ReportNo. 7003032-27 dated January 24, 2005 (Tract 30040-2) Item Nos. A and E pertain to property taxes including supplemental taxes on the property. Item No. Bis in regards to the CFD No. 2003-4 (subject CFD). Item No. C refersto County of Riverside AD 4-5 (Flood Control) with the amount not shown in the report. Item No. D refers to a Notice of Special Tax Lien forPerris Union High School District. Item Nos. F and G refer to tax bills on the property which were paid current at time of the report. Item No. 1 is in regards to water rights. Item No. 2 pertains to an easement on the property. Item No. 3 pertains to an irrevocable offer to dedicate a portion of land for public roads. Item No. 4 pertains to the subject SB 50 Financing Agreement.

Report No. 7003033-27 dated November 19, 2004 (Tract 30040-3) Item Nos. A, B and E pertain to property taxes including supplemental taxes on the property. Item No. C refers to County of Riverside AD 4-5 (Flood Control) with the amount not shown in the report. Item No. D refers to a Notice of Special Tax Lien for Perris Union High School District. Item No. 1 is in regards to water rights. Item Nos. 2 and 3 pertain to easements. Item No. 4 refers to an irrevocable offer to dedicate a portion of said land for roadpu rposes.

Report No. 7003034-27 dated January 25, 2005 (Tract 30040-4) Item Nos. A, B and E pertain to property taxes including supplemental taxes on the property. Item No. C refers to County of Riverside AD 4-5 (Flood Control) with the amount not shown in the report. Item No. D refers to a Notice of Special Tax Lien for Perris Union High School District. Item No. F refers to CFD No. 2003-4 (subject CFD). Item No. 1 SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Un ion School District (Faircrest I Lennar Homes of California, Inc.) Bruce W Hull & Associates, Inc. Page 21 is in regards to water rights. Item Nos. 2, 3 and 4 pertain to easements on the property.

Report No. 7003035-27 dated January 26, 2005 (Tract 30040-5) Item Nos. A, B and E pertain to property taxes including supplemental taxes on the property. Item No. C refers to County of Riverside AD 4-5 (Flood Control) with the amount not shown in the report. Item No. D refers to a Notice of Special Tax Lien for Perris Union High School District. Item No. F refers to CFD No. 2003-4 (subj ect CFD). Item No. 1 is in regards to water rights. Item Nos. 2, 3 and 4 pertain to easements on the property. Item No. 5 refers to relinquishing rights of ingress and egress to Newport Road.

This appraisal assumes that the subject property is free and clear of any liens and/or encumbrances with the exception of CFD No. 2003-4 (subj ect CFD).

Utilities: All normal utilities will be made available to serve the subject site by the following companies:

Electrical: SouthernCalifornia Edison Co. Natural Gas: The Gas Company Water: EasternMunicipal Water District Sewer: EasternMunicipal Water District School District: MenifeeUnion School District and Perris Union High School District Telephone: Verizon Communications

Streets/ Access: The subject property has access from I-215 via Newport Road, west to Bradley Road and north to Lazy Creek Road and west to the subject property.

Interstate 215 is a major north/south freeway that provides access from the 60 Freeway north near Moreno Valley to the south where it merges with Interstate 15 near the subject property.

Newport Road has on/off ramps to Interstate 215 and provides access through the Menifeearea and to the west to the Canyon Lake area.

Bradley Road is a north/south road providing access to residential neighborhoods and commercial property between Newport Road and McCall Road. North of McCall Road Bradley Road is a frontage street along I-215.

Lazy Creek Road 1s an access road to the subject residential neighborhood. SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, In c. Page 22 Current Condition: The subject property has been mass graded with utility construction now underway. There are six model homes under construction along Lazy Creek Road.

Development Costs/ CFD Funds: The property is in a partially finished lot condition. The costs are summarized as follows.

Backbone Hard Costs $ 6,893,289 Backbone Assessments & Fees 854,829 Arbor Lane In-Tract Hard Costs 739,995 Arbor Lane Assessments and Fees 3,470,406 Emerson Lane In-Tract Hard Costs 687,177 Emerson Lane Assessment and Fees 2,676,608 Total Costs $15,322,304 Less: Costs included Beyond a Finished Lot ( 584,720) Constructed to Date (not including CFD reimbursable) ( 2,015,707) CFD Funded ConstructionProceeds ( 1,674,432) Remaining Costs to Complete $11,047,445

Improvement Description: The subject 228 lots are being developed into two neighborhoods. Arbor Lane at Faircrest is being developed on Tracts 30040-2, 04 and 05 for a total of 115 homes. Arbor Lane is an "ei" product which means it is an "Everything's Included" product from Lennar Homes of California, Inc. Arbor Lane will have homes ranging in size from 2,391 to 3,322 square feet with current pricing ranging from $412,990 to $452,990. There are three model homes under construction within Arbor Lane. Emerson Lane at Faircrest is being developed on Tracts 30040-1 and -3 fora total of 113 homes. Emerson Lane is a "ds" product which means it is a "Design Studio Home" fromLennar Homes of California,Inc . Emerson Lane will have homes ranging in size from 2,559 to 3,567 square feetwith current prices ranging from $403,990 to 43 1,430. There are also three model homes under construction within Emerson Lane.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Un ion SchoolDistrict (Fa ircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, Inc. Page 23 HIGHEST AND BEST USE ANALYSIS

The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest andbest use is definedas:

"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially fe asible, and that results in the highest value. ,A

Proper application of this analysis requires the subject property to firstbe considered As Vacant in order to identify the "ideal" improvements in terms of use, size, and timing of development. The existing improvements (if any) are then compared to the "ideal" improvements to determine if the use should be continued, altered, or demolished preparatory to redevelopment of the site with a more productive or ideal use.

As Vacant In the following analysis, we have considered the site's probable use, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible use, or those uses which generate a positive return on investment; and the maximally productive use, or those probable permissible uses which combine to give the owner of the land the highest net returnon value in the foreseeablefutu re.

Physically Possible Uses The propertyconsists of 57 .24 acres of land in an irregular shape. The site has been mass graded and is in process of being developed into single-family detached lots with a minimum lot size of 7 ,200 square feet.

4 The Appraisal of Real Estate, 11th Edition

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union SchoolDistrict (Fa ircrest I Lennar Homes of California, Inc.) Bruce W Hull & Associates, Inc. Page 24 We have reviewed a soils report on the parcel. It concluded that the proposed residential development of the site was feasible if the recommendations contained within the report were adhered to during construction. Access to the property is considered to be good via Interstate 215 to Newport Road, west to Bradley Road and north to Lazy Creek Road. The neighborhood is made up of commercial property along Newport and Bradley Roads, vacant lands and new residential development.

It is an assumption of this report that the soils are adequate to support the highest and best use conclusion and that geotechnical recommendations have been adhered to in the development of the site. It is also assumed that no environmental issues exist which would slow or thwart development of the site. The physical condition of the subject property suggests numerous uses forthe subject property.

Legality of Use The subject properties are located within the community of Menifee in unincorporated Riverside County, the entity responsible for regulating land use through the implementation of general plans and zoning ordinances. Per the County the parcel is zoned R-1 (residential development, minimum lot size of 7,200 square feet) and the general plan designation is residential use, 2-5 dwelling units per acre.

The property has furtherbeen entitled by an approved tentative tract map. Tentative Tract Map ("TTM") 30040 proposes to divide the property into 228 single-family detached lots. TTM 30040 is proposed to be recorded in five phases. The property encompasses 57.24 acres and is proposed for 228 homes, which equates to 3.98 dwelling units per acre, within the range of the general plan. The tentative tract map and proposed phasing maps are consistent with the zoning and general plan designation on the site.

Based on the legality of use analysis, the types of development for which the subject property can be utilized are narrowed to residential use per the zoning designations and the approved tentative tract map on the property. Residential use is consistent with the findings of the physically possible uses.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Me nifee Union School District (Faircrest I Lennar Homes of California, Inc.) Bruce W Hull & Associates, In c. Page 25 Feasibility of Development The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. The late 1980s were characterized by rapidly escalating prices, good pre-sale activity, and a strong resale market drawing move-up buyers. The early 1990s brought a recession, with home sale prices falling from their previous levels and sales volume dropping dramatically while the later half of the 1990s saw prices beginning to rise. The past eight years have seen a steady increase with the exception of a mild short-term recession in 2001, which did not affect the housing market in the subject area. Appreciation was extremely strong during 2002, 2003 and the first half of 2004 with some reports showing home prices doubling in the past few years. The first half of 2004 saw rising prices, however the top of the market appears to have been reached in mid 2004 with prices stabilizing for the first time in the past four years during the second half of 2004. Within the Menifee area housing market we have noted some reductions of new home prices over the past twelve months. The subject property is being marketed fromtwo sales trailers located at the site. Model construction is underway with model opening proposed for June 18, 2005. The sales trailers opened in February 2005. As of May 15, 2005 the two projects have released a total of 55 homes and have sold 26 homes suggesting a sales rate of 8.66 homes per month between the two projects. There has been a price increase since sales began.

The Federal Reserve has reduced interest rates several times in the past few years, which favorably impacted housing sales; however, there have been eight increases in the rates since July 2004. Sales of new homes in most of Southern California are still good. Current rates, although higher than historic lows, are still in the 5 to 6% range for 30 year mortgages. The new home market in the subject area is still strong, mostly due to the still favorable interestrates. The appreciation of single-family detached homes over the past eight years, suggests the attached market is once again viable for first time buyers and has also allowed current homeowners the equity to allow a move-up to a larger home.

Maximum Productivity The subject property is proposed for 228 single-family detached homes. Current market conditions (based on historical sales, current inventory and proposed product) indicate that residential development in the subject area is in demand. In light of the recent sales activity in

SummaryAp praisal Report - Complete Appraisal Community Facilities District No. 2003-4 Menifee Un ion School District (F aircrest I Lennar Homes of California, Inc.) Bruce W.Hull & Associates, Inc. Page 26 the subject marketplace, it is our opinion that the subject property is feasiblefor the development of single-family detached lots, with an adequate profitlevel to entice experienced builders.

Highest and Best Use Conclusion As Vacant The final determinant of highest and best use is the interaction of the previously discussed factors (i.e., physical uses, legal uses, financial feasibility, and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for thesubj ect property, as vacant, is residential development, as proposed.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No . 2003-4 Menifee Union School District (Faircrest I Lennar Homes of California, Inc.) Brnce W. Hull & Associates, In c. Page 27 RESIDENTIAL DETACHED LOT SALES SUMMARY CHART

Data Sales #of Lot Size Finished No. Location Buyer Date Lots (SF) Sales Price Price/Lot Price/Lot Comments 1 Newport Road and Property within CFD. To close NIOLinde rberger, Menifee BIO Shea Homes Escrow 300 7,200 $23,250,000 $77,500 $150,000 upon TIM approval. Seller: Alexander Comm. 2 NWC Haun and Garboni Roads At time of purchase property not in Menifee Capital Pacific Escrow 128 7,200 $170,000 CFD. Due to close upon approval Seller - Rastogi LLC NIA NIA of TTM in raw land condition. 3 NEC Simpson & Leon Roads Within Hemet School District. Menifee Griffin Comm. 12104 202 7,200 $145,000 Overall tax rate of 1.9%. Seller: Stonegate Development NIA NIA 4 swc Leon and Olive Street Sold in raw condition with Menifee Pulte Homes 11104 514 7,200 & $27,000,000 $52,529 See approved mapping in place.* The Seller: Barrrett American Attached Narrative reported price is a blended price for the attached and detached product. Within proposed CFD of $15, 750 per unit which lowers finished lot price to a blended price of $112,174. 5 NWC Newport and Winter Hawk Subject Property. Sold in Menifee U.S. Homes 7104 226 7,200 NIA $145,000 unimproved condition with map Seller: Leigh & Finley NIA approvals. Within CFD. Actual costs lower bringing finished lot to about $135,000. 6 NEC Garbani and Haleblian Sold in unimproved condition. To Menifee Beazer 07104 178 7,200 NIA NIA $145,000 close upon TTM approval. No Seller: Michaelides Homes CFD. 7 EIS Menifee Rd., W10 Scott Rd. Asked $155,000 for property (3/04) Menifee Meritage Homes 06104 146 7,200 NIA NIA $175,000 in an unimproved condition with Seller: CSO Family, LLC approved mapping. Proposed CFD on site. 8 SWC Winchester and Pat Roads Sold in raw condition with French Valley Beazer Homes 3104 179 7,200 $12,022,000 $67,162 $147,500 approved mapping. No CFD Seller: Allen Su assumed in finished lotprice. VALUATION ANALYSIS AND CONCLUSION

The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value forthe subject property, a unit of comparison needs to be addressed. For single-family detached lots, the lots are typically sold on a finishedlot basis. That is, the sales price is determined by a finished lot value and then the remaining costs to develop the property to a finishedlot condition are taken into account in the sales price. Therefore, in determining a current market value forthe land, the current condition of the lots will be taken into consideration. The value conclusion will take into consideration both improvements to be fundedby the bonds of CFD No. 2003-4 and the lien of CFD No. 2003-4.

In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subj ect property, which have recently been sold, are listed forsale, or are under contract (i.e., forwhich purchase offers and a deposit have been recently submitted).

The valuation will be presented as follows. First a discussion of the single-family detached lot market data will be given. Each of the comparable market data (finished lot basis) will be detailed along with a comparison discussion of their relationship to the subject property. A finished lot value conclusion forthe subject lands will then be addressed along with considering the remaining costs to develop the subject to a finished condition in order to arrive at an "As Is" value forthe subject property.

Market Data Discussion - Detached Residential Lots We have searched the area and foundthe eight transactions summarized on the facing page to be most comparable to the subject single-familydetached projects.

Data No. 1 pertains to a recent escrow between Alexander Communities (seller) and Shea Homes (buyer) for 300 single-family detached lots with a minimum lot size of 7,200 square feet. The property is within a proposed CFD with an estimated overall tax rate in the 1.8 percent range. The property is located north of Newport Road and east of Lindenberger Road in the community SummaryAp praisal Report - Complete Appraisal Community FacilitiesDistrict No. 2003-4 Menifee Union School District (Fa ircrestI Lennar Homes of California, In c.) Bruce W. Hu ll & Associates, Inc. Page 28 of Menifee. Shea Homes is purchasing the property on the basis of a $150,000 finished lot. The property is currently in a raw land condition. The sale is contingent upon the seller obtaining tentative tract map approval. In comparison to the subject property, this property is considered to be similar.

Data No. 2 pertains to a current escrow located at the northwest comer of Haun and Garbani Roads east of Interstate 215. Capital Pacific Homes is purchasing 128 lots on the basis of a $170,000 per finished lot. The lots have a minimum lot size of 7,200 square feet. The escrow is due to close upon the approval of the tentative tract map. There is no CFD proposed on the site at this time. In comparison to the subject property this site is similar in location, however superior in overall tax rate.

Data No. 3 is in regards to 202 single-family detached lots, which closed recently with Griffin Communities as the buyer and Stonegate Development as the seller. The lots have a minimum lot size of 7 ,200 square feet and are located at the northeast comer of Leon and Simpson Roads in Menifee. Griffin Communities is purchasing the property based on a finished lot cost of $145,000. This property is located within the Hemet School District. The property has a proposed CFD, which brings the overall tax rate to an estimated 1.9 percent. In comparison to the subj ect property, this is considered to be slightly inferiorin location.

Data No. 4 pertains to another recent sale located in the Menifeearea. The property is located at the southwest comer of Leon Road and Olive Street. Barrett American sold the 514 lots to Pulte Homes in November 2004 for $27,000,000. The property has entitlements and tentative mapping for 514 units, approximately one-half of which are single-family detached with minimum 7 ,200 square foot lots while the remaining 250+ are for attached homes. The price reported in the transaction is a blended price for the two products. Reportedly the 7 ,200 square foot lots are in the $140,000 finishedlot range, assuming a CFD on the project. In comparison to the subject property this sale is considered to be inferior due to the number of units in the transaction.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union School District (Faircrest I Lennar Homes of California, In c.) Bruce W. Hull & Associates, In c. Page 29 Data No. 5 refers to the purchase of the subject property in July 2004. The site was purchased in a raw condition based on a reported finishedlot price of $145,000. The reported price includes a proposed CFD on the site. In comparison to today's value, this transaction is considered to be slightly inferior in date of sale as it was negotiated in early 2004, prior to the first half of 2004 appreciation in the subject marketplace.

Data No. 6 refersto the July 2004 closing of 189 lots to Beazer Homes fromYia nni Michaelides. The lots have a minimum lot size of 7 ,200 square feet. This property is located at the northeast comer of Garbani and Haleblian Roads. The reported price assumes no CFD on this property. The lots are in an unimproved condition with the buyer processing a tentative tract map on the property. The closing was contingent upon obtaining tentative tract map approval. This transaction was negotiated in late 2003, prior to appreciation in the subject marketplace. The lots were purchased on the basis of a $145,000 finished lot. In comparison to the subject property this market data is considered to be similar in location, superior in overall tax rates and inferior in date of negotiation.

Data No. 7 pertains to another recent closing of 146 single-family detached 7 ,200 square foot lots. Meritage Homes purchased the property fromCSO Family, LLC on the basis of a $175,000 finished lot. According to the listing the asking price in March 2004 was a minimum bid of $155,000 per finishedlot. The property was bid up to a purchase price of$175,000. Again, this shows the appreciation in the subject marketplace in the early months of 2004. This site is located within a proposed CFD, which has been considered in the reported sales price. In comparison to the subject property this site is considered to be similar in location; however, the bidding war on the property was at the height of the market, which is considered to be slightly superior to today's market.

Data No. 8 refers to the sale of 179 single-family detached lots to Beazer Homes in March 2004 based on a finishedlot price of $147,500. The lots have a minimum lot size of 7,200 square feet. This property is not located within a CFD and was sold in a raw land condition with approved mapping in place. The lots are located at the southwest comer of Winchester and Pat Roads in Menifee. In comparison to the subject property this sale is considered to be inferior in date of negotiation (late 2003) and superior in overall tax rates. SummaryAp praisal Report - Complete Appraisal CommunityFa cilities District No. 2003-4 Menifee Union School District (Faircrest I Lennar Homes of California, Inc.) Bruce W. Hull & Associates, Inc. Page 30 The market data is summarized below.

Data Date of Finished No. Lot Size (SF) Sale Lot Price Comparison to Sub.i ect 1 7,200 Current Escrow $150,000 Similar 2 7,200 Current Escrow $170,000 Superior - Overall tax rate 3 7,200 12/04 $145,000 Inferior- location 4 7,200 11/04 $140,000 Inferior- Number of lots 5 7,200 7/ 04 $145,000 Subject Property Inferior- Date of negotiation 6 7,200 7/04 $145,000 Superior - Overall tax rate Inferior - Date of negotiation 7 7,200 6/04 $175,000 Superior - Date of Sale 8 7,200 3/04 $147,500 Superior - Overall tax rate Inferior- Date of negotiation

This market data has a price range of $140,000 to $175,000 on a finished lot basis. The lowest sale refers to a transaction involving 514 units suggest a discount due to the number of units (500±). Market Data No. 2 is not located within a CFD, which is considered superior due to the lower overall tax rate on the property. Data No. 7 was included in a bidding war at the height of the market. The remaining market data range from$1 45,000 to $150,000. The subject property has been mass graded which removes some of the risk from thepro ject.

Value Conclusion There subject lots have been mass graded and utilities are now being installed to the property. The lots have a minimum square footage of 7 ,200 square feet. There are six model homes under construction on six of the lots. We will value the homes under construction on the basis of a finished lot rather than attribute value to a partially constructed improvement. We have concluded that the subject lots have a current market value of $150,000 in a finishedcondition. As previously discussed under the Property Description section earlier within this report there are remaining costs to complete the property to a finished condition of $11,047,445. Based on our conclusions, the subject property has an "as is" value as shown on the following page.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Un ion SchoolDistrict (Fa ircrest I Lennar Homes of California, Inc.) Bruce W Hull & Associates, Inc. Page 31 228 lots x $150,000 $34,200,000 Less: Costs to Complete ( 1 1,047,445) "As Is" Value forLots $23,1 52,555 (say) $23,150,000

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Union SchoolDistrict (Fa ircrest I Lennar Homesof California, Inc.) Bruce W. Hull & Associates, Inc. Page 32 MARKETING AND EXPOSURE TIME

It is our estimation that the marketing and exposure time for the subject property, if on the market today are at the concluded value, are less than 12 months.

SummaryAp praisal Report - Complete Appraisal CommunityFacilities District No. 2003-4 Menifee Un ion School District (F aircrest I Lennar Homes of California, In c.) Bruce W Hull & Associates, Inc. Page 33 APPRAISAL REPORT SUMMARY

This appraisal assignment was to value the subject lands within CFD No. 2003-4 of the Menifee Union School District. The subject property consists of a community being developed by Lennar Homes of California, Inc. which is known as Faircrest. Faircrest encompasses two residential neighborhoods proposed for 228 single-family homes known Arbor Lane at Faircrest (115 lots) and Emerson Lane at Faircrest (113 lots). The property has been mass graded and utilities are now under construction. There are six model homes under construction, three within each neighborhood.

The Sales Comparison Approach was used to conclude a finished lot value. Remaining development costs to complete the project were then deducted in order to arrive at an "as is" value. The valuations take into account the easements and encumbrances of record, the subject CFD No. 2003-4 Special Tax Bonds and the benefitsthat accrueto the propertyby the proceeds of these bonds. The concluded value estimate forthe subject property, subject to the special tax lien, is:

TWENTY-THREE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS ($23,150,000)

All values are stated subject to the Assumptions and Limiting Conditions and the Appraiser's Certificationas of the date of value.

SummaryAp praisal Report - Complete Appraisal CommunityFa cilities District No. 2003-4 Menifee Union School District (Fa ircrest I Lennar Homes of California, In c.) Bruce W.Hull & Associates, In c. Page 34 APPRAISER'S CERTIFICATION

We certifythat to the best of our knowledge and belief:

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

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

3. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved.

4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favorsthe cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.

5. This appraisal was not based on a requested minimum valuation, a specificvaluation, or the approval of a loan.

6. Our analyses, opinions, and conclusions were developed, and this report was prepared, in conformitywith the UniformStandards of ProfessionalAppr aisal Practice.

7. We have made a personal inspection of the property that is the subject of this report.

8. No one provided significant professionalassi stance to the persons signing this report.

9. The reported analyses, opinions, and conclusions were developed, and this report was prepared, in conformitywith the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

SummaryAp praisalReport - Complete Appraisal Community FacilitiesDistrict No. 2003-4 Menifee Union School District (Faircrest I Lennar Homes of California, Inc.) Bruce W.Hull & Associates, In c. Page 35 ADDENDA TRACT MAPS 30040-1 THROUGH -5 E 10. DIRECT ION DISTANC NQ. IN ni£ UNINCORPORATED TERRITORY OF RIVERSIDE COUNTY,STATE OF CALIFORNIA O. 1• • W/ NAIL W/ A V, COUNTY c, FLOOD CONTROL WCO. ON. 0.10' RT •E L1 H 0"00'17•. E 40,62' SOUTH SIOE OF SALT CREnR CHANN L (( N 0"29' to• E 40.58'>) ANO E.AST OF BRADLEY OAD CHANNEL,E L3 N 0"29'11 • E 45,00' C2 NO REF, IN UEU OF 1' IP TAC 1435! P R II IN 0"29' 10• E 45,00'Ill TRA CT MAP 30040-1 RS 84/10-M L4 N 0"29'21 • E 356, 74' Cl /,,,. (!IN 0"29' 10" £ 357,30' ll) C4 BEINGE A PORTION OF PARCELS 1 ANO 2R TOGETHER WITH LETTERED LOTS ':E' AND 'F" INCLUSl�EE OF PARCEL MAP \310S L7 N 0"29'40" E AS P R MAP IN BOOK T2. PACES 80 TH OUGH 81, ANO PARCELS 1 TMROUGH 4 TOGETH R WITH LETTERED LOTS R"A THROUGH [fl l�t:�: 111 C5 '[' OF PARCEL MAP 16605, AS PE:R MAP RE:CORDEO IN BOOK 133, PAGE: '42 OF PARCEL MAPS, AND PARCEl.S 1 TH OUGH 4 L8 g.grn: : 3,43' V •11,• [[ = 111 INCLUSI E. TOOETHERR WITH LETTERED ELOTS THROUGHR E 'E'OF PARCEL MAP 16606, AS PER MAP RECORDED lN BOOK 93, S,!12' PAGE 86 OF PA CEL MAPS. ALL lN TH COUNTY L9 J : 2�}::;g: l 66,58' OF IV RSIDE, STATE OF C�LIFORNIA, LYING WITHIN SEC, 33, TSS., R3W, [[( 111 s.s.e.M. L10 � 8�:grn: : 66,59' 720, 75 ' RICK ENGINEERING COMPANY PROCEDURE OF SURVEY MARCH, 2005 720,8\'l]] L 11 [[(� :f:�rn:: 838,42' C[CN e2•1 s·o9• • 838,37')]] N.T.S, L12 N e2•01 •13• W 315,69' P.!116.1" 11@58 $-j I IN 12•34• 49" rW 31 5, TO' ll :.1-. �=-1 L13 N 12•01 •13• 375,24' �HI '!1'11�/'ll�H18 ENGINEER'S NOTES .....__ [((N a2�34• 49" I' 375,46' ]]] E T IC!ffl!EH 1, Tl!E BASEIS OF B ARINGS FDR TH IS MAP IS THE CENTERl lNE OF BRADLEY ROAD BETWEEN au LAZY CR E� ROAD ,5. NOPORT ROAD PER TRACT MAP 6252, MB 17/J SHOWN AS N0" 33' 19"E. C!Xl��Wll!l 2. INDICATES FOLINO MONUMENT AS SHOWN.

R 3, llllDICATES SET 1 • I ON PIPE TAGGED R,C,E, 33591, FlUSH. E E 4, INDICAT S FOUND 1 • 1,0, ,c 18" l,P. TAG6ED R,C, . 14358 , FLUSH, s. PER RS 84/10-14 ALL 111'.t!UMENTS SET ARE PER RIVERSIDE COUNTY ORD INANCE 461 ,9, 6. TH IS TRACT CONTAINS 19. 72 ACRES GROSS, 7, DRAINAGE EASEt.(NTS SHALL BE KEPT FREE OF BUILDING AND OBSTRUCTIONS,

8. ALLE MONUMENTS SHOWN SEET SHALL BE SEl IN ACCORDANCE E WITHE TH MCINUMENTAT ION AGR EMENT FOR THIS MAP UNLESS OTH RWIS \ NDTEO. \ 9, TH IS TRACT CONTAINS !3 RESIDENTIAL LOTS. FD, Tf.P. WI 10, ---- ··········{NOICATES SUBDIVISION BOUNDARY, NAIL ANO TAG R llLEGIBLE � I . RAD ...... iHOICATES ADIAL BEARING, DOWN 0.40' PER E E E 12, ( l ...... IN OIC.1.TES R CORD P R TRACT PARC L MAP 27782 PM8 186/36-40 E R 13, ( ] ...... '."""" "·I DICAT S . · N ECORD _PER. . TRACT _13706-1 MB 109/86-�4 _ H, ) , ...... , ...... IND ICATES RECORD PER TRACT 6252 MEI 1713 E ER E 15, ( I )I ··-...... INDICAT S RECORD P PARC L MAP 21445 PM8 141 /T2-H E 16, [[ J3 ...... JND ICAT S RECORD PER RS 80/TO E E IT, « )) ... , ...... IND ICATES R CORD P R PARCEL MAP 13105 PMS 72/80-�l E E 1 8. ((( I)) . ... ,... .. , ...... (N D I CATES R CORD P R PARCEL MAP 13752 PMB 75/67, E E 19, ([[ ]J] ...... , ..(N DICATES R CORO P R RS 84110-1 4,

A E E E 20, RLEAD ANO OISEC STAll' D R,C. . 33591 , S T FLUSH, 0<11 ( tv.co.sro. " "l, IN TOP OF CURB AT PROLONGATION OF � SIOE LOT LINES,E ALSO FOR E, c. 'S • e.c., s AND CURI! RETURNSE E ; cr::ii:oz ON A LINE PROJ CTED ON AE RAO IAL TO THE PROPERTY LIN CURV , 336.84' -w 19 20 �� 2!. A 1" IRON P JPE II ITH TAC R. C.t, 33591 , SETE FLUSH L,JCJ IRIV. CO. STD, "A"J At 4LL REARE LOT CORN RS ANO ANCLE POINTS ...JLL. IN LOT L !MES UNLESS OTHERWIS INOICATEO, �� 00 6 c::-

E .&.Of'F R OF DEDICATION PER PMB 72180-81, PMB 93/86 ANO PMB 133/42,

l'(Oll1'1 · 300 a 600 900 SEC. 33, TSS, R3W, S.B.B.M., SCHEDULE A, J.P. NO. 030051 No, DIRECT I CN DISTANCE IN THE UNINCORPORATED TERRITORY OF RlVERSIIE COUNTY, STATE OF CALIFORNIA - ° SHEET 2 OF 4 SHEETS L 1 <«N 0"00'17" E i:11<«'N 89 30'50' W 217, 93'»> «N 0-29' 10" E IN 89'30'50' II 218,03' ) L2 « C ! IN 0'29' 10" £ L19 «» LlO m� g:il:1g: � C3 «<82'29' 18' 55.00' 79 . 1 a•»> TOO MIAP 'ii@&8 l-3l PROCEDURE OF SURVEY L 12 � C4 513,00' Wi &:irn:i cs nm:�rg: 513.00' �Im 1111�/11� ·'118 L 13 <«N 82"01 ' 13" II 447,00' IN 82'34'49' W 8/UT Cli8lfH L14 (((N 81'39' 17" I I H 12' 15'09' I CODUJOOl!ll. L15 <«N 82"01 '13" I SEE DETAIL CIN 82' 34 '49" W "B• LI 6 «< N 82'01 ' 13' W ENGINEER'S NOTES [ I IN S2' 34' 49• I 1, TI,E BASIS OF BE.t.RINGS FOR TH IS MAP IS THE CENTERLINE OF BRADLEY ROACl BETwEEN LAZY CREEK ROAD 4. NEWPORT ROAD PER TRACT MAP 6252, MB 1T /3 SijOWN AS NO' 33 ' 19 "E . N.£.COR. PAR. 1 2. � ...... INDICATES FOUND MONUMENT AS SHOWN.

3_, @,, ..... INDIC4TES FOUND 1" IRONI PIPE TAGGE.O R •.C.E, 33591 , PE.R TRACT MIIP 300�0-1 MB 4. 0 ...... , INDICATES SET 1• IRON PIPE TAGGED R,C,E, 33591, FLUSH, 5- • ...... i��l�flMW-��1• 1,0, ,: 18" l,P, TAGGED R,C,E. 14358, FLUSH, 6, ALL MONUMENiS SET ARE PER RIVERSIDE COUNTY ORDINANCE �61 .9, 1. THIS TRACT CONTA INS 9,13 ACRES GROSS. 8, DRAIN.t.GE EASEMENTS SHALL BE KEPT FREE Of BUILDING AND OBSTRUCT IONS, 9, ALL MONUt.tENTS SHO'*'N SET SHALL BE SET IN ACCORDANCE WITH THE MONUMENTATION AGREEMENT FOR TH IS. MAP UNLESS OTHERWISE NOTED, TH IS TRACT CONTAINS 35 RESIDENTlAL LOTS, ---- ...... iNDICATES SUBDJVISIDN BOUNDARY, FO. 1' I.P, NI NAIL AND TAG LS 5570 DOWN 0.10'. 12, RAD ...... 1NO I CATES RADIAL eEARING, CL, INTERSECTION LAH CREEK1 RO. AND BRADLEY RD, ) ...... RCEL MAP 27TB2 PMB 186/38-�0. O:El�· GED 13. . iNDICATES RECORD PER TRACT PA [� )�i3 1\�� 14, ...... 1ND ICATES RECORD PER TRACT 13706-1 MB 109/86-9�. IP. FD. 1' IN PLASTIC PLUG 15, ...... rnDICATES RECORD PER TRACT 6252 MO 17/3 , R.C.E. 17550 FLUSH IN A.C. 16, ll ll ...... HIDICATES REC!lftO PER PARCEL MAP 21445 PMS 141/72-74, � ��i��R�� Ji,· WA�K � AVE. 11, [[ ]] ...... IN DICATES RECORD PER RECORD OF SURVEY 80/TO, f l PARK AVE 18. « )) ...... , ... 1NQICATES RECORD PER PARCEL MAP 13105 PMB 72/80-81, 19. (I( )JI ...... ,tND ICATES RECORD PER PARCEL MAP 13152 PMB 75167, 20, [[[ ])] ...... ,t NO IC.I.TES RECORD PER RECORD OF SURVEY 84/10-14.

21 . ((( })) ...... INDICATESI RECORD AND MEASURED PER TRACT MAP 30040-1 Ma • 22 , A i.EAD AND DISC STAMPED R.C. E, 33591 , SET FLUSH, lRiV.CO,STO, 'E 'J, IN TO!' Of CURB AT PROLONGATION DF SID£ LOT LINES- ALSO FOR E-C-'S . e.c. ·s ANO CURB RETURNS ON A LINE PROJECTED ON A DRADIAL TO THE PROPERTY LINE CURVE, UNI.ESS OTHERWISE INDICATE . 23. A 1 • IRON PIPE WITH TAG R, C, E, 33S91 , SET FLUSH

24, C. C. & R's, RECORDED AS INST. #

EASEMENT NOTES

ACCEPTING 30' AND 60' EASElo(NTS, TOCETHER WI TH CORNER CUTBACKS PER INSTRUI.IENT ND, 20899, RECORDED FEBRUARt 21, 1975 A RESOLUTION FDR ROAD AND UT ILITY USES SEPTEMBER 2, 1982 AS JIISiRUMENT NO, 153179, . & LlC T lTY AN IRREVOCABLE OFFERE s OF DEl>ICATIOHFOR PUBLl Y b RDAII,o�A�Ert.S P� I � t.h f�RRt�M.smi: A� 1�Sl��,l�¥�0?'2�° ¥�: OFf E , R c OED

ENVI RONMENTAL CONSTRAINT NOTE SCALE I' = 300' BlVIROtlMENTAL CONSTRAINTS SHEET AFFECTING THIS M�P IS ON FILE IN THE COUNTY OF RIVERSIDE TRMiSPORTATION DEPARTMENT-SURVEY DIVISION, IN E.C.S. - BOOK , PAGE • THIS AFFECTS All LOTS. 300 0 300 soo 900 IN THE UttlNCORPORATED TERRITORY OF RIVERSIDE COUNTY,STATE OF CALIFORNIA TRA CT. MAP 30040-3

MARCH, 2005 'Ill fD. !' I.P. NAIL W/TAC RIV. COUNTY fLOOO CONTROL WCD.DN. 0. 10' RT II SDUT'H SIDE OF SALT CREEK CHANNEL .I.NO EAST DF BRADLEY RDADA C�ANl'IEL, NO REF, IN LIEU OF 1' IP T G 14358 PER RS 84110-14 ENGINEER'S NOTES . 1, THEA BASIS OF BE.I.R INGS FDRTi' IISA MAP ISR THE CENTER� INE OF BRADLEY ROAD BETWEEN L ZY CREEK ROAD & NEWl'CflT RO D PER T ACT UAP 6252, M8 1113 SHOWN AS N0'33'19"E . 2, ...... INDICATES FOUtlO MONUMENT .I.S SHOWN, A 3, @ ...... INDICATES FOUND 1• IROHI PIPE T GGED R,C,E, 33591 . PER TRACT MAP 30040-1 M6 T 4. • ······· INDICA ES FOUND 1• 1.0, x 18" I.P, TAGGED R,C.E, \4358, FLUSH, PER RS 84110-14 A 5, ..t.. ······· INDIC TES FOUND 1" IRONI PIPE. TAGGED R,C.E, 33591 , PER TRACT MAP 30040-2 118 6, 0 ...... INDIC TES SET 1" IRON PIP£ TAGG£0 R.C.E. 33591 , FLUSH. A R · 1, ALL MONUMENTS S£T ARE PE RIVERSIDE COUNTY ORD INANCE 461 .9, A A 8, TH IS lRACT CONT INS B,4D CRES GROSS. 9. DRAINAGE EASEMENTS SHALL BE KEPT FREE OF BU ILDING AND OBSTRUCTIONS, 10, .QL r.()HUI.ENTS SHOWN SET SHALL BE SET IN ACCORDANCE WITH THE MONUMENTATION AGREEMENT FOR TH IS MAP UNLESS OTHERlllSE NOTED 11, THIS TR.I.CT CONTAINS 32 RESIDENTIAL LOTS. 12, ---- ...... ·-INOIC.1.TtS SUBD IVISION BOUNDARY, A RAD ·· " • 1 FD, 1' I.P.fl/ NAIL ND 1 3, ··· ·········· · · NOIC.1.TES RADIAL BEARltiG, TAG LS 5510 DONN 0.10'. 1'l, ( ) •·• ······ ..···:·····-INDI CATES RECORD PER TRACT PARCEL MAP 277112 M8 11l613B-10 CL, INTERSECTION LAZY . T CREEK RD,Atjp BRADLEYGED RO. IS, [ ] ...... ,-INDICATES RECORD &MEASURE PER TRAC 1370t-1 MB 10�/8&-94 [1 �if3 i£i��:- ��\ 16. >····················-INDICATES RECORD & ME.I.SURE PER TRACT 6252 17/3 17- (( )) ., ...... rnDICATES RECORD & loEASURE PER TRACT 21��5 PMS 111/72-74 18., [[ ll-··················-INDICAfES RECORD & ME.I.SURE PER RECORD OF SURVEY MB eo,ro 1!1. « )) · ...... ,.JNDICATES RECOR!) PER PARCEL MAP 131 OS PMB. 72/80-81 20. (l( ))J •..•..•....•.•.•..••JND IC.I.TES RECORD PER PARCEL MAP 13752 pi,e 75/67. �1. [[[ ]]l ...... JNDICATES RECORD PER RECORD OF SURVEY 84/1 0-14, R 2:2, ((( ))) ···················INDICATES RECORD & ME.I.SURE PER T ACT MAP30040-1 Mii / 2:. .I. LEAD AND DISC STAAl'ED R. C.E. 3359 1, SET Fl,.USH, 11:11v.co. sro. "E"l, 'IN TOP OF CURB .I.T PROLONGATIONOF SIDE LOT LINES, ALSO FOR E,C.'S • e.c. ·s· AND CURB RETURNS , .a. Dl.1.L TO THE PROPERTY LINE C URVE 8';tMl�M��iP��orc M� .I. I"1 IRON PI0PE WITH T.I.G R.C.E, 33591 , SET FLUSH �0/Ei Nl� ERS AND ANGLE POINTS rn u..:�;J�l�� 1�PMn ...���

25, . C.C. & R's, RECORDED AS INST, # EASEMENT NOTES A o R E CUTB C S �m5M' ��. c�m A K & �f�Em��J2�T �&. 6g�,�� :��DE� .... .I. RESOLUTIONR FOR ROAD .I.ND UT ll!TY IJSES SEPTEMBER 2, 1982 AS ,- INST UMENT NO. 153179. £_ AN EAY:MtNT FOR PUBL IC UTILITIES ANO INC IDENT.1.L PURPOSES GRANTED TO C.1.LIFORNIA ELECTRIC POWER CDI.P�HY RECOROEO JUNE 21 , 1950 IN BOOK 11U, PAO[ 31. UNDETERMINED WIDTH &. EASEMENT FOR PUBLIC ROAD, PUBLIC UTILlflES ANO INCIDENTAL l'U!!POSES PER INST. s NO 233.6S, D.R.11/22/ 197 7 P!l)�'.T':" ;-• MAR 1 B 2Dn5 ENVIRONMENTAL CONSTRAINT NOTE SCALE. I' = 300' . ENVIRONMENTALT CONSTRAR INTS SHEETAFFECTING THIS MW IS ON FILE IN N D mt DEP.1.RIMENT-SIJIIVEY DIVISION. IN E.C.S. J�/� PAir �f� f,/ft:t:'� r---.. 300I 600I 300 0 900 SEC. 33, T5S, R3W, S.B.B.M., . SCHEDULE A, I.P. NO. 030106 o. IN THE UNINCORPORATED TERRITORY OF RIVERSIDE COUNTY, STATE OF CALIFORNIA TRA CT MAP 30040-4 PARCELS 1 i\NO 2 TOGETHER WITH LETTERED LOTS A, 8, C, E AND C OF PARCEL MAP 12764, AS PER MAP RECORDED IN BOOK 0 64, PAGES 9T AND 98 OF PARCEL MAPS, IN THE COUNTY or RIVERSIDE, STATE OF ���--�-�- LENGTH CALIFORNIA, LYING WITHIN SEC. :n, T5S, R3W, S.8.8.M. C1 ({(19•59•43• 300.00' 104-69'>» C2 «<19'59'52" 300.00' 104. 71 '))) RICK ENGINEERING COMPANY FO,f•'PROCEDURE l,P, NO TAG OF SURVEY MARCH, 2005 C3 «<82'29'18* 55,00' 19. ,a·»> ON. 0.2'l!EF. PM 186/ 38·40 C4 513,00' SET 1' I.P. TAGCEt> ll.C.E. ', 513.00' / •33591 FLUSH ' cs 40,00' / { l!ftADLEY"""'1 ROAD \ N.T,S, fMl£P 1@1 8 3-2 I i4 1997, 1�' (1997,20] \ 1111 111�/11� -18 1341.or � I J ENGINEER'S NOTES ,I rNB9"5 ·so-w 132� 1, THE BASIS OF E B ARINGS FDR THIS II.AP IS THE CENTERllNE OF BRADLEY ROIID BETWEEN L45 I LAlY CR£EK ROAD & NEWl'ORT ROAD PER TRACT MAP 6252, MB 1713 S!!OWN AS N0'33'19"E. UD..T CHH Lt NEWPORT RO,Jf ' / z. e ...... INDICATES FOUND MONUMENT AS SHOWN, EECIHlAIHIIM!E!l. ' DETAIL 'D' / S , ,,, DETAIL'S' ""' 3. ® ...... INDICATES FOUND 1 • IRON PIPE TAGGED R,C,E . 33591, L1J "-�·�:.--- PER TRACT MAP 30040-1 II! I = F'D. l' J,P IN PLASTIC PLUG LS 4, 0 ...... INDICATES SH 1 • IRON PtPE TAGGEO R,C,E, !3591 , FLUSH. TJ::l����'J!!!!...::..e�,� -::'l'w:;��-5..i-...c Ti"'. 3962 FWSH. IN A.C. CL. BRADLEY RO, o SOUTH SIDE 5, .& ...... i�� �m N E TAGGED R: c.E. , R/W OF SALT CREEK CHANNEL l � goi�o��DNl,l t . E PER RS 84/10·t4 RS 78/41 6, • ...... INDICATES FOUND ,. r.o. x 18" J.P. TAGGED R,C, , 14358, FLUSH. PER RS 84/10-14 7, ALL MONUMENTS SET ARE PER RI YERSIDE COUNTY ORDINANCE 461 . 9. a. T� IS TRACT CONTAINS 9,9� ACRES GROSS, 9. ORAi.NAG£ EASEMENTS SHALL BE KEPT FREE Of BUILDING AND 08STRUCTIONS, ALL MONUMENTS SHOWN SET SHALL BE SET IN ACCORDANCE WI TH THE MDNUMENTATION AGREEMENT FOR THIS MAP UNLESS OTHERWJ SE NOTED, THIS TRACT CONTAINS 39 RESIOENTlAL LOTS, -- ...... INDICATES SUEIOIVISION BOUNDARY. RAO ...... : ...... INDICATES RAOIIIL BE�RING,. . ( ...... INDICATES RECORD PER TRACT PARCEL MAP 21782 MB 186/38--40 ...... tNDICATES RECDRO & M::ASURE PER TRACT 13706-1 MB 109/86-94 FD. 1' l,P, IN PLIISTIC PL!£ R.C.E. 17550 FLUSH IN A,C, ACC£PTEO AS C� INT, R BRADLEY O. AND PARK :1bARKAVE :s� ;l; � �t� S

E I R c�:�� CUTBACKS & ��rm��u��T 'i:8.eg�e��� ���EmJ��M I�. A RESOLUTIONOF ACCEPTANCE FOR ROAD ANO UTILITY USES E O SUR ,. FLUSH, SEPTEMB R 2, 1982 AS INSTRUMENT ND, 1531 19, ��· f6 ��.PsE'r.Yif . Y INTERSECTION CL. N£WPORT RD, T R N R s • EVANS RD, PER PMS IT/3 £ 1�s����� NFJ. e��� � ��. � l����o:t&����f¥� iHPco�m· .: RIVERSIDE.

&.AN EASUE'.NT FOR smEET '-HD P,U,E PER PM 12764, PMS 64/97-98 ANO ALL PER RESOLUTION Of ACCEnANCE FOR ROAD AND UTILITY USES ENVIRONMENTAL CONSTRAINT NOTE SEPTEMBER 2, 1982 AS tNSTRUI.IENT NO, 153179, ENVIRONMENTAL CONSTRAINTS SllfET AfFECTING THIS MM' IS ON FILE IN 900 THE COUNTY OF RIVERSIDE TRANSPORTATION OEPARtMENT·Sl.f!VEY DIVISION. IN E.C,S, BOOK , PAGE • THIS AFFECTS ALL lOTS. SEC. 33, TSS, R3W, S.B.B.M,, SCHEDULE A, J.P. NO. 030107

----·-··-·· ...... -··-·------·-···---··· ..··- .... -...... _._ ...... ,.______...... _...... _.... . ,. '-_- --·- : -- � ...... -·-· ___ .,�.

No.------. DIRECT IDH No.------DELTA ----RADIUS LENGTH IN THE UNINCORPORATED TERRlTORY OF RIVERSIDE COUNTY,STATE OF CAUFDRHIA LI «< N 0-29'11" E C1 «) ...... INDICATES RECORD PER T ACT MAP 30040-1 MEI � � .... � I I I 22...... INDICATES RECORD PER TRACT MAP 30040-1 MEI ; ��� E E 23. A L AD AND DISCE STAt.f'ED R.C.E. 3359RB 1, SRT FLUSH, lR[v.co.sro. · "J. IN TOP OF CU AT P OLONGATION OF SID£ LOT LlNES,ALSO FOR E-C-'S • B,C.E'S AND CURB RETURNS ON A LINE PROJECTED ON A RADIAL TO TH PRa>ERTY LIN! CURVE, !Jll.ESS OTHERWISE INDICATED; E 24. A 1· IRON PIPE WITH TAC R.c.[.R 33591· S r FLUSH !IUY. CD, STD. •A• I AT ALL EAR LOT CORNERSE ANO ANGLE POINTS IN LOT LINES UNLESS OTHERWISE INDICAT D. E 25. - LLLLLLLL. ··········· INDICATES. R STRICTED ACCESS, EASEMENT NOTES IUN CITY A R & AN. EASf.MENT FDR DRAIN GE OITCHES RECORDED JANUA T 23, 1915, AS 8757, O,R. . INSTRUMENT NO. , £ AN EASEMENT FOR INC IDENTAL PURPOSES AS SHOWN ON PM 12T64 - ., • PMB 64/97-'38 r.:.,,_,,;�·� .1 R M��J�}O::t�s�m.ANOU TILI TY U SES SEPTEMBE 2 . \ 982t,it� 1 '1 2005 �OR1'l!SID! ·•• t ENVIRONMENTAL CONSTRAINT NOTE E uB s R R A ENYIRONMENTAL CONSTRAINTS SHEET AFFECTING THIS MAP IS OM FllE IN & ��,�� f� J� : ��p�m:�� Rm:irn �M�:�� �.c����� �{ INSTRUMENT NO. 152246, D.R. RO BTHE COUNTY OF RIVERSIDE TRANSPORTATION DEPARTMENT-SURVEY OIVISION, IN E.C.S. 300 600 900 I OOK , PAGE • THIS AFFECTS AU LOT$. NO SCALE SEC. 33, T5S, R3W, S.B.8.M., SCHEDULE A, I.P. NO. 030108 APPRAISERS' QUALIFICATIONS QUALIFICATIONS OF BRUCE W. HULL, MAI

Business Locations: 1056 E. Meta Street, Suite 202 Ventura, California93 001 (805) 641 -3275 * Facsimile (805) 641 -3278 E-Mail Address - [email protected] Direct Correspondence to Ventura Location

115 E. Second Street, Suite 100 Tustin, California 92780 {949) 581-2194 * Facsimile (949) 581-21 98

Bruce W. Hull & Associates, Inc. is an appraisal firm that provides a wide variety of appraisal assignments for public agencies, developers and financial institutions.

The principal! Bruce W. Hull, MAI, has been in the appraisal field since graduation in 1969 from Westmont College, Santa Barbara. After being employed by the Ventura County Assessor's Office forfive years, he established an appraisal company in Orange County in 197 4. In August of 1995 he established . an office in Ventura while maintaining an Orange County location. While most of the appraisal assignments are in Southern California, assignments have been completed in areas from San Francisco/Bay Area and Lake Tahoe to San Diego.

The appraisal assignments completed have been diverse in nature, including such property types as large masterplanned developments, shopping centers, large retail uses, and mitigation land. A brief summary of the more challenging assignments is given on the following pages.

MASTERPLANNED DEVELOPMENT

These are typically more than 1 ,000 acres in size and have a wide variety of residential product, often ranging from condominiums to large estate type of properties. In addition, there is oftena commercial use within the development. I have been involved in the following projects.

Lake ShelWOod, Hidden Valley Wood Ranch, Simi Valley Rancho San Clemente, San Clemente Towne Center, Rancho Santa Margarita Rancho Trabuco North and South, Rancho Santa Margarita Hunters Ridge, Fontana The Corona Ranch, Corona Mountain Cove, Temescal Mountain Gate, South Corona The Foothill Ranch, Corona Orangecrest, City of Riverside Aliso Viejo, County of Orange Talega Valley, City of San Clemente/County of Orange Otay Ranch, City of Chula Vista

RETAIL USE

Consultant to City of Long Beach regarding a 30 acre· site (Long Beach Naval Hospital) which the City was acquiring from the US Navy for inclusion in a 100 acre shopping center site.

Towne Center; Rancho Santa Margarita, is a masterplanned project which contains two shopping centers (Towne Center, 160,000 SF plus a Target Store, 122,000 SF; Plaza Antonio, 165,000 SF).

Mission Grove, City of Riverside, is a 395,362 SF center which included a K­ MartDepartmen t Store among the major tenants.

Victoria Gardens Masterplan was a proposed mixed use project consisting of 3,065 acres of land which included a mixture of residential (2, 150 acres); commercial (335 acres of which 91.9 acres was a regional center site); schools; parks; and open space for the remainder of the lands.

Menifee Village! Riverside County, is a 1977 acre masterplanned development which had approvals for 5,256 units. The assignment included the valuation of Planning Area 2-7 which was a commercial site that had been developed with a Target Store, Ralph's Market, and in-line stores (190,000 SF with eventually being a 257, 000 SF center).

MITIGATION LANDS

These assignments involved valuing lands that are considered mitigation lands which are often acquired by public agencies or nonprofit organizations.

Balsa Chica, Huntington Beach, a 42-acre site which was part ofa larger wetlands conservation program. This particular acreage was unique since it was subject to "tidal flushing" and had both fresh and saltwater impacting the lands. This assignment was completed for Metropolitan Water District.

San Joaquin Marsh, City of Irvine, consisted of approximately 289 acres of wetlands which were acquired for use as a "buffer" zone by the Irvine Ranch Water District.

-2- Eagle Valley, a 1072-acre parcel near Lake Matthews in Riverside County, was acquired by Metropolitan Water District foruse as a water treatment plant and buffer zone.

Poormans Reservoir, Moreno Valley, a 38-acre site acquired by the City of Moreno Valley for preservation/open space use.

ASSESSMENT DISTRICTS/BOND ISSUES

Have been involved in the appraisals of the following Bond Issues regarding Community Facilities Districts and/or Assessment Districts. (This represents a partial list of assignments completed from 1990 thru Present.)

CFO No. 9 (Orangecrest - lmpr. Areas 1, 3 & 5); City of Riverside CFD No. 2000-1 (Crosby Estate @ Rancho Santa Fe); Solana Beach CFO No. 2001-01 (Murrieta Valley U.S.D.);Murrieta CFO No. 90-1 (Lusk-Highlander); City of Riverside Otay Ranch SPA I - CFO No. 99-2; City of Chula Vista CFO No. 7 (Victoria Grove); County of Riverside ··, CFD No. 10 (Fairfield Ranch); City of Chino Hills CFO No. 2000-1; Tejon Industrial Complex; Lebec CFO No. 99-1; Santa Margarita Water District CFO No. 97-3; City of Chula Vista CFO No. 2 (Riverside Unified School District); City of Riverside CFO No. 89-1 ; City of Corona Lake Sherwood A.D. Refunding; County of Ventura CFO No. 9; City of Chino Hills CFO NO. 88-1 2; City of Temecula CFO No. 90-1 (Refunding); City of Corona A.O. No. 97-1-R; City of Oxnard A.O. No. 96-1; Valley Center Municipal Water District; San Diego County A.O. No. 96-1 ; City of Oxnard CFO No. 88-1 (Saddleback Valley Unified School Dist.); Rancho Santa Margarita CFO No. 89-2 (Saddleback Valley Unified School Dist.); Rancho Santa Margarita CFO No. 89-3 (Saddleback Valley Unified School Dist); Rancho Santa Margarita Centex A.O. No. 95-1; City of Corona Coyote Hills A.O. No. 95-1 ; City of Fullerton Sycamore Creek A.D. No. 95-1; City of Orange Prop. CFO No. 2 (Riverside Unified School District); City of Riverside CFO No. 91-:-1 ; City of Rancho Cucamonga Prop. CFO No. 2; City of Chino CFD No. 9; County of San Bernardino A.O. No. 89-1; City of Corona CFO No. 87-1 (Series B); City of Moreno Valley CFO No. 90-1 ; City of Corona

-3- CFO No. 89-1; (Saddleback Valley Unified School District); Orange County A.O. No. 96-1; City of Oxnard A.O. Nos. 86-3, 87-1 and 89-1 (Refunding); City of Oxnard CFO No. 90-1 ; City of Corona CFO No. 1 (Refunding); City of Jurupa CFO No. 88-12; City of Temecula

PARTIAL LIST OF CLIENTS

Have completed appraisal assignments for a wide variety of clients. A partial list of these includes the following.

Anaheim City Unified School District Bank of America NT & SA Bank of Montreal Bear, Stearns & Co., Inc. Best Best & Krieger LLP (Law Firm) Carpinteria Valley Unified School District Chino Unified School District Citicorp, N.A. City of Brea City of Chino City of Chino Hills City of Chula Vista City of Colton City of Corona City of Fullerton City of Huntington Beach City of Jurupa City of Mission Viejo City of Moreno Valley City of Orange City of Oxnard City of Rancho Cucamonga City of Riverside City of San Bernardino City of San Marcos City of Temecula Coast Federal Bank Colton Join� Unified School District County of Los Angeles County of Orange County of Riverside County of San Bernardino County of Ventura

-4- Downey Savings and Loan Federal National Mortgage Association (FNMA) Federal Deposit Insurance Corporation (FDIC) Fieldman, Rolapp & Associates (Financial Consultants) Irvine Ranch Water District Irvine Unified School District Jurupa Community Services District Metro bank Metropolitan Water District Meserve, Mumper & Hughes (Law Firm) Munger, Tolles & Olson LLP (Law Firm) Murrieta Valley Unified School District Rialto Unified School District Riverside Unified School District Saddleback Valley Unified School District Santa Margarita Water District Sidley & Austin (Law Firm) Solana Beach Unified School District Southern California Edison Company Stone & Youngberg LLC (Bond Underwriters) Talmantz Aviation The Irvine Company Wells Fargo Bank Wells Fargo Mortgage Company Weyerhaeuser Mortgage Company

COURT EXPERIENCE

Qualified Expert Witness in the following courts:

United States District Court/Central District of California, Los Angeles Los Angeles County Superior Court Orange County Superior Court Riverside County Superior Court Ventura County Superior Court

ORGANIZATIONS

Member - Appraisal Institute (No. 6894)

-5- LICENSES Certified General Real Estate Appraiser (AG004964) State of California; Expires April 15, 2004 Licensed Real Estate Broker (00821209) State of California; Expires August 15, 2004

GUEST SPEAKER (for) UCLA Symposium on Mello Roos Districts - 1988

"Exploring the Rumors & Realities of Land Secured Debt in California" - Conference sponsored by Stone & Youngberg, LLC, bond underwriters, held in Los Angeles on January 15, 1992

"Appraisals for Land Secured Financing" presentation for Stone & Youngberg, LLC, bond underwriters, held at San Francisco Headquarters on March 5, 1998

UCLA Symposium on Mello-Roos Districts - 2001

MISCELLANEOUS Member Advisory Panel to California Debt Advisory Qommission regarding Appraisal Standards for Land Secured Financing (May 1994 and March 2003)

-6- QUALIFICATIONS OF KAREN S. SIINO, MAI

EDUCATION

Bachelor of Arts in Business Administration , Financial Investments, California State University, Long Beach, California (1980) Post-graduate Study, Real Estate Development , University of California, Irvine, California Appraisal Ipstitute Classes : Uniform Standards of Profes­ sional Appraisal Practice , A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization ; Advanced Income Capitalization; Narrative Report Writing ; Advanced Applications , Case Studies . Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and passing the Comprehensive Exam for the Appraisal Institute . Became a Member of the Appraisal Institute in December, 1996 .

EMPLOYMENT

1985 - Present Associate Appraiser for various MAI 's. Duties Include the appraisal of various types of properties such as conunercial , retail, industrial and vacant land . Specialty properties include easements, right­ of-ways and special assessment districts. From 1985 to 1988 worked part-time; from 2/88 full-time . 1986 - 1988 Project Manager of Development for Ferguson Partners, Irvine , California. Duties included finding land ; review of fee appraisals and valuations ; analysis of proposed development ; planning and design; management of development , construction and lease-up . The types of properties developed were conunercial and indus­ trial . Duties ranged from raw, vacant site develop­ ment through property management of recently devel­ oped projects . 1981 - 1986 Manager of Finance, Construction for Community Development Division , The Irvine Company , Irvine , California . Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions . Worked with analysis and budgets for Community Development Division . Coordinated with cities in forming new Assessment Districts to finance major infrastructure improvements . Types of proper­ ties were apartments and single family residential lots on a for sale basis to apartment and home builders . 1980 - 1981 Investment Counselor , Newport Equity Funds, Newport Beach, Cali fornia. Duties included obtaining private financing for residential p'roperties and working with appraisals of properties and analyzing the invest­ ments .

LICENSES

Real Estate Sales Person , State of California, 1980 Certified General Appraiser, State of California (#AG004793)

ORGANIZATIONS

MAI #11145 - Appraisal Institute APPENDIX D

SUMMARY OF FISCAL AGENT AGREEMENT

The following is a brief summary of the provisions of the Fiscal Agent Agreement ("Agreement"). This Summary is not intended to be definitive. Reference is made to the actual document (a copy of which is available fromthe District) forthe complete terms thereof.

DEFINED TERMS

The following terms have the following meanings, notwithstanding that any such terms may be elsewhere defined in this Official Statement. Any terms not expressly defined in this Summary or previously defined in this Official Statement have the respective meanmgs previously given. The following are not all of the terms definedin the Agreement.

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

"Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of the District: the costs of computing the Special Taxes and of preparing the annual Special Tax collection schedules (whether by the Superintendent or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent forthe Bonds; the costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required of it under the Agreement; the costs of the District or its designee or an obligated person in complying with the disclosure requirements of applicable fe deral and state securities laws and of the Act, the District's or obligated person's Continuing Disclosure Agreement and the Agreement including those related to public inquiries regarding the Special Tax and disclosures to Owners and the Original Purchaser; the costs of the District or its designee related to any appeal of the Special Tax; any amounts required to be rebated to the fe deral government in order for the School District to comply with fe deral law; and an allocable share of the salaries of the School District staff directly relating to the foregoing. Administrative Expenses shall also include amounts advanced by the School District for any other administrative purposes of the District including costs related to prepayments of Special Taxes; recordings related to the prepayment, discharge or satisfaction of Special Taxes; amounts advanced to ensure compliance with fe deral rebate requirements; and the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Taxes.

"Agreement" means the Fiscal Agent Agreement, as it may be amended or supplemented fromtime to time by any Supplemental Agreement adopted pursuant to the provisions therein.

"Annual Debt Service" means, foreach 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 (including by reason of the provisions of the Agreement, providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to the Agreement.

D-1 "Authorized Investments" or "Permitted Investments" means, subject to applicable law:

(i) Federal Securities.

(ii) direct obligations for any of the following fe deral agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations rated "Aaa" by Moody's (as definedherein) and "AAA" by S&P (as defined herein) issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC); obligations of the Resolution Funding Corporation (REFCORP); and senior debt obligations of the Federal Home Loan Bank System.

(iii) Registered state warrants or treasury notes or bonds of the State of California (the "State"), including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short-term or long-term rating categories by either Moody's or S&P, and which have a maximum term to maturity not to exceed three years.

(iv) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, including the Fiscal Agent or its affiliates, or a state or fe deral savings and loan association; provided, that the certificates of deposit shall be one or more of the following: ( 1) continuously and fully insuredby the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (i) or (ii) of this definition of Permitted Investments which shall have a market value, as determined on a marked-to-market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates of deposit.

(v) Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or S&P, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an "A" or higher rating for the issuer's debentures, other than commercial paper, by either Moody's or S&P, provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20 percent of the proceeds of the Bonds invested pursuant to this definitionof Permitted Investments.

(vi) A repurchase agreement with a state or nationally charted bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the following conditions are satisfied: ( 1) the agreement is secured by any one or more of these securities described in subdivision ( i) of this

D-2 definition of Permitted Investments, (2) these underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least one hundred million dollars ($100,000,000) and which is independent of the issuer of the repurchase agreement, (3) these underlying securities are maintained at a market value, as determined on a marked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested.

(vii) An investment agreement or guaranteed investment contract with, or guaranteed by, a financial institution the long-term obligations of which are rated "Aa3" or "AA-", respectively, or better by Moody's and S&P at the time of initial investment. The investment agreement shall be subject to a downgrade provision with at least the following requirements: (1) the agreement shall provide that within five Business Days after the financial institution's long-term unsecured credit rating has been withdrawn, suspended, other than because of general withdrawal or suspension by Moody's or S&P fromthe practice of rating that debt, or reduced below "AA-" by S&P or below "Aa3" by Moody's (these events are called "rating downgrades") the financial institution shall give notice to the School District and the Fiscal Agent and, within the five Business Day period, and for as long as the rating downgrade is in effect, shall deliver in the name of the School District or the Fiscal Agent to the School District or the Fiscal Agent fe deral securities allowed as investments under subdivision (i) or (ii) of this definition of Permitted Investments with aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement invested with the financial institution at that time and unpaid interest, and shall deliver additional allowed fe deral securities as needed to maintain an aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement and unpaid interest within three days after each evaluation date, which shall be at least weekly, (2) the agreement shall provide that, if the financial institution's long-term unsecured credit rating is suspended, withdrawn or reduced below "A3" by Moody's or below "A-" by S&P, and the Fiscal Agent or the School District may, upon not more than five Business Days' written notice to the financial institution, withdraw the investment agreement, with accrued but unpaid interest thereon to the date, and terminate the agreement. Providers with ratings of at least "A3" or "A-" are allowed with collateral.

(viii) Money market funds rated in the highest category by either Moody's or S&P, including funds for whichthe Fiscal Agent or an affiliate acts as financial advisor or provides other services.

(ix) The State of CaliforniaLoca l Agency Investment Fund; provided that the Fiscal Agent may restrict investments in such fund to the extent necessary to keep moneys available forthe purposes of the Agreement.

"Authorized Officer"means the Superintendent, the Assistant Superintendent, Business Services, or any other officeror employee authorized by the Board of Education of the School District or by an Authorized Officer to undertake the action referred to in the Agreement as required to be undertaken by an Authorized Officer.

D-3 "Bond Counsel" means Rutan & Tucker, LLP or any attorney or firm of attorneys selected by the District with expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities.

"Bonds" means Community Facilities District No. 2003-4 of the Menifee Union School District, 2005 Special Tax Bonds.

"Business Day" means any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust officeare authorized or obligated by law or executive order to be closed.

"Capitalized Interest Subaccount" means the subaccount within the Bond Fund by that name established by the Agreement.

"Closing Date" means the date upon which there is delivery of the Bonds in exchange forthe amount representing the purchase price of the Bonds by the Original Purchaser.

"Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the School District, on behalf of the District, and acknowledged and consented to by David Taussig & Associates, Inc., as dissemination agent, dated the Closing Date, as originally executed and as it may be amended fromtime to time in accordance with the terms thereof.

"Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the District or School District and related to the authorization, sale and issuance of the Bonds, which items of expense include, but are not limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its firstannual administration fee and fe es and expenses of its counsel, expenses incurred by the District or School District in connection with the issuance of the Bonds and the establishment of the District including costs related to any mitigation agreement or other agreement related to establishment of the District, special tax consultant fe es and expenses, preliminary engineering fe es and expenses, bond underwriter's discount, legal fees and charges, including bond counsel, disclosure counsel, financial consultants' fe es, charges for execution, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing.

"Costs of Issuance Fund" means the fundby that name established by the 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 period which relate to principal which has been retired beforethe beginning of such period.

"Developed Property" shall have the meaning given in the Rate and Method of Apportionment.

D-4 "District" means the Community Facilities District No. 2003-4 of the Menifee Union School District formedby the School District under the Act and the Resolution of Formation.

"Federal Securities" means any of the following which are non-callable and which atthe time of investment are legal investments under the laws of the State of Californiafor funds held by the Fiscal Agent:

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

(ii) any of the following obligations of the following agencies of the United States of America: ( a) direct obligations of the Export-Import Bank, (b) certificates of beneficial ownership 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 and bonds guaranteed by the United States of America.

"Fiscal Agent" means U.S. Bank National Association, appointed by the District and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place.

"Fiscal Year" means the twelve-month period extending fromJuly 1 in a calendar year to June 30 of the succeeding year, both dates inclusive.

"Interest Payment Dates" means March 1 and September 1 of each year, commencing March 1, 2006.

"Letter of Credit" or "Letters of Credit" means those certain irrevocable, standby letters of credit issued pursuant to the Agreement by one or more Letter of Credit Banks, or any reissuance or extension thereof, which Letter of Credit shall be in the Stated Amount therefor and shall be fora term of no less than one year.

"Letter of Credit Bank" means the issuer fromtime to time of any Letter of Credit and the respective successors and assigns of the business thereof and any surviving, resulting or transferee banking association or corporation with or into which it may be consolidated or merged or to which it may transfer all of its banking business, provided that the short-term and long-term ratings of such entity are at least investment grade (minimum Moody's long-term rating of "A" and short-term rating of "P-1 "), as evidenced by proof provided by the Letter of Credit Bank to the District and the Fiscal Agent.

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

D-5 "Net Special Tax Revenues" means, after the initial $30,000 is funded to the Administrative Expense Fund pursuant to the Agreement, the proceeds of the Special Taxes received by the District, including any scheduled payments, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Net Special Tax Revenues" does not include any penalties or costs of collecting delinquent Special Taxes collected in connection with delinquent Special Taxes.

"Ordinance" means any ordinance adopted by the legislative body of District providing forthe levy of the Special Taxes.

"Outstanding", when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04 of the 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 Section 9. 03 of the Agreement; and (iii) Bonds in lieu of or in substitution for which other Bonds have been authorized, executed, issued and delivered by the District pursuant to this Agreement or any Supplemental Agreement.

"Owner" means any person who is the registered owner of any Outstanding Bond.

"Principal Office" means the corporate trust office of the Fiscal Agent set forth in the Agreement and fortransf er, registration, surrender and payment of Bonds means the corporate trust officeof the Fiscal Agent in St. Paul, Minnesota or such other or additional officesas may be designated by the Fiscal Agent.

"Project" means the facilities more particularly described m the Resolution of Formation.

"Rate and Method of Apportionment" means the Rate and Method of Apportionment of Special Taxes forthe District, as approved by the voters of the District on December 14, 2004.

"Record Date" means the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day.

"Reserve Requirement" means, as of any date of calculation an amount equal to the lesser of (i) the then Maximum Annual Debt Service on the Bonds, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service on the Bonds, or (iii) ten percent (10%) of the initial principal amount of the Bonds issued hereunder.

"Resolution" means Resolution No. 2004-05/75, adopted by the Board of Education of the School District on June 14, 2005, authorizing issuance of the Bonds.

"Resolution of Formation" means Resolution No. 2004-05/50 adopted by the Board of Education on December 14, 2004.

"Special Taxes" means the special taxes levied within the District pursuant to the Act, the Ordinance and the Agreement.

D-6 "Stated Amount" means the amount available to be drawn under any Letter of Credit or Letters of Credit from time to time, as such amount is set forth in the initial Letter of Credit delivered on the Closing Date and as such amount shall be stated in such Letters of Credit thereafter delivered to the Fiscal Agent or the amount of any cash deposit made with the Fiscal Agent, as such amount may change fromtime to time. During the time in which such Letter of Credit or cash deposit is in effect and until changed through the procedures set forth in the Agreement, the Stated Amount of a Letter of Credit shall equal the estimated amount of Special Taxes to be levied in the next Fiscal Year on property owned by the Developer at the time the Letter of Credit is issued or renewed.

"Supplemental Agreement" means an agreement the execution of which is authorized by a resolution that has been duly adopted by the legislative body of the District under the Act and which agreement amends or supplements the Agreement, but only if and to the extent that such agreement is specifically authorized under this Agreement.

FUNDS AND ACCOUNTS

The following funds and accounts are established pursuant to the Agreement:

Improvement Fund. An Improvement Fund is established, as a separate fundto be held by the Fiscal Agent. Monies in the Improvement Fund shall be held in trust by the Fiscal Agent forthe benefitof the District and shall be disbursed forthe payment or reimbursement of costs of the Project upon written direction of an Authorized Officer. Monies in the Improvement Fund shall be invested in Authorized Investments. Interest earnings and profits from such investment shall be deposited and credited by the Fiscal Agent to the Improvement Fund and shall be used forthe payment of the costs of the Project.

Costs of Issuance Fund. A Costs of Issuance Fund is established, as a separate fundto be held by the Fiscal Agent. Monies in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed from time to time to pay Costs of lssuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by an Authorized Officerand delivered to the Fiscal Agent concurrently with the delivery of the Bonds and fromtime to time thereafter. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 90 days after theClos ing Date and then shall transfer any monies remaining therein, including any investment earnings thereon, to the Improvement Fund. Upon such transfer, the Costs of Issuance Fund shall be closed. Monies in the Costs of Issuance Fund shall be invested in Authorized Investments. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for thepur poses of such fund.

Reserve Fund. A Reserve Fund is established, as a separate fundto be held by the Fiscal Agent, to the credit of which a deposit shall be made equal to the Reserve Requirement as of the Closing Date for the Bonds, and deposits shall thereinafter be made as provided in the Agreement. Monies in the Reserve Fund shall be held in trust by the Fiscal Agent forthe benefit of the Owners as a reserve forthe payment of principal of, and interest and any premium on, the Bonds and shall be subject to a lien in favor of the Owners. All amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely forthe purpose of making

D-7 transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or forthe purpose of redeeming Bonds. Monies in the Reserve Fund shall be invested in Authorized Investments. Whenever a transfer is made fromthe Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund, the Fiscal Agent shall provide written notice thereof to an Authorized Officer, specifying the amount withdrawn. Whenever, on the Business Day prior to any Interest Payment Date, or on any other date at the request of an Authorized Officer, the amount in the Reserve Fund exceeds the Reserve Requirement (including interest earnings), the Fiscal Agent shall provide written notice to an Authorized Officer of the amount of the excess and shall transfer an amount equal to the excess fromthe Reserve Fund to the Bond Fund to be used forthe payment of interest on and principal of the Bonds on the next Interest Payment Date in accordance with the Agreement. Whenever the balance in the Reserve Fund equals or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall upon the written direction of an Authorized Officer transfer the amount in the Reserve Fund to the Bond Fund to be applied on the next succeeding Interest Payment Date to the payment and redemption, in accordance with the Agreement, as applicable, of all of the Outstanding Bonds. If the amount transferred fromthe Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred to the District to be used forany lawful purpose of the District. Notwithstanding the foregoing, no amounts shall be transferred fromthe Reserve Fund pursuant to the Agreement until after (i) the calculation of any amounts due to the fe deral government pursuant to the Agreement following payment of the Bonds and withdrawal of any such amount fromthe Reserve Fund forpur poses of making such payment to the fe deral government, and (ii) payment of any fe es and expenses due to the Fiscal Agent. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment pursuant to of the Agreement, a proportionate amount in the Reserve Fund ( determined on the basis of the principal of Bonds to be redeemed and the original aggregate principal amount of the Bonds) shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to the Agreement. Monies in the Reserve Fund shall be invested in accordance with the Agreement. Interest earnings and profits resulting from said investment shall be retained in the Reserve Fund and ( to the extent the balance in the Reserve Fund is otherwise equal to or greater than the Reserve Requirement) may at any time be used, at the written direction of an Authorized Officer, forpur poses of paying any rebate liability under the Agreement. Amounts not so used shall be transferred to the Bond Fund.

Bond Fund. A Bond Fund is established, as a separate fund to be held by the Fiscal Agent. Within the Bond Fund, the Fiscal Agent shall establish a temporary subaccount to be known as the Capitalized Interest Subaccount, and a separate subaccount known as the Special Tax Prepayments Subaccount. Monies in the Bond Fund and the subaccounts therein shall be held in trust by the Fiscal Agent forthe benefitof the Owners, shall be disbursed forthe 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. If amounts in the Bond Fund are insufficient forthe purposes set forth above, theFis cal Agent shall withdraw fromthe Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund shall be deposited in the Bond Fund. If, afterthe foregoing transfers, there are insufficient funds in the Bond Fund to make all

D-8 of the required payments, the Fiscal Agent shall apply the available funds firstto the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. Monies in the Special Tax Prepayments Subaccount shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption can timely be given forredemption of Bonds, and shall be used to redeem Bonds on the redemption date selected. On each Interest Payment Date on and before September 1, 2005, the Fiscal Agent shall withdraw from the Capitalized Interest Subaccount and transfer to the Bond Fund an amount sufficient to pay the interest then due and payable on the Bonds, including any amounts of interest due on the Bonds by reason of a redemption of the Bonds required by the Agreement, taking into account any amounts then on deposit in the Bond Fund. Fallowing the transfer of all remaining amounts to the Bond Fund, the Fiscal Agent shall close the Capitalized Interest Subaccount. Monies in the Bond Fund and the Special Tax Prepayments Subaccount shall be invested in Authorized Investments. Interest earnings and profits resulting from the investment of amounts in the Bond Fund and the Special Tax Prepayments Subaccount shall be retained in the Bond Fund and the Special Tax Prepayments Subaccount, respectively, to be used for purposes of such fund and accounts. Interest earnings and profits resulting from the investment of amounts in the Capitalized Interest Fund shall be transferred not less than monthly to the Improvement Fund, and the Tract Accounts therein, pro rata in the same manner specified for earnings in the Improvement Fund in the same manner set forth forallo cation of earnings in the Improvement Fund.

Special Tax Fund. A Special Tax Fund is established, as a separate fundto be held by the Fiscal Agent, to the credit of which the District will authorize direct deposit of all Special Taxes received by the District. Monies in the Special Tax Fund shall be held in trust by the Fiscal Agent forthe benefitof the District and the Owners, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners and the District. From time to time as needed to pay the obligations of the District, but no later than the Business Day before each Interest Payment Date, the Fiscal Agent shall withdraw fromthe Special Tax Fund and transfer the following amounts in the following order of priority: (i) the amount or portion thereof, not exceeding $30,000, which an Authorized Officerdirects the Fiscal Agent in writing to deposit in the Administrative Expense Fund forpayment of Administrative Expenses; (ii) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from theImprovemen t Fund and the Special Tax Prepayments Subaccount to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on the next Interest Payment Date; (iii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement; (iv) amounts to reimburse the Letter of Credit Bank (but only from amounts of delinquent Special Taxes deposited into the Special Fund); and (v) the amount of Administrative Expenses transferred to the Administrative Expense Fund in excess of the amount previously transferred thereto pursuant to (i) above, as directed in writing by an Authorized Officer. The amounts the Authorized Officer directs the Fiscal Agent to transfer from time to time to the Administrative Expense Fund shall not exceed, in any Fiscal Year, the amount included in the Special Tax levy for such Fiscal Year forAdmini strative Expenses. At any time following the deposit of Special Taxes in an amount sufficient to make payment of all of the foregoingdepos its

D-9 forthe current Bond Year, any amounts in excess of such amounts remaining in the Special Tax Fund shall, upon the written direction of an Authorized Officer, be transferred by the Fiscal Agent to the Improvement Fund to be used for any lawful purpose. In the absence of such written direction, all amounts remaining in the Special Tax Fund on the first day of the succeeding Bond Year shall be retained in the Special Tax Fund and applied to the succeeding Bond Year's Annual Debt Service; provided, however, that in no event shall such amount be invested at a yield in excess of the yield of the Bonds. Monies in the Special Tax Fund shall be invested in Authorized Investments. Interest earnings and profits resultingfrom such investment and deposit shall be retained in the Special Tax Fund to be used forthe purposes thereof.

Administrative Expense Fund. An Administrative Expense Fund is established, as a separate fund to be held by the Fiscal Agent. Monies in the Administrative Expense Fund shall be held in trust by the Fiscal Agent for the benefit of the School District. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent and paid to the District upon receipt by the Fiscal Agent of requisition of an Authorized Officerstating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of such Administrative Expense. Monies in the Administrative Expense Fund shall be invested in Authorized Investments. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Administrative Expense Fund to be used forthe purposes thereof.

Letter Of Credit Fund. A Letter of Credit Fund is established as a separate fundto be held by the Fiscal Agent. As a condition precedent to issuance of the Bonds, the District shall cause Developer to either ( a) provide a Letter of Credit in the Stated Amount having the Fiscal Agent as beneficiary, or (b) provide a cash deposit with the Fiscal Agent in an amount equal to the stated amount (the "Cash Deposit"). Each Letter of Credit or Cash Deposit shall secure payment of Special Taxes levied on property owned by the Developer.

The Letter of Credit shall be in effect in each Fiscal Year that individual homeowners own fewer than 60% of lots in the District. On the Closing Date and again on or before each July 1, commencing July 1, 2006, the District shall determine (i) the number of lots then owned by individual homeowners within the District and (ii) if fewer than 60% of the lots within the District are owned by individual homeowners, (A) the number of such lots owned by individual homeowners and (B) shall certifyto the Fiscal Agent the Stated Amount of the Letter of Credit or Cash Deposit required to be in effect during the next succeeding Fiscal Year on property owned by the Developer and direct the Fiscal Agent to complete and submit the appropriate certificate to the Letter of Credit Bank or release the appropriate amount of the Cash Deposit. The Developer may at any time submit written evidence to the District that 60% or more of the lots in the District are owned by individual homeowners and the District shall promptly investigate the Developer's claim. If followingthe investigation, the District determines, either by such investigation or its own independent investigation at any time, that 60% or more of the lots in the District are owned by individual homeowners, then it shall so certify in writing to the Fiscal Agent and direct the Fiscal Agent to release the Letter of Credit to the Letter of Credit Bank or release the Cash Deposit to the Developer.

In the event the Fiscal Agent does not receive an (i) irrevocable written commitment from a Letter of Credit Bank to renew the current Letter of Credit; (ii) a Letter of Credit to replace the

D-10 current Letter of Credit or (iii) a Cash Deposit to replace a prior Letter of Credit, the Fiscal Agent shall upon the written direction of an Authorized Officer immediately, with no further authorization or instruction, draw upon the Letter of Credit or Cash Deposit in the full State Amount. The Fiscal Agent shall deposit the proceeds of such draw in ton the appropriate subaccount of the Letter of Credit Fund.

(i) Draws prior to an Interest Payment Date. No later than five days before each Interest Payment Date, the Fiscal Agent shall determine whether amounts on deposit in the Bond Fund and those amounts on deposit in the Special Tax Fund that will be deposited into the Bond Fund on that Interest Payment Date will be sufficientto pay principal of and interest on the Bonds that will be due and payable on such Interest Payment Date and notifythe District of any deficiency. If amounts in the Bond Fund will be insufficientto pay principal of and interest on the Bonds and such insufficiency is attributable to the Developer's delinquency in the payment of Special Taxes for properties owned by it in the District, the Fiscal Agent shall upon the written direction of an Authorized Officer (prior to any withdrawals from the Reserve Fund permitted by the Agreement) draw upon such Letter of Credit or Cash Deposit; provided, however, that the amount of such draw (as set forth in said written direction of the Authorized Officer) shall be no greater than the delinquent Special Taxes levied on property owned by the Developer. The Fiscal Agent shall deposit the proceeds of any such draw upon a Letter of Credit into the Letter of Credit Fund and, on the day preceding the Interest Payment Date, and prior to any transfers fromthe Reserve Fund, transfer such amounts fromthe Letter of Credit Fund to the Bond Fund. The District shall have no obligation to reimburse the Letter of Credit Bank ( or its designee, which may be the Developer) forany such draw on any Letter of Credit except from (i) any proceeds of the draw on that Letter of Credit not required to pay Debt Service on the Bonds on such Interest Payment Date and (ii) delinquent Special Taxes subsequently received by the District with respect to the property owned by the Developer.

(ii) Draws prior to Termination of the Letter of Credit. In the event the Fiscal Agent draws upon the Letter of Credit as described above, the Fiscal Agent shall deposit the proceeds of such draw into the Letter of Credit Fund and pending any transfer to the Bond Fund forthe purposes described in above, such proceeds shall be invested and reinvested by the Fiscal Agent in Authorized Investments at the written instruction of an Authorized Officer. At no time shall the District direct that the proceeds of a draw on any Letter of Credit or Cash Deposit held in the Letter of Credit Fund be invested by the Fiscal Agent at a yield exceeding the yield on the Bonds. Investment earnings and profits from such investments shall be retained in the Letter of Credit Fund.

(iii) Final Release of Moneys fromthe Letter of Credit Fund. If at any time moneys remain on deposit in the Letter of Credit Fund with respect to any Letter of Credit and an Authorized Officerprovides written direction to the Fiscal Agent that (i) 60% or more of the lots are owned by individual homeowners, (ii) such moneys are not required to pay Debt Service on the Bonds on the followingInterest Payment Date as a result of delinquencies in the payment of Special Taxes by the Developer, and (iii) the Developer is not delinquent on Special Taxes payable with respect to property owned by the Developer in the District, then the Fiscal Agent shall immediately return all ( or such portion of the) amounts on deposit in the Letter of Credit Fund to the Developer.

D-11 In the event any Letter of Credit Bank wrongfullyre fusesto honor any drawing made on any Letter of Credit, the District, on behalf of the owners of the Bonds, shall immediately bring an action and pursue any remedy available at law or in equity forthe purpose of compelling the Letter of Credit Bank to honor such drawing and to enforcethe provisions of the Letter of Credit.

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 Agreement.

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 forthe payment of any claim for intereston any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest is extended or funded, whether or not with the consent of the District, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of the Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims forinterest that have not been so extended or funded.

Against Encumbrances. The District shall not encumber, pledge or place any charge or lien upon any of the Net Special Taxes or other amounts or fundspled ged to the Bonds superior to or on a paritywith the pledge and lien herein created forthe benefitof the Bonds, except as permitted by the Agreement.

Books and Records. The District shall 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 fromthe Administrative Expense Fund and the Special Tax Fund, and to the Net Special Taxes. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

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

Collection of Special Taxes. The District shall comply with all requirements of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcementof delinquent Special Taxes.

Covenant to Foreclose. The District covenants that it shall order, and cause to be commenced, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the Fiscal Agent Agreement.

D-12 Further Assurances. The District shall adopt, make, execute and deliver any and all such furtherresolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirmingunto the Owners of the rights and benefitsprovided in the Agreement.

Tax Covenants. The District will not take, nor suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds" or "private activity bonds" within the meaning of the Tax Code. The District agrees to comply with all applicable provisions of the Tax Code relating to the rebate of excess investment earnings on the proceeds of the Bonds to the United States of America.

INVESTMENTS

Monies in any fund or account created or established by the Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Authorized Investments, as directed pursuant to the written direction of an Authorized Officer. In the absence of any such written direction, the Fiscal Agent shall invest, to the extent reasonably practicable, any such monies in the Authorized Investment described in paragraph 7 of the definitionthereof , and otherwise hold such amounts uninvested. Obligations purchased as an investment of monies in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of the Agreement fortransfer of interest earnings and profits resulting from investment of amounts in funds and accounts.

LIABILITY OF THE DISTRICT

The District shall not incur any responsibility in respect of the Bonds or the Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The District shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The District shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. No provision of the Agreement shall require the District to expend or risk its own general funds or otherwise incur any financial liability in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such fundsor adequate indemnity against such risk or liability is not reasonably assured to it.

MODIFICATION OR AMENDMENT OF THE AGREEMENT

The Agreement and the rights and obligations of the District and of the Owners may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmativevote at a meeting of Owners, or with the written consent without a meeting of the Owners, of at least sixty percent ( 60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualifiedas provided in the Agreement. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair

D-13 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 parity with the pledge and lien created forthe benefitof the Bonds ( except as otherwise permitted by the Act, the laws of the State of Californiaor this Agreement), or (iii) reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modifyany of the rights or obligations of the Fiscal Agent without its written consent.

The Agreement and the rights and obligations of the District and of the Owners may also be modifiedor amended at any time by a Supplemental Agreement without the consent of any Owners only to the extent permitted by law and only for any one or more of the following purposes:

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

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

(C) to make such provisions forthe purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Agreement, or in regard to questions arising under the Agreement, as the District and the Fiscal Agent may deem necessary or desirable, so long as the provisions are not inconsistent with the Agreement and do not adversely affect the rights of the Owners;

(D) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption fromgro ss federal income taxation of interest on the Bonds; and

(E) to modify, alter or amend the rate and method of apportionment of the Special Taxes in any manner so long as such changes do not reduce the maximum annual Special Taxes that may be levied in each year on developed property within the District to an amount which is less than 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds Outstanding as of the date of such amendment.

DISCHARGE OF AGREEMENT

The District has the option to pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the followingways :

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

(B) by depositing with the Fiscal Agent, in trust, at or beforematurity, money that, together with the amounts then on deposit in the funds and accounts provided for in the Bond Fund and the Reserve Fund, is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or

D-14 (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the District determines as confirmed by Bond Counsel or an independent certified public accountant, will, together with the interest to accrue thereon and monies then on deposit in the fund and accounts provided forin the Bond Fund and the Reserve Fund, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or beforetheir respective maturity dates.

If the District takes any of the actions specifiedin (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof and notice of such redemption has been given as provided in the Agreement or the District has made provision forthe giving of such notice satisfactory to the Fiscal Agent, then, at the election of the District, and notwithstanding that any Bonds have not been surrendered forpayment, the pledge of the Special Taxes and other funds provided for in the Agreement and all other obligations of the District under this Agreement with respect to such Outstanding Bonds shall cease and terminate. The District shall file notice of such election with the Fiscal Agent. Notwithstanding the foregoing, the District will still be obligated to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, all amounts owing to the Fiscal Agent and otherwise to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds fromgr oss income forfe deral income tax purposes.

Upon compliance by the District with the foregoing with respect to all Bonds Outstanding, any fundsheld by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent that are not required forthe purposes of the preceding paragraph shall be paid over to the District and any Special Taxes thereafterrecei ved by the District shall not be remitted to the Fiscal Agent but shall be retained by the District to be used forany purpose permitted under the Act.

D-15 ( Page intentional I y I eft blank.) APPENDIX E

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of the Depository Trust Company (''DTC'J, the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to OTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between OTC, the OTC Parlicipants and the Beneficial Owners is based solely on information provided by OTC. Accordingly, no representations can be made concerning these matters and neither the OTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with D TC or the D TC Parlicipants, as the case may be.

No assurances can be given that OTC, OTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) cerlificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to OTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that OTC, OTC Parlicipants or OTC Indirect Parlicipants will act in the manner described in this Appendix. The current "Rules" applicable to OTC are on file with the Securities and Exchange Commission and the current "Procedures" of OTC to be followed in dealing with OTC Parlicipants are on file with OTC.

DTC and its Participants. The Depository Trust Company ("OTC"), 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 OTC. 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 OTC.

OTC, 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 York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. OTC holds and provides 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. OTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U. S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. 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 OTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (respectively, "NSCC", "GSCC", "MBSCC", and "EMCC", also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the OTC system is also available to others such as both U. S. and non-U.S. securities brokers

E-1 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"). OTC has Standard & Poor's highest rating: AAA. The OTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about OTC can be found at www.dtcc.com.

Book-Entry Only System. Purchases of the Bonds under the OTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from OTC 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 the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with OTC 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 OTC. The deposit of the Bonds with OTC and their registration in the name of Cede & Co. or such other OTC nominee do not effect any change in beneficial ownership. OTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by OTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 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 nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to OTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither OTC nor Cede & Co. (nor any other OTC 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, OTC 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 the record date (identified in a listing attached to the Omnibus Proxy).

E-2 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 detail information from the School 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 OTC (nor its nominee), the Fiscal Agent, or the School District, subject 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 OTC) is the responsibility of the School 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 any time by giving reasonable notice to the School District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

The School District may decide to discontinue use of the system of book-entry transfers through OTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

Discontinuance of DTC Services. If (a) OTC determines not to continue to act as securities depository for the Bonds, or (b) the Community Facilities District determines that OTC will no longer so act and delivers a written certificate to the Fiscal Agent to that effect, then the Community Facilities District will discontinue the Book-Entry Only System with OTC for the Bonds. If the Community Facilities District determines to replace OTC with another qualified securities depository, the Community Facilities District will prepare or direct the preparation of a new single separate, fully registered Bond for each maturity of the Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the Fiscal Agent Agreement. If the Community Facilities District fails to identify another qualified securities depository to replace the incumbent securities depository for the Bonds, then the Bonds will no longer be restricted to being registered in the Bond registration books in the name of the incumbent securities depository or its nominee, but will be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the Bonds designates.

If the Book-Entry Only System is discontinued, the following provisions would also apply: (i) the Bonds will be made available in physical form, (ii) principal of, and redemption premiums, if any, on, the Bonds will be payable upon surrender thereof at the corporate trust office of the Fiscal Agent in Los Angeles, California, (iii) interest on the Bonds will be payable by check mailed by first-class mail or, upon the written request of any Owner of $1,000,000 or more in aggregate principal amount of Bonds received by the Fiscal Agent on or prior to the 15th day of the calendar month immediately preceding the interest payment date, by wire transfer in immediately available funds to an account with a financial institution within the continental United States of America designated by such Owner, and (iv) the Bonds will be transferable and exchangeable as provided in the Fiscal Agent Agreement.

E-3 ( Page intentional I y I eft blank.) APPENDIX F

FORM OF ISSUER CONTINUING DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE (Community Facilities District)

$2,580,000 COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT 2005 SPECIAL TAX BONDS

This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and delivered by Community Facilities District No. 2003-4 of the Menifee Union School District (the "District") in connection with the issuance of the bonds captioned above (the "Bonds"). The Bonds are being issued pursuant to a Fiscal Agent Agreement dated as of June 1, 2005 (the "Fiscal Agent Agreement"), by and between the District and U. S. Bank National Association, as fiscal agent (the "Fiscal Agent"). The District hereby covenants and agrees as follows:

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

Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

"Annual Reporf' means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Annual Report Date" means the date that is six months after the end of the District's fiscal year (currently December 31 based on the District's fiscal year end of June 30).

"Central Post Office" means DisclosureUSA (information regarding which is currently located at www.DisclosureUSA.org), the Internet-based filing system approved by the Securities and Exchange Commission to receive and submit filings to the National Repositories, or any similar filing system approved by the Securities and Exchange Commission.

"Dissemination Agent" means David Taussig & Associates, Inc., or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

"District" means Community Facilities District No. 2003-4 of the Menifee Union School District.

"Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate.

F-1 "National Repository'' means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Information on the National Repositories as of a particular date is available on the Securities and Exchange Commission's Internet site at www.sec.gov.

"Official Statement" means the final official statement executed by the District in connection with the issuance of the Bonds.

"Participating Underwriter' means Stone & Youngberg LLC, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

"Repository'' means each National Repository and each State Repository, if any.

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

"State Repository'' means any public or private repository or entity designated by the State of California 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 Disclosure Certificate, 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 the Annual Report Date, commencing December 31, 2005, with the report for the 2004-05 fiscal year, provide to the Participating Underwriter and to each Repository an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. In lieu of filing the Annual Report with each Repository, the District or the Dissemination Agent may file the Annual Report with the Central Post Office, with a copy to the Participating Underwriter. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. The audited financial statements of the District may be included within or constitute a portion of the audited financial statements of the Menifee Union School District. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) If the District does not provide, or cause the Dissemination Agent to provide, an Annual Report to the Repositories by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to (i) each National Repository or the Municipal Securities Rulemaking Board, and (ii) the appropriate State Repository, if any, in substantially the form attached hereto as Exhibit A, with a copy to the Fiscal Agent (if different than the Dissemination Agent) and the Participating Underwriter. In lieu of filing the notice with each Repository, the District or the Dissemination Agent may file the notice with the Central Post Office, with a copy to the Fiscal Agent (if different than the Dissemination Agent) and the Participating Underwriter.

(c) With respect to each Annual Report, the Dissemination Agent shall:

F-2 (i) determine each year prior to the Annual Report Date the name and address of each National Repository and each State Repository, if any; and

(ii) if the Dissemination Agent is other than the District, file a report with the District and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided.

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

(a) The District's audited financial statements for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement:

THE DISTRICT'S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF'S INTERPRETATION OF RULE 15C2-12. NO FUNDS OR ASSETS OF THE DISTRICT OR THE MENIFEE UNION SCHOOL DISTRICT ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND NEITHER THE DISTRICT NOR THE MENIFEE UNION SCHOOL DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE DISTRICT OR THE MENIFEE UNION SCHOOL DISTRICT IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS.

(b) Total assessed value (per the Riverside County Assessor's records) of all parcels currently subject to the Special Tax within the District, showing the total assessed valuation for all land and the total assessed valuation for all improvements within the District and distinguishing between the assessed value of improved and unimproved parcels. Parcels are considered improved if there is an assessed value for the improvements in the Assessor's records.

(c) The total dollar amount of delinquencies in the District as of August 1 of any year and, in the event that the total delinquencies within the District as of August 1 in any year exceed 5% of the Special Tax for the previous year, delinquency information for each parcel responsible for more than $5,000 in the payment of Special Tax, amounts of delinquencies, length of delinquency and status of any foreclosure of each such parcel.

(d) The amount of prepayments of the Special Tax with respect to the District for the prior Fiscal Year.

(e) A land ownership summary listing the property owner responsible for more than 5% of the annual Special Tax levy, as shown on the Riverside County Assessor's last equalized tax roll prior to the September next preceding the Annual Report Date.

(f) The principal amount of the Bonds outstanding and the balance in the Reserve Fund (along with a statement of the Reserve Requirement) as of the September 30 next preceding the Annual Report Date.

F-3 (g) An updated table in substantially the form of the table in the Official Statement entitled "Appraised Values and Value to Burden Ratios" based upon the most recent information available, provided that assessed values shown on the Riverside County assessor's most recent equalized tax roll prior to the September next preceding the Annual Report Date may be substituted for appraised values.

(h) An updated table in substantially the form of the table in the Official Statement entitled "Direct and Overlapping Governmental Obligations" as of the District's most recently completed fiscal year, but only until all of the property in the District is classified as "Developed Property" under the Rate and Method of Apportionment for the District.

(i) Any changes to the Rate and Method of Apportionment for the District set forth in Appendix B to the Official Statement.

U) A copy of the annual information required to be filed by the District with the California Debt and Investment Advisory Commission pursuant to the Act and relating generally to outstanding District bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information.

(k) In addition to any of the information expressly required to be provided under paragraphs (a) through U) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference.

Each Annual Report shall include the form of cover sheet attached as Exhibit B, completed with the appropriate information relating to the Bonds.

Section 5. Reporting of Significant Events.

(a) 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) Unscheduled draws on debt service reserves reflecting financial difficulties.

(4) Unscheduled draws on credit enhancements reflecting financial difficulties.

(5) Substitution of credit or liquidity providers, or their failure to perform.

(6) Adverse tax opinions or events affecting the tax-exempt status of the security.

F-4 (7) Modifications to rights of security holders.

(8) Contingent or unscheduled bond calls.

(9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities.

(11) Rating changes.

(b) 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 law.

(c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with (i) each National Repository or the Municipal Securities Rulemaking Board, and (ii) each appropriate State Repository, if any, with a copy to the Fiscal Agent (if different than the Dissemination Agent) and the Participating Underwriter. Each notice of the occurrence of a Listed Event shall include the form of cover sheet attached as Exhibit B, completed with the appropriate information relating to the Bonds. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) 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.

(d) In lieu of filing the notice of the occurrence of a Listed Event with each Repository, the District or the Dissemination Agent may file the notice of the occurrence of a Listed Event with the Central Post Office, with a copy to the Fiscal Agent (if different than the Dissemination Agent) and the Participating Underwriter.

Section 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Certificate 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 manner as for a Listed Event under Section S(c).

Section 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent will be David Taussig & Associates, Inc.

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

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or S(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

F-5 (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner 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 the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

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

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section S(c).

Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include 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 District to comply with any provision of this Disclosure Certificate, the Participating Underwriter or 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 District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 11. Duties1 Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers,

F-6 directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Property Owner, the Fiscal Agent, the Bond owners or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:

To the Issuer: Community Facilities District No. 2003-4 of the Menifee Union School District 30205 Menifee Road Menifee, CA 92584 Fax: (909) 672-1385

To the Fiscal Agent: U. S. Bank National Association 633 West 5th Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Fax: (213) 615-6199

To the Dissemination Agent: David Taussig & Associates, Inc. 1301 Dove Street, Suite 600 Newport Beach, California 92660 Attention: Benjamin Dolinka, Vice President Fax: (949) 955-1590

To the Participating Underwriter: Stone & Youngberg LLC One Ferry Building San Francisco, California 94111 Attention: Municipal Research Department Fax: (415) 445-2395

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 Certificate shall inure solely to the benefit of the District, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

F-7 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: July 14, 2005

COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT

Daniel J. Wood, Assistant Superintendent, Business Services Menifee Union School District on behalf of Community Facilities District No. 2003-4 of the Menifee Union School District

AGREED AND ACCEPTED: David Taussig & Associates, Inc., as Dissemination Agent

Name:

Title: ______

F-8 EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2003-4 of the Menifee Union School District (the "District")

Name of Bond Issue: Community Facilities District No. 2003-4 of the Menifee Union School District 2005 Special Tax Bonds Date of Issuance: July 14, 2005

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.16 of the Fiscal Agent Agreement dated as of June 1, 2005, between the District and U.S. Bank National Association. The District anticipates that the Annual Report will be filed by ______

DISSEMINATION AGENT:

David Taussig & Associates, Inc.

By: ������������ Its: ______

F-9 EXHIBIT B

Municipal Secondary Market Disclosure Information Cover Sheet

This cover sheet should be sent with all submissions made to the Municipal Securities Rulemak:ing Board, Nationally Recognized Municipal Securities Information Repositories, and any applicable State Information Depository, whether the filingis voluntary or made pursuant to Securities and Exchange Commission rule 15c2-12 or any analogous state statute.

See www.sec.gov/info/municipal/nrmsir.htm for list of current NRMSIRs and SIDs

IF THIS FILING RELATES TO A SINGLE BOND ISSUE: Provide name of bond issue exactly as it appears on the cover of the Official Statement (please include name of state where issuer is located):

Provide nine-digit CUSIP* numbers if available, to which the information relates:

IF THIS FILING RELATES TO ALL SECURITIES ISSUED BY THE ISSUER OR ALL SECURITIES OF A SPECIFIC CREDIT OR ISSUED UNDER A SINGLE INDENTURE: Issuer's Name (please include name of state where Issuer is located): Other Obligated Person's Name (if any): ------(Exactly as it appears on the Official Statement Cover)

*(Contact CUSIP's Municipal Disclosure Assistance Line at 212.438.6518 for assistance with obtaining the proper CUSIP numbers.)

TYPE OF FILING: D Electronic (number of pages attached) ______D Paper (number of pages attached) ______

If information is also available on the Internet, give URL: ______

F-10 WHAT TYPE OF INFORMATION ARE YOU PROVIDING? (Check all that apply) A. Financial Information and Operating Data pursuant to Rule 15c2-12 (Financial information and operating data should not be filed with the MSRB.)

D Annual D Semi-annual D Quarterly

B. D Audited Financial Statements or CAFR pursuant to Rule 15c2-12

Fiscal Period Covered: ______

C. D Notice of a Material Event pursuant to Rule 15c2-12 (Check as appropriate)

1. D Principal and interest payment delinquencies 6. D Adverse tax opinions or events affecting the tax- exempt status of the security 2. D Non-payment related defaults 7. D Modifications to the rights of security holders 3. D Unscheduled draws on debt service reserves reflecting financial difficulties 8. D Bond calls 4. D Unscheduled draws on credit enhancements reflecting 9. D Defeasances financial difficulties 10. D Release, substitution, or sale of property securing 5. D Substitution of credit or liquidity providers, or their repayment of the securities failure to perform 11. D Rating changes

D. D Notice of Failure to Provide Annual Financial Information as Required

E. D Other Secondary Market Information (Specify): ______

I hereby represent that I am authorized by the issuer or obligor or its agent to distribute this information publicly:

Issuer/Filer Contact: Name ______Title ______

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Issuer Web Site Address ______

F-11 Dissemination Agent Contact, if any: Name ______Title ______

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Relationship to Issuer ______

Obligor Contact, if any: Name ______Title ______

Employer ______�

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Obligor Web site Address ______

Investor Relations Contact, if any:

Name ______Title ______

Telephone ______Email Address ______

F-12 APPENDIX G

FORM OF PROPERTY OWNER DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE (Property Owner)

$2,580,000 COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT 2005 SPECIAL TAX BONDS

This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and delivered by Lennar Homes of California, Inc., a California corporation (the "Property Owner"), in connection with the issuance by Community Facilities District No. 2003-4 of the Menifee Union School District (the "District") of the bonds captioned above (the "Bonds"). The Bonds are being issued pursuant to a Fiscal Agent Agreement dated as of June 1, 2005 (the "Fiscal Agent Agreement"), by and between the District and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"). The Property Owner covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds.

Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

"Affiliate" of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person, 5% or more of whose outstanding voting securities 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. For purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.

"A ssumption Agreement" means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner's development and financing plans with respect to the District), whereby such Major Owner or Affiliate agrees to provide Semi-Annual Reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent pursuant to a provision substantially in the form of Section 11 hereof.

"Central Post Office" means DisclosureUSA (information regarding which is currently located at www.DisclosureUSA.org), the Internet-based filing system approved by the Securities

G-1 and Exchange Commission to receive and submit filings to the National Repositories, or any similar filing system approved by the Securities and Exchange Commission.

"Dissemination Agent" means U.S. Bank National Association, or any successor Dissemination Agent designated in writing by the Property Owner, with the written consent of the District, and which has filed with the Property Owner, the District and the Fiscal Agent a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.

"District" means Community Facilities District No. 2003-4 of the Menifee Union School District.

"Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate.

"Major Owner'' means, as of any Report Date, an owner of land in the District responsible in the aggregate for 10% or more of the Special Taxes in the District actually levied at any time during the then-current fiscal year.

"National Repository'' means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Information on the National Repositories as of a particular date is available on the Securities and Exchange Commission's Internet site at www.sec.gov.

"Official Statement" means the final official statement executed by the District in connection with the issuance of the Bonds.

"Participating Underwriter'' means Stone & Youngberg LLC, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

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

"Property'' means, as of any Report Date, the property owned by the Property Owner in the District.

"Report Date" means (a) September 15 each year, and (b) March 15 each year.

"Repository'' means each National Repository and each State Repository, if any.

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

"Semi-Annual Report" means any Semi-Annual Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Special Taxes" means the special taxes levied on taxable property within the District.

"State Repository'' means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by

G-2 the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository.

Section 3. Provision of Semi-Annual Reports.

(a) The Property Owner shall, or upon written direction shall cause the Dissemination Agent to, not later than the Report Date, commencing March 15, 2006, provide to each Repository a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the District. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Semi-Annual Report to the Dissemination Agent. The Property Owner shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent, the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the District to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Fiscal Agent, the Participating Underwriter and the District may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Semi-Annual Report. In lieu of filing the Semi-Annual Report with each Repository, the Property Owner or the Dissemination Agent may file the Semi-Annual Report with the Central Post Office, with a copy to the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the District. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.

(b) If the Dissemination Agent does not receive a Semi-Annual Report 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the Repositories by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to (i) each National Repository or the Municipal Securities Rulemaking Board, and (ii) each appropriate State Repository, if any, in substantially the form attached hereto as Exhibit A, with a copy to the Fiscal Agent (if other than the Dissemination Agent), the District and the Participating Underwriter. In lieu of filing the notice with each Repository, the Property Owner or the Dissemination Agent may file the notice with the Central Post Office, with a copy to the Fiscal Agent (if other than the Dissemination Agent), the District and the Participating Underwriter.

(c) With respect to each Semi-Annual Report, the Dissemination Agent shall:

(i) determine prior to each Report Date the name and address of each National Repository and each State Repository, if any;

G-3 (ii) to the extent the Semi-Annual Report has been furnished to it, file the Semi-Annual Report with the Repositories and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the District and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided.

Section 4. Content of Semi-Annual Reports. The Property Owner's Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner 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 final official statement, it must be available from the Municipal Securities Rulemaking Board. The Property Owner shall clearly identify each such other document so included by reference.

In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner's Semi-Annual Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

The Dissemination Agent shall include the form of cover sheet attached as Exhibit C, completed with the appropriate information relating to the Bonds, to each Semi-Annual Report.

Section 5. Reporting of Significant Events.

(a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds, if material:

(i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which could have a significant impact on the Property Owner's ability to pay Special Taxes or to sell or develop the Property;

(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property prior to the delinquency date;

(iii) filing of a lawsuit against the Property Owner or, if known, an Affiliate of the Property Owner, seeking damages which could have a significant impact on the Property Owner's ability to pay Special Taxes or to sell or develop the Property;

(iv) material damage to or destruction of any of the improvements on the Property;

(v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property; and

G-4 (vi) any cancellation of, failure to renew, or amendment or modification of any letter of credit to be provided by the Property Owner and described in the Fiscal Agent Agreement, but excluding any permitted termination of the letter of credit or permitted reductions in the amount thereof.

(b) Whenever the Property Owner obtains 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 law.

(c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with (i) each National Repository or the Municipal Securities Rulemaking Board, and (ii) each appropriate State Repository, if any, with a copy to the Fiscal Agent, the District and the Participating Underwriter. Each notice of the occurrence of a Listed Event shall include the form of cover sheet attached as Exhibit C, completed with the appropriate information relating to the Bonds.

(d) In lieu of filing the notice of the occurrence of a Listed Event with each Repository, the Property Owner or the Dissemination Agent may file the notice of the occurrence of a Listed Event with the Central Post Office, with a copy to the Fiscal Agent, the District and the Participating Underwriter.

Section 6. Duration of Reporting Obligation.

(a) All of the Property Owner's obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following:

(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or

(ii) at such time as Property owned by the Property Owner is no longer responsible for payment of 10% or more of the Special Taxes, or

(iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property.

If the Property Owner's obligations under this Disclosure Certificate terminate, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such termination with each Repository, with a copy to the Fiscal Agent, the District and the Participating Underwriter. The notice of termination shall include the form of cover sheet attached as Exhibit C, completed with the appropriate information relating to the Bonds. In lieu of filing the notice of termination with each Repository, the Property Owner or the Dissemination Agent may file the notice of termination with the Central Post Office, with a copy to the Fiscal Agent, the District and the Participating Underwriter.

(b) If all or a portion of the Property in the District owned by the Property Owner, or any other Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner

G-5 hereunder with respect to the property in the District owned by such Major Owner and its Affiliates may 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 assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance satisfactory to the District and the Participating Underwriter, and with notice to the Dissemination Agent.

Section 7. Dissemination Agent. The Property Owner may, from time to time, with the written consent of the District, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent with the written consent of the District, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. The Dissemination Agent may resign by providing thirty days' written notice to the District, the Property Owner and the Fiscal Agent.

Section 8. Amendment Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):

(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or S(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in 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 beneficial owners of the Bonds.

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

Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Fiscal Agent shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner

G-6 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 Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance.

Section 11. Duties1 Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors and employees, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder during the time that the Property Owner is a Major Owner obligated to comply with the Disclosure Certificate, including the reasonable costs and expenses (including attorneys' fees) of defending against any such claim of liability, but excluding liabilities, costs and expenses due to the Dissemination Agent's negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent's schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 Property Owner, the Fiscal Agent, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:

To the Issuer: Community Facilities District No. 2003-4 of the Menifee Union School District 30205 Menifee Road Menifee, CA 92584 Fax: (909) 672-1385

To the Dissemination Agent: U. S. Bank National Association 633 West 5th Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Fax: (213) 615-6199

To the Participating Underwriter: Stone & Youngberg LLC One Ferry Building San Francisco, California 94111 Attention: Municipal Research Department Fax: (415) 445-2395

G-7 To the Property Owner: Lennar Homes of California, Inc. 391 North Main Street, Suite 300 Corona, CA 92880 Fax: (951) 817-3592

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 Certificate shall inure solely to the benefit of the District, the Property Owner (its successors and assigns), the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization.

Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: July 14, 2005 LENNAR HOMES OF CALIFORNIA, INC., a California corporation

By:

Title:

AGREED AND ACCEPTED: U. S. Bank National Association as Dissemination Agent

By: Title:

G-8 EXHIBIT A

NOTICE OF FAILURE TO FILE SEMI-ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2003-4 of the Menifee Union School District

Name of Bond Issue: Community Facilities District No. 2003-4 of the Menifee Union School District 2005 Special Tax Bonds Date of Issuance: July 14, 2005

NOTICE IS HEREBY GIVEN that (the "Major Owner") has not provided a Semi-Annual Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated July 14, 2005. The Major Owner anticipates that the Semi-Annual Report will be filed by ______

Dated: ______

DISSEMINATION AGENT: U. S. Bank National Association

By: ------­ Its:

G-9 EXHIBIT B

SEMI-ANNUAL REPORT

COMMUNITY FACILITIES DISTRICT NO. 2003-4 OF THE MENIFEE UNION SCHOOL DISTRICT 2005 SPECIAL TAX BONDS

This Semi-Annual Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the "Disclosure Certificate") dated as of July 14, 2005, and executed by the undersigned (the "Property Owner") in connection with the issuance of the above-captioned bonds by Community Facilities District No. 2003-4 of the Menifee Union School District (the "District").

Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.

I. Property Ownership and Development

The information in this section is provided as of ______(this date must be not more than 60 days before the date of this Semi-Annual Report).

A. Property currently owned by the Property Owner in the District (the "Property"):

Development Name(s)

Total Lots and Homes Completed Since Property Sold Since the Property Sold Since Homes the Date of Issuance of the Date of Issuance of the the Last Semi-Annual in the Development Bonds (July 14, 2005) Bonds (July 14, 2005) Report

Acres* Acres* Lots Lots Lots Homes Homes Homes Homes

* For bulk land sales only (excluding sales of finished lots or completed homes).

B. Status of land development or home construction activities on the Property:

C. Status of building permits and any significant amendments to land use or development entitlements with respect to the Property:

G-10 D. Status of any land purchase contracts with regard to the Property, whether acquisition of land in the District by the Property Owner or sales of land to other property owners (other than individual homeowners).

II. Legal and Financial Status of Property Owner

Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement.

Ill. Change in Development or Financing Plans

Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any development plans or financing plans relating to the Property that are materially different fro m the proposed development and financing plan described in the Official Statement.

IV. Official Statement Updates

Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the heading "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT" that would materially and adversely interfere with the Property Owner's ability to develop and sell the Property as described in the Official Statement.

V. Other Material Information

In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

G-11 Certification

The undersigned Property Owner hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Property Owner under the Disclosure Certificate.

Dated: ______

LENNAR HOMES OF CALIFORNIA, INC., a California corporation

By:

Title:

G-12 EXHIBIT C

Municipal Secondary Market Disclosure Information Cover Sheet

This cover sheet should be sent with all submissions made to the Municipal Securities Rulemak:ing Board, Nationally Recognized Municipal Securities Information Repositories, and any applicable State Information Depository, whether the filing is voluntary or made pursuant to Securities and Exchange Commission rule 15c2-12 or any analogous state statute.

See www.sec.gov/info/municipal/nrmsir.htm for list of current NRMSIRs and SIDs

IF THIS FILING RELATES TO ALL SECURITIES ISSUED BY THE ISSUER OR ALL SECURITIES OF A SPECIFIC CREDIT OR ISSUED UNDER A SINGLE INDENTURE: Issuer's Name (please include name of state where Issuer is located): Other Obligated Person's Name (if any):------(Exactly as it appears on the Official Statement Cover)

*(Contact CUSIP's Municipal Disclosure Assistance Line at 212.438.6518 for assistance with obtaining the proper CUSIP numbers.)

TYPE OF FILING: D Electronic (number of pages attached) ______D Paper (number of pages attached) ______

If information is also available on the Internet, give URL: ______

G-13 WHAT TYPE OF INFORMATION ARE YOU PROVIDING? (Check all that apply) A. Financial Information and Operating Data pursuant to Rule 15c2-12 (Financial information and operating data should not be filed with the MSRB.)

D Annual D Semi-annual D Quarterly

B. D Audited Financial Statements or CAFR pursuant to Rule 15c2-12

Fiscal Period Covered: ______

C. D Notice of a Material Event pursuant to Rule 15c2-12 (Check as appropriate)

1. D Principal and interest payment delinquencies 6. D Adverse tax opinions or events affecting the tax- exempt status of the security 2. D Non-payment related defaults 7. D Modifications to the rights of security holders 3. D Unscheduled draws on debt service reserves reflecting financial difficulties 8. D Bond calls 4. D Unscheduled draws on credit enhancements reflecting 9. D Defeasances financial difficulties 10. D Release, substitution, or sale of property securing 5. D Substitution of credit or liquidity providers, or their repayment of the securities failure to perform 11. D Rating changes

D. D Notice of Failure to Provide Annual Financial Information as Required

E. D Other Secondary Market Information (Specify): ______

I hereby represent that I am authorized by the issuer or obligor or its agent to distribute this information publicly:

Issuer/Filer Contact: Name ______Title ______

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Issuer Web Site Address ______

G-14 Dissemination Agent Contact, if any: Name ______Title ______

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Relationship to Issuer ______

Obligor Contact, if any: Name ______Title ______

Employer ______�

Address ______City ______State ___Z ip Code ______

Telephone ______Fax ______

Email Address ______Obligor Web site Address ______

Investor Relations Contact, if any:

Name ______Title ______

Telephone ______Email Address ______

G-15 ( Page intentional I y I eft blank.) APPENDIX H

FORM OF FINAL OPINION

Board of Education Menifee Union School District 30205 Menifee Road Menifee, California92 584

Re: Community Facilities District No. 2003-4 of the Menifee Union School District, 2005 Special Tax Bonds (Final Opinion)

Dear Board Members:

We have acted as bond counsel forthe Menifee Union School District (the "District") in connection with proceedings forthe issuance and sale of $2,580,000 aggregate principal amount of 2005 Special Tax Bonds (the "Bonds") of Community Facilities District No. 2003-4 of the District (the "CFD"). The Bonds are designated 2005 Special Tax Bonds; are in the denomination of $5,000, or any integral multiple thereof; are dated July 14, 2005; bear interest payable semiannually at the rates and mature on September 1 in the years and in the amounts, as follows:

Year Principal Amount Interest Rate 2007 $ 45,000 3.050% 2008 45,000 3.300 2009 50,000 3.650 2010 50,000 3.850 2011 50,000 4.000 2012 55,000 4.150 2013 55,000 4.250 2014 60,000 4.350 2015 60,000 4.450 2016 65,000 4.550 2017 65,000 4.650 2018 70,000 4.750 2019 75,000 4.850 2020 75,000 4.875 2021 80,000 4.875 2022 85,000 5.000 2023 90,000 5.050 2024 95,000 5.000 2025 100,000 5.100 2030 575,000 5.125 2035 735,000 5.200

Both the principal of and interest on the Bonds are payable in lawful money of the United States of America. Interest on the Bonds is payable to the registered owner on March 1 and

H-1 September 1 of each year commencing March 1, 2006, by check of the Fiscal Agent, U.S. Bank National Association, at the address shown on the registration books as of the fifteenth day of the month preceding such payment date. Principal and interest at maturity are payable upon surrender at the principal corporate trust officeof the Fiscal Agent in Los Angeles, California.

The Bonds are issued pursuant to the provisions of Title 5, Division 2, Part 1, Chapter 2. 5 of the Government Code, authorized by an election held on December 14, 2004, a resolution adopted on June 14, 2005 (the "Resolution") of the Board of Education of the District acting as the legislative body of the CFD, and a Fiscal Agent Agreement, dated as of June 1, 2005, by and between the CFD and the Fiscal Agent ( collectively, the "Fiscal Agent Agreement").

We have examined the Resolution, the Fiscal Agent Agreement, and other legal proceedings required forthe issuance of the Bonds. Based on such review, in our opinion such proceedings show lawful authority for the issuance of the Bonds by the CFD under the Constitution and laws of the State of Californianow in force, and the Bonds are valid and legally binding obligations of the CFD, enforceable in accordance with their terms, except as moratorium, reorganization or other similar laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases. The Bonds are payable fromthe proceeds of a special tax to be levied by the CFD and other amounts as provided in the Fiscal Agent Agreement.

We are of the opinion that interest on the Bonds is exempt from personal income taxes imposed by the State of California, and, assuming compliance by the CFD with the covenants in the Fiscal Agent Agreement designed to meet the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), we are further of the opinion that, under existing law, regulations, rulings and court decisions, interest on the Bonds is excluded fromgro ss income for purposes of fe deral income taxation and is not an item of tax preference for purposes of the fe deral alternative minimum tax imposed by Section 5 5 of the Code on individuals and corporations.

The opinions expressed herein may be affected by actions taken (or not taken) or events occurring ( or not occurring) after the date hereof. We have not undertaken to determine, or to informany person, whether such actions or events are taken or do occur.

The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities.

Very truly yours,

RUTAN & TUCKER, LLP

H-2 APPENDIX I

COMMUNITY FACILITIES DISTRICT BOUNDARY MAP SHEET 1 OF 1 PROPOSED BOUNDARIES OF MENIFEE UNION SCHOOL DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2003-4 RIVERSIDE COUNTY STATE OF CALIFORNIA

- - , - ( 1) Filed in the office of the Clerkof the Board , this _ day of _, 20_. \ Clerk of the Board 338-1 50-042 338-150-030 338-1 50-037 (2) I hereby certify that the within mop showing the proposedof boundaries Community Facilities District No. 2003-4, Riverside Counfy, State ofColiomio, was approved bythe Governing lj Board at a regular meeting thereof, held on this__ day of 20_, by 338-1 50-021 , , 338-1 50-006 ---- its Resolution No. ___ . 338-150-022 I 338-150-007 Clerkof the Board 111111: 338-1 50-035 338-1 50-023 .., 338-150-008 (3) Filed this _day of 20_, at the hour of _ o'clock_ni, in Book __ of Mops of Amsmentand Community Facilities Districts .., at page __ and as InstrumentNo. _ in 338-150-024 338-1 50-009 the officeof the Counfy ofRecorder R'iverside Counfy, State of Coliomio.

I �l \ii C.C.I KUAU \\ Counfy Recorder of Riverside Counfy

CII Reference is hereby made to the CII CD Assessor maps of the County of 338-1 70-001 338-1 70-002 338-1 70-005 .!. Riverside for an exact description of the lines and dimensions of each a, lot and parcel.

I

111111: LEGEND Boundcrles of Community FacDltles District No. 2003-4 Assessor Parcel Boundaries nnn-nnn-nnn AaaNaor Parcel Number 338-170-003 338-1 70-004

PREPARED BY DAVID TAUSSIG & ASSOCIATES, INC.

NEWPORT ROAD