NEW ISSUE -- FULL BOOK-ENTRY RATING: Moody’s: “Aa2” See “RATING” herein.

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, based upon existing laws, regulations, rulings, court decisions, and assuming (among other things) compliance with certain covenants, interest on the Refunding Bonds is exempt from State of California personal income taxes, although interest on the Refunding Bonds is not excluded from gross income for federal income tax purposes. Bond Counsel expresses no opinion regarding any other tax consequences caused by the ownership or disposition of, or the accrual or receipt of interest on, the Refunding Bonds. See “TAX MATTERS” herein. $37,225,000 KERN HIGH SCHOOL DISTRICT (Kern County, California) 2011 Taxable General Obligation Refunding Bonds

Dated: Date of Delivery Due: As shown on inside cover Authority. The Kern High School District (Kern County, California) 2011 Taxable General Obligation Refunding Bonds (the “Refunding Bonds”) are being issued by the Kern High School District (the “District”) pursuant to certain provisions of the California Government Code and a resolution of the Board of Trustees of the District adopted on May 24, 2011 (the “Bond Resolution”). The Refunding Bonds are being issued to refund all or a portion of the District’s General Obligation Refunding Bonds, Series 1996A. See “THE REFUNDING BONDS – Financing Plan.” Security. The Refunding Bonds are general obligations of the District. The Board of Supervisors of the County has the power and is obligated to annually levy ad valorem taxes upon all property subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Refunding Bonds. There are currently other series of general obligation bonds in the District that are similarly secured by tax levies. All general obligation bonds are issued on a parity basis with one another. See “THE REFUNDING BONDS - Security for the Refunding Bonds.” No Redemption. The Refunding Bonds are not subject to optional or mandatory redemption prior to maturity as described herein. See “THE REFUNDING BONDS – No Early Redemption.” Book-Entry Only. The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). Purchasers will not receive physical certificates representing their interests in the Refunding Bonds. See “APPENDIX F - Book-Entry Only System.” Payments. Interest on the Refunding Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2012, by check mailed to the person in whose name the Refunding Bond is registered. Payments of principal and interest on the Refunding Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, as Paying Agent, to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Refunding Bonds. See “APPENDIX F – Book-Entry Only System.”

MATURITY SCHEDULE (See inside front cover)

Cover Page. This cover page contains information for quick reference only. It is not a summary of all the provisions of the Refunding Bonds. Investors must read the entire official statement to obtain information essential in making an informed investment decision. The Refunding Bonds are offered when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters also will be passed upon for the District by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel. It is anticipated that the Refunding Bonds in definitive form will be available for delivery to Cede & Co., as nominee of The Depository Trust Company, on or about June 29, 2011, in New York, New York.

The date of this Official Statement is: June 15, 2011

MATURITY SCHEDULE

KERN HIGH SCHOOL DISTRICT (Kern County, California) 2011 Taxable General Obligation Refunding Bonds

BASE CUSIP(†): 492246

Maturity Date Principal Interest (August 1) Amount Rate Price CUSIP(†) 2012 $7,140,000 0.730% 100.000% MA8 2013 7,535,000 1.480 100.000 MC4 2014 7,970,000 1.984 100.000 ME0 2015 6,450,000 2.538 100.000 MG5 2016 4,880,000 2.988 100.000 MJ9 2017 3,250,000 3.438 100.000 ML4

† Copyright 2011, 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 District nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

Use of Official Statement. This Official Statement is submitted in connection with the sale of the Refunding 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 between any bond owner and the District or the Underwriter.

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

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Refunding Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

Information in Official Statement. The information set forth in this Official Statement has been furnished by the District and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness.

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

Document Summaries. All summaries of the Bond Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions.

No Securities Laws Registration. The Refunding Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Refunding Bonds have not been registered or qualified under the securities laws of any state.

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 Refunding Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District, the County, the other parties described in this Official Statement, or the condition of the property within the District since the date of this Official Statement.

The Refunding Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exception from the registration requirements contained in such act. The Refunding Bonds have not been registered or qualified under the securities laws of any state.

Website. The District maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Refunding Bonds.

KERN HIGH SCHOOL DISTRICT KERN COUNTY STATE OF CALIFORNIA

BOARD OF TRUSTEES

Bryan Batey, President Chad Vegas, Vice President Mike Williams, Clerk William Perry, Member Martha Miller, Member

DISTRICT ADMINISTRATION

Dr. Donald E. Carter, Superintendent Bryon Schaefer, Associate Superintendent, Business

FINANCIAL ADVISOR

Dale Scott & Company, Inc. San Francisco, California

BOND COUNSEL AND DISCLOSURE COUNSEL

Jones Hall, A Professional Law Corporation San Francisco, California

PAYING AGENT, TRANSFER AGENT, BOND REGISTRAR AND ESCROW BANK

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California

VERIFICATION AGENT

Causey Demgen & Moore Inc. Denver, Colorado

TABLE OF CONTENTS Page

INTRODUCTION ...... 1 THE REFUNDING BONDS ...... 1 The District...... 1 Description of the Refunding Bonds ...... 1 Authority for Issuance...... 2 Financing Plan ...... 2 Security for the Refunding Bonds...... 3 Paying Agent...... 4 No Redemption ...... 4 Registration, Transfer and Exchange of Refunding Bonds ...... 4 Book-Entry-Only System ...... 4 DEBT SERVICE SCHEDULES ...... 5 SOURCES AND USES OF FUNDS ...... 7 PROPERTY TAXATION ...... 8 Ad Valorem Property Taxation ...... 8 Assessed Valuations...... 8 Appeals of Assessed Value...... 11 Property Tax Collection ...... 12 Largest Property Owners ...... 13 Overlapping Debt Obligations...... 15 CONTINUING DISCLOSURE ...... 17 VERIFICATION OF MATHEMATICAL ACCURACY ...... 17 CERTAIN LEGAL MATTERS...... 18 Absence of Material Litigation ...... 18 Legal Opinion...... 18 TAX MATTERS...... 18 RATING ...... 18 UNDERWRITING...... 19 ADDITIONAL INFORMATION...... 19

APPENDIX A - Audited Financial Statements of the District For Fiscal Year Ending June 30, 2010...... A-1 APPENDIX B - General and Financial Information About the District...... B-1 APPENDIX C - General Information About the City of Fresno and Kern County...... C-1 APPENDIX D - Form of Opinion of Bond Counsel ...... D-1 APPENDIX E - Form of Continuing Disclosure Certificate...... E-1 APPENDIX F - Book-Entry Only System ...... F-1

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$37,225,000 KERN HIGH SCHOOL DISTRICT (KERN COUNTY, CALIFORNIA) 2011 TAXABLE GENERAL OBLIGATION REFUNDING BONDS

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and attached appendices, is to set forth certain information concerning the sale and delivery by the Kern High School District (the “District”) of its 2011 Taxable General Obligation Refunding Bonds (the “Refunding Bonds”).

This Official Statement makes reference to resolutions and to other documents and laws. Such references do not purport to be complete, comprehensive or definitive and are qualified in their entirety by reference to each such document and provision.

All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Bond Resolution (as defined below).

THE REFUNDING BONDS

The District

The District was created in 1916 and covers an area of approximately 3,500 square miles, which represents 43% of the total area of Kern County. The District is the State’s largest grade 9 through 12 high school district as measured by enrollment, and is made up of 18 comprehensive high schools, 5 continuation high schools, a state-honored adult school, a regional occupation center and numerous special education sites. Student enrollment for the 2010-11 fiscal year is over 35,000 students. See “APPENDIX B – General and Financial Information About the District.”

Description of the Refunding Bonds

The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Purchasers will not receive physical certificates representing their interest in the Refunding Bonds. See "Book-Entry Only System" below and “APPENDIX F – Book-Entry Only System.”

Interest on the Refunding Bonds accrues from the dated date set forth on the cover hereof (the “Dated Date”), and is payable semiannually on February 1 and August 1 of each year (each, an “Interest Payment Date”) commencing February 1, 2012. Each Refunding Bond will bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered and authenticated prior to an Interest Payment Date and after the close of business on the 15th day of the month preceding such Interest Payment Date (each, a “Record Date”), in which event it shall bear interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to January 15, 2012, in which event it will bear interest from the date of original delivery; provided, however, that if at the time of authentication of a Refunding Bond, interest is in default thereon,

such Refunding Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

Interest on the Refunding Bonds, including the final interest payment upon maturity, is payable by check of the Paying Agent mailed on the Interest Payment Date by first-class mail to the Owner thereof at such Owner’s address as it appears on the bond register maintained by the Paying Agent at the close of business on the preceding Record Date, or at such other address as the Owner may have filed with the Paying Agent for that purpose, or upon written request filed with the Paying Agent as of the Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Refunding Bonds, by wire transfer.

The Refunding Bonds will be issued in denominations of $5,000 principal amount each or any integral multiple thereof. The Refunding Bonds mature on February 1 and August 1 in the years and amounts set forth on the inside cover page hereof.

Authority for Issuance

The Refunding Bonds will be issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Bond Law”) and under a resolution adopted by the Board of Trustees of the District on May 24, 2011 (the “Bond Resolution”).

Financing Plan

The District has previously issued its Kern High School District (County of Kern, California) General Obligation Refunding Bonds, Series 1996A (the “1996 Bonds”), for the purpose of refunding outstanding general obligation bonds of the District.

The Refunding Bonds are being issued by the District to refund on a current basis all of the 1996 Bonds (the “Refunded Bonds”) identified in the following table.

KERN HIGH SCHOOL DISTRICT Identification of Refunded Bonds Redemption Principal Price (% of Amount Paid Redemption Par Amount Series Maturities to be Refunded and Redeemed Date Redeemed) GORBs, Series 1996A 02/01/2012 through 08/01/2017 $36,030,000(1) 08/01/2011 102.0%

(1) Does not include principal amount coming due on August 1, 2011.

The District will deliver a portion of the proceeds of the Refunding Bonds to The Bank of New York Mellon Trust Company, N.A., as escrow agent (the “Escrow Bank”), for deposit in an irrevocable escrow fund (the "Escrow Fund") established under the Escrow Agreement (the “Escrow Agreement”), entered into by and between the District and the Escrow Bank.

The Escrow Bank will hold all amounts deposited in the Escrow Fund in cash, uninvested, until August 1, 2011, on which date the Escrow Bank will pay the redemption price of the Refunded Bonds.

Sufficiency of the deposits in the Escrow Fund for those purposes will be verified by Causey Demgen & Moore Inc., certified public accountants, Denver, Colorado (the “Verification Agent”). See “VERIFICATION OF MATHEMATICAL ACCURACY” below.

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The amounts held and invested by the Escrow Bank in the Escrow Fund are pledged solely to the payment of the Refunded Bonds. Neither the funds deposited in the Escrow Fund nor the interest on the invested funds will be available for the payment of debt service with respect to the Refunding Bonds.

Security for the Refunding Bonds

The Refunding Bonds are a general obligation of the District. The Board of Supervisors of the County has the power and is obligated to levy ad valorem taxes for the payment of the Refunding Bonds and the interest thereon upon all property within the District subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates). Such taxes are required to be levied annually, in addition to all other taxes, during the period that the Refunding Bonds are outstanding in an amount sufficient to pay the principal and interest on the Refunding Bonds when due. Such taxes, when collected, will be deposited into an interest and sinking fund for the Refunding Bonds (the “Debt Service Fund”), which is maintained by the County Treasurer and which is created by statute for the payment of principal of and interest on the Refunding Bonds when due. Although the County is obligated to levy an ad valorem tax for the payment of the Refunding Bonds, the Refunding Bonds are not a debt of the County.

The District currently has other general obligation bonds outstanding which are similarly secured by the levy of ad valorem taxes in the District. See “APPENDIX B – GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT – DISTRICT FINANCIAL INFORMATION – Existing Debt Obligations.”

The moneys in the Debt Service Fund, to the extent necessary to pay the principal and interest on the Refunding Bonds as the same become due and payable, shall be transferred by the County to the Paying Agent (as defined herein) which, in turn, shall pay such moneys to DTC to pay the principal and interest on the Refunding Bonds. DTC will thereupon make payments of principal and interest on the Refunding Bonds to the DTC Participants who will thereupon make payments of principal and interest to the beneficial owners of the Refunding Bonds.

The rate of the annual ad valorem tax levied by the County to repay the Refunding Bonds will be determined by the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Refunding Bonds. A reduction in the assessed valuation of taxable property in the District caused by economic factors beyond the District's control, such as economic recession, slower growth, or deflation of land values, a relocation out of the District by one or more major property owners, or the complete or partial destruction of such property caused by, among other eventualities, an earthquake, flood or other natural disaster, could cause a reduction in the assessed value of the District and necessitate an unanticipated increase in the annual tax levy. There are currently other series of general obligation bonds that are similarly secured by tax levies. For further information regarding the District's tax base, tax rates, overlapping debt and other matters concerning taxation, see “PROPERTY TAXATION.”

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Paying Agent

The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will act as the registrar, transfer agent, and paying agent for the Bonds (the “Paying Agent”). As long as DTC is the registered owner of the Refunding Bonds and DTC's book-entry method is used for the Refunding Bonds, the Paying Agent will send any notice of redemption or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the redemption of the Refunding Bonds called for redemption or of any other action covered by such notice.

The Paying Agent and the District have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Refunding Bonds.

No Redemption

The Refunding Bonds are not subject to redemption prior to maturity.

Registration, Transfer and Exchange of Refunding Bonds

If the book entry system is discontinued, the District shall cause the Paying Agent to maintain and keep at its principal corporate trust office all books and records necessary for the registration, exchange and transfer of the Refunding Bonds.

If the book entry system is discontinued, the person in whose name a Refunding Bond is registered on the Bond Register shall be regarded as the absolute owner of that Bond. Payment of the principal of and interest on any Refunding Bond shall be made only to or upon the order of that person; neither the District, the County nor the Paying Agent shall be affected by any notice to the contrary, but the registration may be changed as provided in the Bond Resolution.

Refunding Bonds may be exchanged for Refunding Bonds of like tenor, maturity and principal amount upon presentation and surrender at the principal corporate trust office of the Paying Agent in Los Angeles, California. Any Refunding Bond may, in accordance with its terms, but only if (i) the District determines to no longer maintain the book entry only status of the Refunding Bonds, (ii) DTC determines to discontinue providing such services and no successor securities depository is named or (iii) DTC requests the District to deliver Bond certificates to particular DTC Participants, be transferred, upon the books required to be kept pursuant to the provisions of the Bond Resolution, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Refunding Bond for cancellation at the office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed.

No exchanges of Refunding Bonds shall be required to be made (a) fifteen days prior to an Interest Payment Date or the date established by the Paying Agent for selection of Refunding Bonds for redemption or (b) with respect to a Refunding Bond after such Refunding Bond has been selected for redemption.

Book-Entry-Only System

The Refunding Bonds will be issued in fully registered form only and, when initially issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as

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securities depository for the Refunding Bonds. Purchasers of the Refunding Bonds will not receive physical certificates representing their beneficial ownership interests in the Refunding Bonds purchased. Payments of principal and interest on the Refunding Bonds will be paid by the Trustee to DTC, which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Refunding Bonds. See “APPENDIX F – BOOK-ENTRY ONLY SYSTEM” herein.

DEBT SERVICE SCHEDULES

Refunding Bonds Debt Service. The following table shows the annual debt service schedule with respect to the Refunding Bonds (assuming no optional redemptions).

KERN HIGH SCHOOL DISTRICT Debt Service Schedule Refunding Bonds

Semi—Annual Annual Refunding Bonds Refunding Bonds Refunding Bonds Refunding Bonds Payment Date Principal Interest Debt Service Debt Service 02/01/2012 - $ 437,553.40 $ 437,553.40 - 08/01/2012 $ 7,140,000 371,507.60 7,511,507.60 $7,949,061.00 02/01/2013 - 345,446.60 345,446.60 - 08/01/2013 7,535,000 345,446.60 7,880,446.60 8,225,893.20 02/01/2014 - 289,687.60 289,687.60 - 08/01/2014 7,970,000 289,687.60 8,259,687.60 8,549,375.20 02/01/2015 - 210,625.20 210,625.20 - 08/01/2015 6,450,000 210,625.20 6,660,625.20 6,871,250.40 02/01/2016 - 128,774.70 128,774.70 - 08/01/2016 4,880,000 128,774.70 5,008,774.70 5,137,549.40 02/01/2017 - 55,867.50 55,867.50 - 08/01/2017 3,250,000 55,867.50 3,305,867.50 3,361,735.00 Total $37,225,000 $2,869,864.20 $40,094,864.20 $40,094,864.20

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In addition to the Refunding Bonds, the District has previously issued other general obligation bonds, as described in Appendix A. The County similarly levies an amount necessary to pay such bonds and the Refunding Bonds, which are payable on a parity from such tax levies. The following table shows the combined debt service for other outstanding general obligation bonds of the District, together with the Refunding Bonds.

KERN HIGH SCHOOL DISTRICT Combined Debt Service Schedule General Obligation Bonds

Other General Aggregate Period Ending Obligation Bonds Refunding Bonds Annual (August 1) Debt Service(1) Debt Service Debt Service 2011 $ 21,365,863 - $ 21,365,863 2012 13,193,915 $ 7,949,061 21,142,976 2013 13,201,415 8,225,893 21,427,308 2014 13,195,753 8,549,375 21,745,128 2015 13,227,553 6,871,250 20,098,803 2016 13,210,903 5,137,549 18,348,452 2017 13,183,251 3,361,735 16,544,986 2018 13,195,951 - 13,195,951 2019 13,249,378 - 13,249,378 2020 13,208,110 - 13,208,110 2021 13,230,279 - 13,230,279 2022 13,209,703 - 13,209,703 2023 13,209,115 - 13,209,115 2024 13,174,948 - 13,174,948 2025 13,145,848 - 13,145,848 2026 13,101,448 - 13,101,448 2027 13,066,510 - 13,066,510 2028 13,039,660 - 13,039,660 2029 13,008,273 - 13,008,273 2030 9,533,706 - 9,533,706 2031 4,680,913 - 4,680,913 2032 4,659,806 - 4,659,806 2033 4,650,369 - 4,650,369 2034 3,141,600 - 3,141,600 2035 3,116,688 - 3,116,688 2036 3,126,788 - 3,126,788 TOTAL $291,327,740 $40,094,864 $331,422,604

(1) Does not include debt service on Refunded Bonds.

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SOURCES AND USES OF FUNDS

The sources and uses of funds with respect to the Refunding Bonds are as follows:

Sources of Funds: Principal Amount of Refunding Bonds $37,225,000.00

Total Sources: $37,225,000.00

Uses of Funds: Escrow Fund $36,750,600.00 Costs of Issuance(1) 474,400.00

Total Uses: $37,225,000.00

(1) Costs of issuance include legal fees, financial advisor fees, underwriter’s discount, printing costs, rating agency fees and other miscellaneous costs and expenses of issuing the Refunding Bonds.

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PROPERTY TAXATION

Ad Valorem Property Taxation

Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10 percent penalty attaches to any delinquent payment. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is subject to sale by the Treasurer.

Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10 percent penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The taxing authority has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the assessee.

Assessed Valuations

The assessed valuation of property in the District is established by the Kern County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100 percent of the “full value” of the property, as defined in Article XIIIA of the California Constitution. Prior to 1981-82, assessed valuations were reported at 25 percent of the full value of property. For a discussion of how properties currently are assessed, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”

Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions.

The District has a 2010-11 gross assessed valuation of $45,676,505,640 (full cash value).

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KERN HIGH SCHOOL DISTRICT (1) Historic Assessed Valuations District Annual County Fiscal Year Assessed Valuation(2) %Change Assessed Valuation(3) Annual %Change 2000-01 $23,761,397,384 -- $43,467,013,692 -- 2001-02 25,429,252,146 7.0 46,104,488,127 6.1% 2002-03 25,733,940,851 1.2 44,779,081,744 (2.9) 2003-04 27,628,428,265 7.4 47,018,189,723 5.0 2004-05 30,113,289,732 9.0 50,584,523,432 7.6 2005-06 34,398,560,159 14.2 58,325,850,679 15.3 2006-07 41,713,422,910 21.3 68,474,459,030 17.4 2007-08 47,307,530,766 13.4 79,505,881,353 16.1 2008-09 48,686,900,344 2.9 84,161,663,262 5.9 2009-10 45,319,765,052 (6.9) 78,916,696,162 (6.2) 2010-11 45,676,505,640 0.8 82,640,474,871 4.7

(1) Before redevelopment increment. (2) Excludes unitary utility valuation. (3) Includes unitary utility valuation. Source: California Municipal Statistics, Inc.

The following table shows a breakdown of local secured property assessed value and parcels within the District by land use for fiscal year 2010-11.

KERN HIGH SCHOOL DISTRICT Local Secured Property Assessed Valuation and Parcels by Land Use

2010-11 % of No. of % of Assessed Valuation(1) Total Parcels Total Non-Residential: Agricultural $ 1,462,843,335 3.42% 17,691 6.19% Commercial 1,811,959,085 4.23 4,954 1.73 Professional/Office 690,899,840 1.61 825 0.29 Industrial 2,500,270,086 5.84 1,915 0.67 Oil & Gas Production/Mineral Rights 8,362,546,730 19.53 2,421 0.85 Recreational 117,566,341 0.27 774 0.27 Government/Social/Institutional 220,145,881 0.51 7,260 2.54 Miscellaneous 13,754,921 0.03 1,311 0.46 Subtotal Non-Residential $15,179,986,219 35.45% 37,151 13.01%

Residential: Single Family Residence $24,371,234,246 56.91% 173,690 60.80% Condominium/Townhouse 589,832,736 1.38 5,993 2.10 Mobile Home 192,885,998 0.45 5,987 2.10 Mobile Home Park 115,147,601 0.27 257 0.09 2-4 Residential Units 734,884,159 1.72 4,279 1.50 5+ Residential Units/Apartments 1,010,593,462 2.36 1,412 0.49 Subtotal Residential $27,014,578,202 63.08% 191,618 67.08%

Vacant Parcels $629,169,675 1.47% 56,892 19.92%

Total $42,823,734,096 100.005 285,661 100.00%

(1) Local secured assessed valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

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The following table sets forth the per parcel assessed valuation of single-family homes in fiscal year 2010-11. KERN HIGH SCHOOL DISTRICT Per Parcel Assessed Valuation of Single-Family Homes

No. of 2010-11 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 173,960 $24,371,234,246 $140,315 $121,560

2010-11 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $24,999 7,048 4.058% 4.058% $ 102,717,552 0.421% 0.421% $25,000 - $49,999 17,733 10.210 14.267 678,340,449 2.783 3.205 $50,000 - $74,999 24,854 14.309 28.577 1,497,577,770 6.145 9.350 $75,000 - $99,999 23,563 13.566 42.143 1,899,107,111 7.792 17.142 $100,000 - $124,999 18,726 10.781 52.924 2,114,296,482 8.675 25.817 $125,000 - $149,999 17,997 10.362 63.286 2,302,878,123 9.449 35.267 $150,000 - $174,999 14,541 8.372 71.658 2,342,991,330 9.614 44.880 $175,000 - $199,999 12,322 7.094 78.752 2,222,531,462 9.119 54.000 $200,000 - $224,999 8,350 4.807 83.559 1,729,477,050 7.096 61.096 $225,000 - $249,999 7,280 4.191 87.751 1,700,178,480 6.976 68.072 $250,000 - $274,999 4,510 2.597 90.347 1,173,253,950 4.814 72.887 $275,000 - $299,999 2,963 1.706 92.053 830,042,968 3.406 76.292 $300,000 - $324,999 2,812 1.619 93.672 886,345,212 3.637 79.929 $325,000 - $349,999 1,822 1.049 94.721 610,601,394 2.505 82.435 $350,000 - $374,999 1,312 0.755 95.476 473,965,248 1.945 84.379 $375,000 - $399,999 1,250 0.720 96.196 483,176,250 1.983 86.362 $400,000 - $424,999 1,174 0.676 96.872 487,693,688 2.001 88.363 $425,000 - $449,999 1,110 0.639 97.511 488,014,830 2.002 90.366 $450,000 - $474,999 982 0.565 98.076 458,199,236 1.880 92.246 $475,000 - $499,999 990 0.570 98.646 480,624,210 1.972 94.218 $500,000 and greater 2,351 1.354 100.000 1,409,221,451 5.782 100.000 Total 173,690 100.000% $24,371,234,246 100.000%

(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

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Typical tax rates for fiscal years 2006-07 through 2010-11 for two tax rate areas within the District are set forth on the following table.

KERN HIGH SCHOOL DISTRICT Typical Total Tax Rates – TRA 1-001 and 121-001 (Dollars Per $100 of Assessed Valuation)

Typical Total Tax Rates per $100 of Assessed Valuation (TRA 1-001)(1)

2006-07 2007-08 2008-09 2009-10 2010-11 1% General Fund Levy 1.000000 1.000000 1.000000 1.000000 1.000000 Kern County Water Agency .038184 .053401 .049469 .060084 .055301 Bakersfield City School District .038811 .057729 .056831 .067568 .066321 Kern High School District .040466 .038224 .035832 .043114 .044697 Kern Community College District SRID .005283 .008036 .009053 .009401 .010117 Total All Property 1.122744 1.157390 1.151185 1.180167 1.176436

Kern County Water Agency, I.D. No. 4 -.000562 -.000094 - - - Total All Property – Less Minerals -.000562 -.000094 - - -

Typical Total Tax Rates per $100 of Assessed Valuation (TRA 121-001)(2)

2006-07 2007-08 2008-09 2009-10 2010-11 1% General Fund Levy 1.000000 1.000000 1.000000 1.000000 1.000000 Kern County Water Agency .018754 .024210 .020615 .026896 .023851 Standard School District .023937 .020972 .023953 .025810 .020623 Kern High School District .040466 .038224 .035832 .043114 .044697 Kern Community College District SRID .005283 .008036 .009053 .009401 .010117 Total All Property 1.088440 1.091442 1.089453 1.105221 1.099288

(1) 2010-11 assessed valuation of TRA 1-001 is $1,134,529,787 (2) 2010-11 assessed valuation of TRA 121-001 is $2,836,558,122 Source: California Municipal Statistics, Inc.; Kern County Auditor-Controller/Treasurer-Tax Collector’s Office for 2010-11.

Appeals of Assessed Value

There are two types of appeals of assessed values that could adversely impact property tax revenues within the District.

Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. See “LIMITATIONS ON TAX REVENUES” in Appendix B.

Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Proposition 8 reductions may also be unilaterally applied by the County Assessor.

Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for

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inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See “LIMITATIONS ON TAX REVENUES” in Appendix B.

A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.

The District cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers. Any reduction in aggregate District assessed valuation due to appeals, as with any reduction in assessed valuation due to other causes, will cause the tax rate levied to repay the Bonds to increase accordingly, so that the fixed debt service on the Bonds (and other outstanding general obligation bonds, if any) may be paid.

Property Tax Collections

The Board of Supervisors of the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The District participates in the Teeter Plan, and thus receives 100% of secured property taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes.

So long as the Teeter Plan remains in effect, the District’s receipt of revenues with respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors can under certain circumstances terminate the Teeter Plan in part or in its entirety with respect to the entire County and, in addition, the Board of Supervisors can terminate the Teeter Plan with respect to the District if the delinquency rate for all ad valorem property taxes levied within the District in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District.

Historical secured tax levy collections and delinquencies in the District are summarized in the following table. Such information with respect to the 2010-11 fiscal year is not available at this time.

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KERN HIGH SCHOOL DISTRICT Secured Tax Charges and Delinquencies

Secured Amt. Delinquent % Delinquent Year Tax Charge(1) June 30 June 30 2004-05 $ 6,739,996 $ 105,953 1.57% 2005-06 11,601,331 (2) (2) 2006-07 91,407,524 (2) (2) 2007-08 103,098,051 3,941,526 3.82 2008-09 104,866,062 3,263,292 3.11 2009-10 97,644,344 2,430,413 2.49

(1) Debt service levy in 2004-05 through 2005-06; 1% general fund apportionment in 2006-07 and after. (2) Delinquencies and percentage of delinquencies are not available for these fiscal years. Source: California Municipal Statistics, Inc.

Top Twenty Property Owners

General. The following table shows the 20 largest owners of taxable property in the District as determined by secured assessed valuation in fiscal year 2010-11, which represent 24% of the secured tax base. KERN HIGH SCHOOL DISTRICT Top Twenty Secured Property Taxpayers

2010-11 % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Occidental of Elk Hills Inc. Oil & Gas Production $ 4,288,894,223 9.82% 2. Chevron USA Inc. Oil & Gas Production 2,525,941,435 5.79 3. Pastoria Energy Facility LLC Power Generation 484,900,000 1.11 4. MacPherson Oil Co. Oil & Gas Production 407,947,906 0.93 5. William Bolthouse Farms Inc. Food Processing 345,062,972 0.79 6. Oxy USA Inc. Oil & Gas Production 341,486,944 0.78 7. Elk Hills Power LLC Power Generation 306,600,000 0.70 8. Nestle Holdings Inc. Industrial 216,731,466 0.50 9. Vintage Production Cal LLC Oil & Gas Production 192,900,511 0.44 10. Grimmway Enterprises Inc. Industrial 192,332,834 0.44 11. National Cement Co. of Calif. Industrial 185,404,074 0.42 12. California Water Service Co. Water Company 158,147,395 0.36 13. Sycamore Cogeneration Co. Power Generation 151,389,000 0.35 14. Target Corporation Industrial 147,911,392 0.34 15. Bakersfield Mall LLC Shopping Center/Mall 145,229,294 0.33 16. Castle & Cooke California Inc. Residential Development 91,143,295 0.21 17. Ensign United States Drilling (CA) Inc. Industrial 83,829,407 0.19 18. BLC Glenwood Gardens SNF LP Assisted Living Facility 79,044,687 0.18 19. Lennar Homes of California Residential Development 78,917,037 0.18 20. J.G. Boswell Co. Food Processing 77,787,258 0.18 $10,501,601,130 24.05%

(1) 2010-11 Total Secured Assessed Valuation: $43,662,331,105 Source: California Municipal Statistics, Inc.

Concentration of Property Ownership. The top twenty property owners in the District account for 24.05 percent of the assessed valuation in the District. Two property owners in the District own properties that each account for over five percent of the assessed valuation in the District. Notwithstanding that these owners own significant properties in the District, the Refunding Bonds are secured by ad valorem property taxes, which the County is obligated to levy against District properties in sufficient amounts to pay debt service on the Refunding Bonds. In the event of delinquencies or non-payment, the County participates in the Teeter

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Plan, described above, and as a result, the District receives a credit for the amount of ad valorem taxes levied for the Refunding Bonds, notwithstanding delinquencies. To follow is some information available from public sources regarding the top two secured property owners; however, the District makes no representation regarding the accuracy or completeness of such information.

Occidental of Elk Hills, Inc. Occidental of Elk Hills, Inc., is a subsidiary of Occidental Petroleum Corporation (NYSE:OXY), which is an international oil and gas exploration and production company. The property owned by Occidental in the District consists of approximately 21,170 acres and was acquired by them in 1997. The land is an active large oil field in the northwestern portion of Kern County.

Chevron USA. Chevron Corporation (NYSE: CVX) has an extensive world-wide oil and gas exploration and production operation. It operates the Kern River Oil Field in north-northeast Bakersfield, composed of approximately 10,750 acres.

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Overlapping Debt Obligations

Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and dated May 1, 2011. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

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KERN HIGH SCHOOL DISTRICT Statement of Direct and Overlapping Bonded Debt Dated as of May 1, 2011

2010-11 Assessed Valuation: $45,676,505,640 Redevelopment Incremental Valuation: 1,075,090,746 Adjusted Assessed Valuation: $44,601,414,894

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 5/1/11 Kern Community College Safety, Repair and Improvement District 64.529% $ 69,595,309 Kern High School District 100. 212,940,000(1) Bakersfield City School District 100. 40,450,027 Beardsley School District 100. 15,539,898 Fruitvale School District 100. 24,216,159 Greenfield Union School District 100. 16,993,406 Richland School District 100. 22,768,756 Other School Districts Various 84,067,086 Buttonwillow Recreation and Park District 100. 4,810,000 Kern Delta Water District 100. 1,525,000 Water Storage Districts Various 3,681,688 Other Special Districts Various 328,405 Greenfield Union School District Community Facilities District No. 1 100. 2,455,000 RNR Community Facilities District No. 92-1 100. 68,030,000 Tejon Ranch Public Facilities Authority Community Facilities District 100. 41,655,000 1915 Act Bonds (Estimated) 69.769-100. 67,902,503 TOTAL GROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $676,958,237 Less: Water Storage Districts (100% supported by water charges) 3,040,471 TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $673,917,766

DIRECT AND OVERLAPPING GENERAL FUND DEBT: Kern County Certificates of Participation 57.475% $ 76,033,678 Kern County Pension Obligations 57.475 243,912,696 Kern County Board of Education Certificates of Participation 57.475 30,547,963 Kern Community College District Certificates of Participation 57.001 53,589,490 Kern Community College District Benefit Obligations 57.001 48,077,493 KERN HIGH SCHOOL DISTRICT GENERAL FUND OBLIGATIONS 100. 118,850,000 Arvin Union School District Certificates of Participation 100. 7,200,000 Fairfax School District Certificates of Participation 100. 4,500,000 Kernville Union School District Certificates of Participation 100. 4,225,000 Panama-Buena Vista Union School District Certificates of Participation 100. 32,035,000 Rio Bravo Greeley Union School District General Fund Obligations 100. 1,195,000 Standard School District Certificates of Participation 100. 1,140,000 City of Bakersfield General Fund Obligations 100. 26,620,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $647,926,320

GROSS COMBINED TOTAL DEBT $1,324,884,557(2) NET COMBINED TOTAL DEBT $1,321,844,086

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

Ratios to 2010-11 Assessed Valuation: Direct Debt ($212,940,000)...... 0.47% Total Gross Direct and Overlapping Tax and Assessment Debt...... 1.48% Total Net Direct and Overlapping Tax and Assessment Debt...... 1.48%

Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($331,790,000)...... 0.74% Gross Combined Total Debt...... 2.97% Net Combined Total Debt ...... 2.96%

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0

Source: California Municipal Statistics, Inc.

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CONTINUING DISCLOSURE

The District has covenanted, for the benefit of holders and beneficial owners of the Refunding Bonds to provide certain financial information and operating data (an “Annual Report”) relating to the District to the Municipal Securities Rulemaking Board (the “MSRB”) not later than nine months after the end of the District’s fiscal year (which currently would be March 31), commencing March 31, 2012 with the report for the 2010-11 fiscal year, and to provide notices of the occurrence of certain enumerated events. The notices of material events will be filed by the District with the MSRB. The specific nature of the information to be contained in an Annual Report or other required notices is set forth below under the caption “APPENDIX E - Form of Continuing Disclosure Certificate.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”).

The District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. The County is not obligated to undertake any continuing disclosure in connection with the Refunding Bonds.

VERIFICATION OF MATHEMATICAL ACCURACY

The Verification Agent, upon delivery of the Refunding Bonds, will deliver a report of the mathematical accuracy of certain computations, contained in schedules provided to them on behalf of the District, relating to (a) the sufficiency of the anticipated amount of proceeds of the Refunding Bonds and other funds available to pay, when due, the principal, whether at maturity or upon prior redemption, interest and redemption premium requirements of the Refunded Bonds and (b) the “yields” on the amount of proceeds held and invested prior to redemption of the Refunded Bonds and on the Refunding Bonds considered by Bond Counsel in connection with the opinion rendered by Bond Counsel that the Refunding Bonds are not “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended.

The report of the Verification Agent will include the statement that the scope of their engagement is limited to verifying mathematical accuracy, of the computations contained in such schedules provided to them, and that they have no obligation to update their report because of events occurring, or data or information coming to their attention, subsequent to the date of their report.

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CERTAIN LEGAL MATTERS

Absence of Material Litigation

No litigation is pending or threatened concerning the validity of the Refunding Bonds, and a certificate to that effect, executed by an authorized officer of the District, will be furnished to purchasers at the time of the original delivery of the Refunding Bonds. The District is not aware of any litigation pending or threatened that (i) questions the political existence of the District, (ii) contests the District's ability to receive ad valorem taxes or to collect other revenues or (iii) contests the District's ability to issue and retire the Refunding Bonds.

Legal Opinion

The proceedings in connection with the issuance of the Refunding Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel for the District (“Bond Counsel”). The opinion of Bond Counsel with respect to the Refunding Bonds will be delivered in substantially the form attached hereto as Appendix D. Certain legal matters will also be passed upon for the District by Jones Hall as Disclosure Counsel (“Disclosure Counsel”). The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the Refunding Bonds.

TAX MATTERS

Generally. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, based upon existing laws, regulations, rulings and court decisions, and assuming (among other things) compliance with certain covenants, interest on the Refunding Bonds is exempt from State of California personal income taxes, although interest on the Refunding Bonds is not excluded from gross income for federal income tax purposes. Bond Counsel express no opinion regarding any other tax consequences caused by the ownership or disposition of, or the accrual or receipt of interest on, the Refunding Bonds. A copy of the proposed opinion of Bond Counsel is set forth in APPENDIX D hereto.

Circular 230 Disclaimer. To ensure compliance with requirements imposed by the Internal Revenue Service, Bond Counsel informs Owners of the Refunding Bonds that any U.S. federal tax advice contained in this Official Statement (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code of 1986, as amended, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this Official Statement.

RATING

Moody’s Investors Services ("Moody’s") has assigned its municipal bond rating of “Aa2” to the Refunding Bonds. Such rating reflects only the view of Moody’s, and an explanation of the significance of such rating may be obtained only from Moody’s. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Refunding Bonds.

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UNDERWRITING

The Refunding Bonds are being purchased by E. J. De La Rosa & Co., Inc. (the “Underwriter”). The Underwriter has agreed to purchase the Refunding Bonds at a price of $36,992,343.75 (which is equal to the initial principal amount of the Refunding Bonds less Underwriter's discount of $232,656.25). The purchase contract relating to the Refunding Bonds provides that the Underwriter will purchase all of the Refunding Bonds (if any are purchased), and provides that the Underwriter's obligation to purchase is subject to certain terms and conditions, including the approval of certain legal matters by counsel.

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

ADDITIONAL INFORMATION

The discussions herein about the Bond Resolution and the Continuing Disclosure Certificate are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and for full and complete statements of such provisions reference is made to such documents. Copies of these documents mentioned are available from the Underwriter and following delivery of the Refunding Bonds will be on file at the offices of the Paying Agent in Los Angeles, California.

References are also made herein to certain documents and reports relating to the District; such references are brief summaries and do not purport to be complete or definitive. Copies of such documents are available upon written request to the District. The District may impose charges for copying, mailing and handling.

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

The execution and delivery of this Official Statement have been duly authorized by the District.

KERN HIGH SCHOOL DISTRICT

By: /s/ Dr. Donald E. Carter Superintendent

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APPENDIX A

AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR ENDING JUNE 30, 2010

A-1

KERN HIGH SCHOOL DISTRICT

ANNUAL FINANCIAL REPORT

AS OF JUNE 30, 2010

KERN HIGH SCHOOL DISTRICT JUNE 30, 2010 TABLE OF CONTENTS

Page

Organization III

FINANCIAL SECTION

Independent Auditors’ Report 1

Management Discussion and Analysis

Management Discussion and Analysis 4

Basic Financial Statements

District-wide Financial Statements:

Statement of Net Assets 8

Statement of Activities 9

Fund Financial Statements:

Balance Sheet – Governmental Funds 10

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 12

Statement of Revenues, Expenses, and Changes in Fund Balances – Governmental Funds 13

Reconciliation of the Governmental Funds Statement of Revenues, Expenses, and Changes in Fund Balances to the Statement of Activities 15

Statement of Net Assets – Proprietary Fund 16

Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Fund 17

Statement of Cash Flows – Proprietary Fund 18

Statement of Fiduciary Net Assets – Fiduciary Funds 19

Statement of Changes in Fiduciary Net Assets – KHSD Early Retirement Health Benefit Plan Fund 20

Notes to the Basic Financial Statements 21

I

KERN HIGH SCHOOL DISTRICT JUNE 30, 2010 TABLE OF CONTENTS (Continued)

Page Required Supplementary Information

Schedules of Revenues, Expenses, and Changes in Fund Balances – Budget and Actual:

General Fund 45 Special Reserve Fund 46

Schedule of Funding Progress 47

SUPPLEMENTARY INFORMATION SECTION

Combining Statements – Non-Major Funds:

Explanation of Non-Major Governmental Funds 49 Combining Balance Sheet – Non-Major Funds – Governmental Funds 50 Combining Statement of Revenues, Expenses, and Changes in Fund Balances – Non-Major Funds – Governmental Funds 51 Combining Balance Sheet – Non-Major Special Revenue Funds 52 Combining Statement of Revenues, Expenses, and Changes in Fund Balances – Non-Major Special Revenue Funds 54

II

KERN HIGH SCHOOL DISTRICT ORGANIZATION JUNE 30, 2010

The Kern High School District was formed in 1893 and serves the County of Kern.

During the year ended June 30, 2010, the District operated eighteen comprehensive high schools with a grade span of nine through twelve, and five continuation high schools. The District also maintains three vocational career centers, a charter school and an adult school.

BOARD OF TRUSTEES

Name Office Term Expires

Joel Heinrichs President 2010

Ken Mettler Vice President 2010

Bryan Batey Clerk 2010

Bill Perry Member 2012

Chad Vegas Member 2012

Administration

Donald E. Carter, Ed.D. Superintendent

Joe Thompson, Ph.D. Associate Superintendent, Instruction

William R. Jones Associate Superintendent, Personnel

Dennis Scott, Ed.D. Associate Superintendent, Business

III

Mayer Hoffman McCann P.C. An Independent CPA Firm

5060 California Avenue, Suite 800 Bakersfield, CA 93309 PH 661.325.7500 FAX 661.325.7004

INDEPENDENT AUDITORS’ REPORT

Board of Trustees Kern High School District Bakersfield, California

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Kern High School District (the District) as of and for the year ended June 30, 2010, which collectively comprise the District’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Kern High School District’s management. Our responsibility is to express opinions on these basic financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the District, as of June 30, 2010, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Governmental Auditing Standards , we have also issued our report dated December 14, 2010 on our consideration of the District’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governmental Auditing Standards and important for assessing the results of our audit.

Southern California Locations 10474 Santa Monica Blvd. Suite 200 • Los Angeles, CA 90025 • PH 310.268.2000 • FX 310.268.2001 5060 California Ave. Suite 800 • Bakersfield, CA 93309 • PH 661.325.7500 • FX 661.325.7004 300 Esplanade Dr. Suite 250 • Oxnard, CA 93036 • PH 805.988.3222 • FX 805.988.3220

1

Board of Trustees Kern High School District

The management’s discussion and analysis, budgetary comparison information, and post employment benefit information on pages 4 through 6 and 45 through 47 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures which consisted principally or inquiries of management regarding the methods of measurement and presentation of required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s financial statements as a whole. The combining, individual non-major fund financial statements and supporting schedules related to state compliance requirements are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations , and is also not a required part of the basic financial statements of the District. The combining, individual non-major fund financial statements, supporting schedules related to state compliance requirements and the schedule of expenses of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Bakersfield, California December 14, 2010

2

MANAGEMENT DISCUSSION AND ANALYSIS

KERN HIGH SCHOOL DISTRICT MANAGEMENT DISCUSSION AND ANALYSIS

Summary

The following provides a summary and overview of the financial activities of Kern High School District for the year ended June 30, 2010. The District’s financial activities and related comments are reported in the following financial statements and reports:

1. Government wide financial statements 2. Fund financial statements 3. Notes to the financial statements 4. Supplementary information

District-wide Financial Statements

Statements of net assets and activities report the District’s account balances and financial activities in a format that is similar to presentations used by non-government organizations and attempts to match the timing of income and expenses on an accrual basis. Accrual accounting requires that transactions be reported when the financial event has been completed; completion is determined by various factors and is not limited to cash transactions.

Government wide financial statements include the combined financial activities of Kern High School District and Golden Empire Schools Financing Authority. The Authority, a separate legal entity, is presented with the District because its primary purpose is to provide financial support to the District and has the same governing board.

Fund Financial Statements

Governmental funds account for essentially the same financial activity reported in government wide financial statements but with a focus on cash and other near term resources. These statements report on a modified accrual basis as opposed to the full accrual basis used by the government wide financial statements. The financial activities of the District’s funds are reported as follows:

1. General Fund 2. Special Revenue Funds Special Reserve Fund 3. Capital Projects Funds Building 4. Other Governmental Funds 5. Proprietary Fund Golden Empire Schools Financing Authority 6. Internal Service Fund

Notes to the Financial Statements

Notes include additional information that is essential to a full understanding of data provided in the financial statements.

4

Supplementary Information

This section includes information and additional auditors’ opinions required by federal and state agencies.

District-wide Financial Analysis

Revenue and expenses both declined from prior years, declines to both were related to the State budget shortfalls and the District’s cost cutting measures required by the decline in revenue. Payroll costs were slightly higher than the prior year due to cost of living increases that were negotiated in prior years.

Kern High School District’s Net Assets (amounts expressed in thousands)

Governmental Activities Business-type Activities Total 2010 2009 2010 2009 2010 2009 Assets Current and other assets$ 283,263 $ 284,638 $ 191,614 $ 183,405 $ 474,877 $ 468,043 Capital assets 590,955 585,685 - - 590,955 585,685 874,218 870,323 191,614 183,405 1,065,832 1,053,728

Liabilities Current liabilities 103,697 143,907 1,661 82,907 105,358 226,814 Long term liabilities 260,737 230,666 83,803 - 344,540 230,666 364,434 374,573 85,464 82,907 449,898 457,480

Net assets Invested in capital assets, net of related debt 320,117 306,730 - - 320,117 306,730 Restricted 54,001 66,580 - - 54,001 66,580 Unrestricted 135,666 122,440 106,150 100,498 241,816 222,938 $ 509,784 $ 495,750 $ 106,150 $ 100,498 $ 615,934 $ 596,248

5

District-wide Financial Analysis (Continued) Kern High School District’s Changes in Net Assets (amounts expressed in thousands)

Governmental Activities Business-type Activities Total 2010 2009 2010 2009 2010 2009 Revenues Program revenues Charges for services$ 2,635 $ 3,103 $ 9,358 $ 8,545 $ 11,993 $ 11,648 Contributions and grants - operating 40,008 42,041 - - 40,008 42,041 Contributions and grants - capital 4,518 148 - - 4,518 148 General revenues Revenue limit sources 218,179 244,085 - - 218,179 244,085 Other 130,476 125,325 3,644 5,900 134,120 131,225 395,816 414,702 13,002 14,445 408,818 429,147

Expenses Instruction 183,431 185,993 - - 183,431 185,993 Instruction - related services 45,906 47,445 - - 45,906 47,445 Pupil services 47,993 50,871 - - 47,993 50,871 Ancilliary services 7,342 7,441 - - 7,342 7,441 Community services 539 610 - - 539 610 Interest 13,034 15,473 - - 13,034 15,473 Enterprise 191 60 - - 191 60 Administration 16,327 17,766 - - 16,327 17,766 Plant services 63,631 49,803 - - 63,631 49,803 Other 3,388 1,397 7,350 7,254 10,738 8,651 381,782 376,859 7,350 7,254 389,132 384,113

Change in net assets 14,034 37,843 5,652 7,191 19,686 45,034

Net assets, beginning 495,750 457,907 100,498 93,307 596,248 551,214 Net assets, ending$ 509,784 $ 495,750 $ 106,150 $ 100,498 $ 615,934 $ 596,248

Capital Assets

Construction activity at year end includes several school site modernization projects. Open contracts on these projects total $19 million at year end.

6

BASIC FINANCIAL STATEMENTS

KERN HIGH SCHOOL DISTRICT STATEMENT OF NET ASSETS JUNE 30, 2010 (amounts expressed in thousands)

Primary Government Governmental Business-type Activities Activities Total ASSETS

Cash and investments $ 136,547 $ 119,277 $ 255,824 Receivables 69,553 4,104 73,657 Due from/to other funds 765 - 765 Inventory 1,408 - 1,408 Prepaid lease expense - 63,660 63,660 Prepaid OPEB contribution 18,875 - 18,875 Restricted: Cash and investments 56,115 - 56,115 Cost of Issuance, net - 4,573 4,573 Capital assets: Depreciable capital assets, net 491,769 - 491,769 Land 24,884 - 24,884 Art 294 - 294 Construction in progress 74,008 - 74,008 Total assets 874,218 191,614 1,065,832

LIABILITIES

Accounts payable and accrued liabilities 21,016 896 21,912 Due to other funds - 765 765 Deferred lease revenue 63,660 - 63,660 Deferred revenue 8,916 - 8,916 Noncurrent liabilities : Due within one year 10,105 - 10,105 Due in more than one year 260,737 83,803 344,540 Total liabilities 364,434 85,464 449,898

NET ASSETS

Invested in capital assets, net of related debt 320,117 - 320,117 Restricted for: General fund special activities 17,940 - 17,940 Charter schools 3,914 - 3,914 Capital projects and facilities 32,147 - 32,147 Unrestricted 135,666 106,150 241,816

Total net assets $ 509,784 $ 106,150 $ 615,934

The notes to the financial statements are an integral part of this statement

8

KERN HIGH SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Program Revenues Operating Capital Primary Government Charges for Contributions Grants and Governmental Business-type Expenses Services and Grants Contributions Activities Activities Total Functions/Programs Governmental activities: Instruction $ 183,431 $ 196 $ 21,313 $ - $ (161,922) $ - $ (161,922) Instruction - related services 45,906 - 5,495 - (40,411) - (40,411) Pupil services 47,993 2,439 10,438 - (35,116) - (35,116) Ancillary services 7,342 - 70 - (7,272) - (7,272) Community services 539 - 471 - (68) - (68) Interest 13,034 - - - (13,034) - (13,034) Enterprise 191 - 397 - 206 - 206 General administration 16,327 - 1,118 - (15,209) - (15,209) Plant services 63,631 - 706 4,518 (58,407) - (58,407) Other outgo 3,388 - - - (3,388) - (3,388) Total governmental activities 381,782 2,635 40,008 4,518 (334,621) - (334,621) Business-type activities: Golden Empire Schools Financing Authority 7,350 9,358 - - - 2,008 2,008 Total business-type activities 7,350 9,358 - - - 2,008 2,008 Total primary government $ 389,132 $ 11,993 $ 40,008 $ 4,518 $ (334,621) $ 2,008 $ (332,613)

General revenues: Revenue limit sources $ 218,179 $ - $ 218,179 Federal revenues 26,677 - 26,677 Other state revenues 71,080 - 71,080 Other local revenues 28,686 - 28,686 Interest income 3,388 4,289 7,677 Transfers 645 (645) - Total general revenues 348,655 3,644 352,299 Change in net assets 14,034 5,652 19,686 - Net assets at beginning of year 495,750 100,498 596,248 Net assets at end of year $ 509,784 $ 106,150 $ 615,934

The notes to the financial statements are an integral part of this statement

9

KERN HIGH SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2010 (amounts expressed in thousands)

Special Revenue Capital Project Funds Funds Special Reserve Building General Fund Fund ASSETS Cash $ 15,334 $ 40,492 $ 41,554 Investments - 10,919 12,560 Accounts receivable 65,032 131 127 Due from other funds 55,575 - 571 Inventory 1,336 - -

Total assets $ 137,277 $ 51,542 $ 54,812

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 15,552 $ - $ - Due to other funds 20,637 25,014 3,076 Deferred revenue 8,891 - -

Total liabilities 45,080 25,014 3,076

Fund balances: Reserved 17,940 - - Unreserved: Designated 74,257 26,528 51,736

Total fund balances 92,197 26,528 51,736

Total liabilities and fund balances$ 137,277 $ 51,542 $ 54,812

The notes to the financial statements are an integral part of this statement

10

KERN HIGH SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS (C ONTINUED ) JUNE 30, 2010 (amounts expressed in thousands)

Other Governmental Total Funds 2010 ASSETS Cash $ 49,706 $ 147,086 Investments 22,097 45,576 Accounts receivable 4,263 69,553 Due from other funds 6,007 62,153 Inventory 72 1,408

Total assets $ 82,145 $ 325,776

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 648 $ 16,200 Due to other funds 12,661 61,388 Deferred revenue 25 8,916

Total liabilities 13,334 86,504

Fund balances: Reserved 21,689 39,629 Unreserved: Designated 47,122 199,643

Total fund balances 68,811 239,272

Total liabilities and fund balances$ 82,145 $ 325,776

The notes to the financial statements are an integral part of this statement

11

KERN HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Fund balances of governmental funds $ 239,272

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets, net of depreciation, have not been included as financial resources in governmental fund activity. 590,955

Long term debt and compensated absences from the General Long Term Debt Account Group have not been included in the governmental fund activity: General obligation bonds payable (223,045) Lease obligation bonds payable (39,796) Compensated absences (6,795)

Accrued interest related to the bonds payable have not been reported (4,816) in the governmental funds.

Unamortized issuance premiums on bonds payable have not been reported in the governmental funds. (1,206)

Internal service funds are used by management to account for the KHSD Early Retiree Health Benefit Plan. The assets and liabilites of the internal service funds are included in the governmental activities in the statement of net assets. 18,875

Deferred lease revenue received from the proprietary funds have not been reported in the governmental funds (63,660)

Net assets of governmental activities $ 509,784

The notes to the financial statements are an integral part of this statement

12

KERN HIGH SCHOOL DISTRICT STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Special Revenue Capital Project Funds Funds Special Reserve Building General Fund Fund REVENUES Revenue limit sources $ 215,626 $ - $ - Federal revenues 38,385 - - Other state revenues 83,876 - - Other local revenues 5,914 698 786

Total revenues 343,801 698 786

EXPENSES Instruction 175,180 - - Instruction - related services 42,988 - - Pupil services 34,629 - - Ancillary services 7,342 - - Community services 36 - - Enterprise (4) - - General administration 15,252 - - Plant services 41,286 - 24,686 Other outgo 3,735 - -

Total expenses 320,444 - 24,686

Excess (deficiency) of revenues over (under) expenses 23,357 698 (23,900)

OTHER FINANCING SOURCES (USES) Transfers in - - 1,439 Transfers out (10,762) - - Total other financing sources (uses) (10,762) - 1,439

Net change in fund balances 12,595 698 (22,461)

Fund balances at beginning of year 79,602 25,830 74,197

Fund balances at end of year $ 92,197 $ 26,528 $ 51,736

The notes to the financial statements are an integral part of this statement

13

KERN HIGH SCHOOL DISTRICT STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS (C ONTINUED ) FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Other Governmental Total Funds 2010 REVENUES Revenue limit sources $ 2,553 $ 218,179 Federal revenues 10,955 49,340 Other state revenues 8,057 91,933 Other local revenues 28,345 35,743

Total revenues 49,910 395,195

EXPENSES Instruction 7,814 182,994 Instruction - related services 2,918 45,906 Pupil services 13,364 47,993 Ancillary services - 7,342 Community services 503 539 Enterprise 195 191 General administration 1,075 16,327 Plant services 5,596 71,568 Other outgo 22,226 25,961

Total expenses 53,691 398,821

Excess (deficiency) of revenues over (under) expenses (3,781) (3,626)

OTHER FINANCING SOURCES (USES) Transfers in 9,929 11,368 Transfers out (43) (10,805) Total other financing sources (uses) 9,886 563

Net change in fund balances 6,105 (3,063)

Fund balances at beginning of year 62,706 242,335

Fund balances at end of year $ 68,811 $ 239,272

The notes to the financial statements are an integral part of this statement

14

KERN HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Net changes in fund balances - total governmental funds $ (3,063)

Amounts reported for governmental activities in the statement of activities is different because:

Governmental funds report capital outlay as expenses. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period. 5,246

To record gain on disposal of capital assets. 24

Repayment of bond principal is an expense in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 9,290

To record as an expense the accrued interest related to bonds payable. 192

To record as a transfer in the reduction of the governmental fund's allocation of the business-type's bonds payable due to reallocation of debt maintenance responsibility. (794)

To record as income the amortization of premiums on bonds payable. 58

Internal service funds are used by management to account for the KHSD Early Retiree Health Benefit Plan. The net expense of of certain activities of internal service funds is reported with governmental activities. 876

To record as an expense the net change in compensated absences in the statement of activities. (438)

To record as income the amortization of unearned lease revenue. 2,643

Change in net assets of governmental activities $ 14,034

The notes to the financial statements are an integral part of this statement

15

KERN HIGH SCHOOL DISTRICT STATEMENT OF NET ASSETS PROPRIETARY FUND JUNE 30, 2010 (amounts expressed in thousands)

Golden Empire Governmental Schools Financing Activities - Internal Authority Service Fund ASSETS Current assets: Cash $ 54,573 $ - Investments 64,704 - Accounts receivable 4,104 - Total current assets 123,381 -

Noncurrent assets: Prepaid lease 63,660 - Cost of issuance, net 4,573 - Prepaid OPEB contribution - 18,875 Total noncurrent assets 68,233 18,875

Total assets $ 191,614 $ 18,875

LIABILITIES AND FUND BALANCES Accounts payable 896 - Due to other funds 765 - Noncurrent liabilities: Due in more than one year 83,803 -

Total liabilities 85,464 -

NET ASSETS Unrestricted 106,150 - Reserved - 18,875

Total net assets $ 106,150 $ 18,875

The notes to the financial statements are an integral part of this statement

16

KERN HIGH SCHOOL DISTRICT STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND NET ASSETS PROPRIETARY FUND JUNE 30, 2010 (amounts expressed in thousands)

Golden Empire Governmental Schools Financing Activities - Internal Authority Service Fund OPERATING REVENUES Lease income $ 9,358 $ - Interest income 4,289 -

Total operating revenues 13,647 -

OPERATING EXPENSES Lease administration fees 416 - Interest 4,291 - Lease expense 2,643 -

Total operating expenses 7,350 -

Operating income 6,297 -

Transfers in 794 876 Transfers out (1,439) -

Total transfers in (out) (645) 876

Change in net assets 5,652 876

Net assets at the beginning of year 100,498 17,999

Net assets at end of year $ 106,150 $ 18,875

The notes to the financial statements are an integral part of this statement

17

KERN HIGH SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS JUNE 30, 2010 (amounts expressed in thousands)

Golden Empire Schools Financing Authority CASH FLOWS FROM OPERATING ACTIVITIES Total operating revenues received $ 12,521 Total operating expense paid (8,614) Provided to other funds 3,004

Net cash provided by operating activities 6,911 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt 121,981 Principal paid on capital debt (119,570)

Net cash provided by capital and related financing activities 2,411 CASH FLOWS FROM INVESTING ACTIVITIES Net change in investments (2,981)

Net cash used in investing activities (2,981) Net decrease in cash 6,341 Cash, beginning of year 48,232

Cash, end of year $ 54,573 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 4,858 Adjustment to reconcile operating income to net cash provided by operating activities: (Increase) decrease in: Accounts receivable (1,126) Cost of issuance, net (229) Prepaid lease 2,644 Increase (decrease) in: Accounts payable 175 Due to other funds 589 Net cash provided by operating activities $ 6,911

The notes to the financial statements are an integral part of this statement

18

KERN HIGH SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2010 (amounts expressed in thousands)

KHSD Early Retiree Associated Health Benefit Student Body Plan Fund ASSETS Cash and investments $ 6,074 $ - Investment in SISC GASB 45 Trust, at fair value - 43,765 Prepaid expense - 95 Total assets $ 6,074 $ 43,860

LIABILITIES Due to others $ 6,074 $ - Total liabilities 6,074 -

NET ASSETS Held in trust for other postemployment benefits - 43,860 Total net assets $ - $ 43,860

The notes to the financial statements are an integral part of this statement

19

KERN HIGH SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

KHSD Early Retiree Health Benefit Plan Fund ADDITIONS Contributions: Employer $ 10,347 Investment income, net 4,716 Total additions 15,063

DEDUCTIONS Benefits 4,105 Administrative expense 39 Total deductions 4,144 Change in net assets 10,919 Net assets - beginning 32,941 Net assets - ending $ 43,860

The notes to the financial statements are an integral part of this statement

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KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(1) Summary of significant accounting policies

Reporting Entity

The reporting entity includes the Kern High School District (the District), Golden Empire Schools Financing Authority (the Authority), a component unit, and the KHSD Early Retiree Health Benefit Plan (the Plan), a defined benefit health and welfare plan covering early retirees of the District whose inclusion in the financial statements is required for fair presentation in conformity with generally accepted accounting principles. The Authority is a legally separate entity that is governed by board members who are also the elected board members of the District. The Authority’s financial activities are reported as business-type activities in the District-wide financial statements and as a proprietary fund in the fund financial statements. The Plan is reported as a fiduciary fund in the fund financial statements.

District-wide and fund financial statements

The District-wide financial statements, the statement of net assets and the statement of activities, report information on all the non-fiduciary activities of the primary government and its component unit.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, and other items not properly included among program revenues, are reported as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds even though the latter are excluded from the District-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.

Measurement focus, basis of accounting, and financial statement presentation

The District-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues when all eligibility requirements imposed by the provider have been met.

Governmental and fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are

21

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(1) Summary of significant accounting policies (continued)

Measurement focus, basis of accounting, and financial statement presentation (continued)

considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within one year of the end of the current fiscal period. Expenses generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenses, as well as expenses related to the compensated absences and claims and judgments, are recorded only when payment is due.

The District reports the following major governmental funds:

The General Fund is the primary operating fund of the District. It accounts for all financial resources of the District, except those required to be accounted for in another fund.

The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expense for specific purposes. The District maintains one major special revenue funds:

• The Special Reserve Fund is used to account for specific revenues set aside by the board for particular programs and activities.

The Capital Projects Funds are used to account for the acquisition and/or construction of all major governmental general fixed assets. The District maintains one major capital project funds:

• The Building Fund

The District reports the following proprietary fund:

The Golden Empire Schools Financing Authority is a joint powers authority authorized to finance the District’s construction activities through the issuance of bonds. The authority also leases property to an outside third party.

The District reports the following fiduciary funds:

The Trust and Agency Fund is used to account for assets of the Associated Student Body Funds for which the District acts as the agent.

22

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(1) Summary of significant accounting policies (continued )

Measurement focus, basis of accounting, and financial statement presentation (continued)

The KHSD Early Retiree Health Benefit Plan is used to account for the assets invested in the SISC GASB 45 Trust and postemployment benefits paid to early retirees of the District.

Additionally, the District reports the following fund type:

The Internal Service Fund is used to account for and amortize the District’s prepayment of the actuarially determined liability of the KHSD Early Retirement Health Benefit Plan.

Private-sector standards of accounting, and financial reporting issued prior to December 1, 1989, generally are followed in the District-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board.

As a general rule the effect of inter-fund activity has been eliminated from the District-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, and then unrestricted resources as they are needed.

Assets, liabilities, and net assets or equity

Deposits and investments

The District’s cash and investments are considered to be cash on hand, demand deposits, and short-term investments.

State statutes authorize the District to invest in obligations of U.S. Treasury, commercial paper, corporate bonds, repurchase agreements, and the State Treasurer’s Investment Pool.

23

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(1) Summary of significant accounting policies (continued)

Assets, liabilities, and net assets or equity (continued)

Investments for the District are reported at fair market value.

Inventories

All inventories are valued at average cost and consist of expendable supplies held for consumption. Inventories of governmental funds are recorded as expenses when consumed rather than purchased.

Restricted assets

Bond covenants restrict the use of certain District cash accounts; these restrictions require that the funds be used for either bond repayment or the acquisition of fixed assets.

Capital assets

The District defines capital assets as assets with an initial individual cost of more than five thousand dollars and an estimated useful life in excess of one year. Such assets are recorded at cost or estimated historical cost. Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives:

Assets Years Buildings 50-100 Building improvements 10-25 Vehicles 5-15 Office equipment 5-10

Compensated absences

It is the District’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the District does not have a policy to pay any amounts when employees separate from service with the District. All vacation pay is accrued when incurred in the District-wide financial statements as long-term liabilities. A liability for these amounts is reported in

24

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(1) Summary of significant accounting policies (continued)

Assets, liabilities, and net assets or equity (continued)

governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

Long-term obligations

Bonds payable are reported net of the applicable bond premium or discount in the District- wide financial statements; these adjustments, as well as issuance costs, are deferred and amortized over the life of the bonds.

Fund equity

Fund financial statements classify governmental fund equity as reserved equity when it is not available for appropriation or is legally restricted.

Deferred Revenue

Lease revenue

The deferred lease revenue is amortized over the life of the agreement.

Revenues – non-exchange transactions

Non-exchange transactions, in which the District receives value without directly giving equal value in return, consist of grants and entitlements. Revenue from grants and entitlements is recognized in the year all eligibility requirements are met. Eligibility requirements include timing requirements, which specify the year when use is first permitted and matching requirements, in which the District must provide local resources to be used for a specified purpose. On the modified accrual basis, revenue from non- exchange transactions must also be available before it can be recognized.

(2) Stewardship, compliance, and accountability

Budgetary information

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. All annual appropriations lapse at fiscal year end.

25

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds

Cash and investments

The District’s cash and investments consist of the following at June 30, 2010:

Deposits $ 7,924 Pooled funds 199,809 207,733 Investment in SISC GASB 45 Trust 43,765 Cash with Fiscal Agents 110,280 Total $ 361,778

The District’s deposits and investments are reflected in the accompanying basic financial statements as follows:

Governmental Business-type Fiduciary Grand Activities Activities Funds Total Cash and investments$ 136,547 $ 119,277 $ 49,839 $ 305,663 Restricted cash 56,115 - - 56,115 Total$ 192,662 $ 119,277 $ 49,839 $ 361,778

Deposits

Custodial Credit Risks. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District's deposit policy requires deposits to be covered by the federal depository insurance and collateral having a market value of 110% of the uninsured deposit. As of June 30, 2010, $0 of the District's bank balance of $7,923 (carrying amount of $7,923) was exposed to custodial credit risk.

26

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Cash and investments (continued)

Investments

As of June 30, 2010, the District had the following investments (excluding SISC GASB 45 Trust): Maturities in years Fair Value Less than 1 Year 1 to 5 Years Over 5 Years County of Kern Pooled Funds$ 199,809 $ 199,809 $ - $ - U.S. Treasury Notes 18,294 - 5,836 12,458 U.S. Agencies 26,888 533 15,112 11,243 Corporate Bonds 31,786 5,327 26,299 160 Asset Backed Notes 4,635 366 3,785 484 Local Agency Investment Funds 288 288 - - Money Market Funds 28,389 28,389 - - $ 310,089 $ 234,712 $ 51,032 $ 24,345

Authorized investments

The investments listed above are managed by Board authorized staff and authorized representatives of the County of Kern. Investments managed by the District's staff are invested in accordance with its respective investment policies. Investments managed by bond trustees are invested in accordance by provisions of the respective bond agreements which coincide with provisions of the California Government Code and the District’s investment policy.

The Board authorized staff have direct oversight over the District's pooled investment fund which covers cash and cash equivalents of the District's governmental funds and trust and agency funds which are invested in accordance with the District's investment policy. The investment policy complies with California Government Code Section 53601 and its primary detail is as follows:

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the County of Kern as part of the common investment pool. The County is restricted by Government Code Section 53635 pursuant to Section 53601 to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State treasurer’s investment pool, bankers’ acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements.

The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the District’s investment in the pool is reported in the accompanying financial statements at amounts based upon the District’s

27

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Cash and investments (continued)

Authorized investments (continued)

pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgaged- backed securities, other asset-backed securities, and floating rate securities issued by the federal agencies, government-sponsored enterprises, and corporations.

Investment Types Authorized by Maximum Authorized by Section Investment Maturity 53601 Policy Years

U.S. Treasury and Agencies Yes 10 Mortgage Passthrough Security Yes 5 Medium Term Notes Yes 5 Long Term Notes Yes 10 SISC Investment Pool Yes 5 Kern County Treasurer-Tax Collector Pooled Cash Yes N/A State of California - Local Agency Investment Funds Yes N/A

The District and its investment advisor select the investment under the terms of the applicable trust agreement, direct the bond trustee to acquire the investment, and the bond trustee then holds the investment on the behalf of the District and/or its component units. In addition, the Investment Policy allows for bond reserve funds to be invested in securities with maturities in excess of 5 years.

Interest Rate Risk

The District's investment policy generally complies with the State Government Code with respect to allowable investment instruments as a means of managing its fair value losses arising from changing interest rates. Information about the sensitivity of the fair values of the District and its component units' investments to market rate fluctuations is provided in the table above that shows the distribution by maturity.

Credit Risk and Concentration of Credit Risk

The District's investment policy complies with the State Government Code with respect to allowable investment instruments in managing its risks of loss related to credit risk and concentration of credit risk. The District’s investment policy does not require a maximum allowance investment percentage in any one issuer.

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KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Cash and investments (continued)

Authorized Investments (continued)

Presented below is the actual rating as of June 30, 2010 for each investment type:

Investment Type AAA AA+ AA AA- A+ A A- BBB+ BBB Totals U.S. Agencies $ 26,888 $ - $ - $ - $ - $ - $ - $ - $ - $ 26,888 Corporate Bonds 2,017 1,308 1,162 3,808 5,997 13,337 2,459 884 791 31,763 Asset Backed Notes 4,635 ------4,635 Money Market Funds 28,389 ------28,389 Totals $ 61,929 $ 1,308 $ 1,162 $ 3,808 $ 5,997 $ 13,337 $ 2,459 $ 884 $ 791 $ 91,675 Not rated: California Local Agency Investment Fund 288 County of Kern Pooled Funds 199,809 Corporate Bonds 23 Exempt from credit rating disclosure: U.S. Treasury Notes 18,294 Total Investments $ 310,089

Concentration of credit risk is the increased risk of loss if the District has a significant amount of investments with a single issuer. In accordance with the investment policy of the District, none of the investments categories listed exceeded the maximum allowable percentage of its portfolio. The investment policy of the District contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of the total of the District’s investments are as follows:

Issuer Type of Investment Total CRA4 BNY Mellon, N.A. Money Market Fund$ 15,829 Goldman Sachs Fin'l Sq Treasury Obligations Fund Money Market Fund 12,560

Custodial Credit Risk

This is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Of the District’s investments, certain securities in the amount of $81,603 are subject to custodial risk as they are uninsured or unregistered investments, acquired by the broker or dealer or by its trust department or agent and are not held in the District’s name. The District does not have a policy limiting the amount of investments that can be held by counterparties.

29

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Cash and investments (continued)

KHSD Early Retirement Health Plan Investments

The Plan is a voluntary participant in the SISC GASB 45 Trust (the Trust) that is administered by the Self-Insured Schools of California ("SISC"), a joint powers agency created under California Government Code Section 6507. Although all participants' investments in the Trust are commingled, SISC maintains detailed records of each participant's activities, including contributions and benefits payments and credits each participant's account with a pro-rata share of income, gains and losses attributable to the investments through separate individual employer accounts. Included in the Trust's investment portfolio are cash and mutual funds which are recorded at fair value.

Credit risk and interest rate risk

The Trust is unrated. The interest rate risk of Trust investments could not be determined. However, the Trust's investment policy requires that the investment portfolio be well diversified to avoid undue exposure to any single economic sector, industry group, individual fund, or market segment. Assets shall only be invested in funds approved by the governing board of SISC the administrator of the Trust. Funds may also be invested with California Local Agency Investment Fund and the County Treasury. At June 30, 2010 and 2009 all investments were mutual funds held in trust by Union Bank of California.

30

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Receivables

Governmental receivables as of year-end for the District’s individual major funds and non- major funds, in the aggregate, are as follows:

Special Revenue Capital Fund Project Fund Special Other Reserve Governmental General Fund Funds Building Fund Funds Total Federal Government: Categorical Aid Programs$ 15,773 $ - $ - $ 3,143 $ 18,916 - State Government: Revenue Limit 28,805 - - - 28,805 Lottery 593 - - 14 607 Categorical Aid Programs 5,434 - - 753 6,187 Core (59) - - - (59) Remedial Programs 1,910 - - - 1,910

Totals 36,683 - - 767 37,450 - Interest 182 131 127 291 731 - Miscellaneous: Other 12,394 - - 62 12,456 - Grand Totals $ 65,032 $ 131 $ 127 $ 4,263 $ 69,553

Governmental funds report unearned revenue in connection with receivables in revenues that are not considered to be available to liquidate liabilities of the current period.

Business-type receivables at year-end are summarized as follows:

Primary Government Golden Empire Transit Authority Lease revenue $ 3,366 Other 738 Total $ 4,104

31

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Capital assets

Capital asset activity for the year ended June 30, 2010 was as follows:

Balance Balance 6/30/2009 Additions Retirements 6/30/2010 Capital assets not depreciated: Land $ 24,884 $ - $ - $ 24,884 Art 294 - - 294 Construction in progress 64,408 28,980 (19,380) 74,008 Total capital assets, not being depreciated 89,586 28,980 (19,380) 99,186

Capital assets being depreciated: Building and improvements 621,668 10,488 - 632,156 Equipment 43,845 2,513 (134) 46,224 Vehicles 29,929 1,785 (957) 30,757 Total capital assets being depreciated 695,442 14,786 (1,091) 709,137

Less accumulated depreciation for: Buildings and improvements (151,896) (14,333) - (166,229) Equipment (28,026) (2,993) 111 (30,908) Vehicles (19,421) (1,767) 957 (20,231) Total accumulated depreciation (199,343) (19,093) 1,068 (217,368)

Total capital assets, being depreciated, net 496,099 (4,307) (23) 491,769 Capital assets, net $ 585,685 $ 24,673 $ (19,403) $ 590,955

Depreciation was charged to functions/programs of the primary government as follows:

Governmental activities: Plant Services $ 19,093 Total depreciation expense - governmental activities$ 19,093

32

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Inter-fund receivables, payables, and transfers

The composition of inter-fund balances as of June 30, 2010, is as follows:

Interfund Interfund Fund Receivables Payables General Fund $ 55,575 $ 20,637 Special Reserve Fund - 25,014 Building Fund 571 3,076 Non-major Funds 6,007 12,661 Proprietary Fund: Golden Empire Schools Financing Authority - 765 Totals $ 62,153 $ 62,153

Inter-fund transfers for the 2009-10 fiscal year were as follows:

Transfer In: Governmental Activities Non-major Internal General Building Governmental Service Fund Fund Funds Fund Total Transfer out: Governmental activities General Fund$ - $ - $ 9,886 $ 876 $ 10,762 Non-major Governmental Fund - - 43 - 43 Business-type activities Golden Empire Schools Financing Authority - 1,439 - - 1,439 Total transfers out$ - $ 1,439 $ 9,929 $ 876 $ 12,244

Prepaid Lease and Unearned Revenue

In connection with issuance of bonds there is a prepaid lease recorded in the proprietary fund and a related unearned revenue recorded in the governmental fund. The prepaid lease and related unearned revenue are being amortized to coincide with debt service obligations.

33

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Long-term debt

General Obligation Bonds

The District issued general obligation bonds in prior years to provide funds for the acquisition and construction of major capital facilities. General obligation bonds currently outstanding are as follows:

Interest Purpose Rates Amount Governmental activities 3.0% - 7.0%$ 223,045

Annual debt service requirements to maturity for general obligation bonds are as follows:

Governmental Activities Year Ending June 30 Principal Interest 2011 10,105 11,041 2012 10,925 10,475 2013 11,810 9,847 2014 12,795 9,168 2015 12,825 8,435 2016-2020 44,860 33,613 2021-2025 40,645 24,426 2026-2030 50,795 13,331 2031-2035 22,460 3,648 2036-2037 5,825 280 Total $ 223,045 $ 124,264

Revenue Bonds

The following revenue bonds issued by Golden Empire School Financing Authority were outstanding at year end: Purpose Interest Rates Amount Debt Service/School Financing - GESFA 10 2.375% - 4% $ 118,850 Total $ 118,850

34

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Long-term debt (continued)

Debt service requirements to maturity are as follows:

Year Ending June 30 Principal Interest 2011 $ - $ 4,551 2012 118,850 3,792 Totals $ 118,850 $ 8,343

In prior years, the District defeased certain general obligation and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the District’s financial statements. At June 30, 2010, $46,475 of general obligation bonds outstanding is considered defeased including the 1990 A, 1990 B, 1990 C, and 1990 D issuances.

Changes in long-term liabilities

Long-term liability activity for the year ended June 30, 2010, was as follows:

Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities Bonds Payable: General obligation bonds$ 232,335 $ - $ (9,290) $ 223,045 $ 10,105 Debt allocation for District's 39,002 794 - 39,796 - obligation Less deferred amounts: For issuance premiums 1,264 - (58) 1,206 - Compensated absences 6,357 438 - 6,795 - 278,958 1,232 (9,348) 270,842 10,105 Business-type activities Revenue bonds 119,570 118,850 (119,570) 118,850 - Debt allocation for District's obligation (39,002) - (794) (39,796) - Less deferred amounts: For issuance premiums 1,618 3,218 (87) 4,749 - 82,186 122,068 (120,451) 83,803 - Long-term liabilities$ 361,144 $ 123,300 $ (129,799) $ 354,645 $ 10,105

35

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(3) Detailed notes on all funds (continued)

Long-term debt (continued)

Changes in long-term liabilities

In April 2010 the Golden Empire School Financing Authority issued revenue bonds in the amount of $118,850 which were used to retire the remaining outstanding revenue bonds. For the year ended June 30, 2010, $118,850 was outstanding. Of this debt, $39,796 is the responsibility of the governmental activities, and the remaining $79,054 is to be paid from the business-type activities.

Reservation of Governmental Fund Balances

Reserved governmental fund balances for the year ended June 30, 2010, were as follows:

Other General Governmental Fund Funds Total Revolving cash$ 56 $ 2 $ 58 Stores 1,336 73 1,409 Inventory and other 289 - 289 Grants 16,259 97 16,356 Debt service - 21,517 21,517 Total $ 17,940 $ 21,689 $ 39,629

(4) Other information

Risk management

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the District has provided coverage by participating in Self Insured Schools of California (a self-insurance joint venture agreement).

Joint Ventures (Joint Powers Agreements)

Self Insured Schools of California (SISC) – SISC arranges for and provides health (SISC III), workers’ compensation (SISC I), and property and liability (SISC II) insurance for its member school districts in The County of Kern, Santa Barbara and other counties. SISC is governed by a board consisting of representatives from member districts. The board controls the operations of SISC, including selection of management and approval of

36

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

Joint Ventures (Joint Powers Agreements) (continued)

operating budgets, independent of any influence by the member districts beyond their representation on the board. Each member district pays a premium commensurate with the level coverage requested and share surpluses and deficits proportionate to their participation in SISC.

Although the District transfers risk to the pool for SISC I and SISC II, the District maintains the risk for SISC III. As a result, SISC III is acting only as a claims administrator and reinsurer for the District. The District must repay excess claims and administrative costs over premiums. Total amount of health benefit claims for the year ended June 30, 2010 (the most recent available report) were $35,103.

Condensed combined audited financial information of SISC, by type, for the most current year available is as follows:

June 30, 2010 SISC I SISC II Total assets $ 103,573 $ 48,536 Total liabilities 59,120 28,100 Fund balance $ 44,453 $ 20,436 Total revenues $ 11,764 $ 19,992 Total expenditures 21,873 15,185 Net increase in fund balance $ (10,109) $ 4,807

There was no long-term debt outstanding at June 30, 2010. The District’s share of SISC’s year-end assets, liabilities, or retained earnings has not been calculated by SISC as of June 30, 2010.

Charter Schools

The District operates the Workforce 2000 Academy pursuant to Education Code Section 47605. The financial activities of the Workforce 2000 Academy are presented in the District’s special reserve fund.

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KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

Postemployment healthcare plan

Plan Description The KHSD Early Retiree Health Benefit Plan (the “Plan”) is a single- employer defined health and welfare plan covering early retirees of the District. Employees of the District, hired on or before June 6, 2006, with 10 or more years of consecutive service or employees hired after June 6, 2006 who have 20 years of service with the last 10 years being consecutive, will be eligible for the Plan at age 55. The District will contribute health and welfare benefits to eligible retirees, their spouses and dependents until the employee becomes eligible for other health and welfare benefits. On October 2, 2006, the District joined the SISC GASB 45 Trust (the “Trust”) to pre-fund these other Post-employment Benefits (“OPEB”) liabilities. The Trust is an irrevocable trust under the law of the State of California and a tax-exempt governmental trust under Internal Revenue Code Section 115. The Trust funds are divided into individual employer accounts for each participating employer, which may be pooled for investment purposes. The District establishes and amends benefit provisions. The Plan issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained by writing to Kern High School District, 5801 Sundale Avenue, Bakersfield, CA 95834.

Basis of Accounting The financial statements for the Plan are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan.

Funding Policy The contribution requirements of the District are established and may be amended by the school district board. The required contribution is actuarially determined in accordance with the parameters of GASB 45, with an additional amount to prefund the unfunded actuarial accrued liability as determined annually by the District. For fiscal year 2010, the District contributed $10,347 to the plan for the current year annual required contribution.

Annual OPEB Cost and Net OPEB Obligation The District’s annual OPEB cost (expense) is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The remaining amortization period at June 30, 2010 was 26 years.

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KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

Postemployment healthcare plan (continued)

The following table shows the components of the District’s annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the District’s net OPEB obligation (NOO) to the Plan:

Annual required contribution $ 9,976 Adjustment to prepaid contribution (505) Annual OPEB cost (expense) 9,471 Contributions made (10,347) Decrease in net OPEB obligation (876) Net OPEB prepayment - beginning of year (17,999) Net OPEB prepayment - end of year $ (18,875)

The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the NOO for the year ended June 30, 2010 as follows:

Percentage of Annual Fiscal Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Prepayment 6/30/2010 9,471 100.0% (18,875) 6/30/2009 10,452 100.0% (17,999) 6/30/2008 9,671 100.0% (18,666)

Funding Status and Funding Progress As of June 30, 2010, the most recent actuarial valuation date, using census data as of June, 30 2010 the plan was 45.9 percent funded. The actuarial accrued liability for the benefits was $93,439, and the actuarial value of assets was $42,872, resulting in an unfunded actuarial accrued liability (UAAL) of $50,567. The covered payroll (annual payroll of active employees covered by the plan) was $206,000, and the ratio of the UAAL to the covered payroll was 24.5 percent.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedules of funding progress, presented as required supplementary information following the notes to the financial statements, present multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

39

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

Postemployment healthcare plan (continued)

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of asssets, consistent with the long-term perspective of the calculations. Benefits are projected based on benefit levels and cost-sharing arrangements as of the date of the valuation and do not explicitly reflect the potential effects of legal or contractual funding limitations.

In the June 30, 2010, actuarial valuation, the following assumptions were made:

Discount Rate: 5.25% per annum

Medical and drug trend rates begin at 10% and 7%, respectively, then by year 2015/16 they are each graded down to a rate of 5%.

Dental, vision, and operating expenses trend rates begin at 5%, and remain consistent throughout the year 2015/16.

Mortality, disability, retirement and turnover rates are from the June 30, 2007 pension valuation used by CalSTRS and the June 30, 2005 valuation used by CalPERS.

Compensation increase rate: Not applicable

The UAAL is being amortized using the level dollar method on an open basis. The remaining amortization period at June 30, 2010 was 26 years.

Employee retirement systems and pension plans

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers’ Retirement System, and classified employees are members of the Public Employees’ Retirement System.

State Teachers’ Retirement System (STRS)

Plan description The Kern High School District contributes to the State Teachers’ Retirement System (STRS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement,

40

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

State Teachers’ Retirement System (STRS) (continued)

disability, and survivor benefits to beneficiaries. Employees attaining the age of 60 with 5 years of credited California Services (service) are eligible for normal retirement and are entitled to a monthly benefit of 2 to 2.25 percent of their final compensation for each year of service. The plan permits early retirement options at age 55 or as early as age 50 with 30 years of service. After five years of credited service members become 100 percent vested in retirement benefits earned to date. If a member’s employment is terminated, the accumulated member contributions are refundable.

Benefit provisions for STRS are established by the State Teachers’ Retirement Law (Part 13 of the California Education Code, Section 22000 et seq.)

STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 7667 Folsom Boulevard, Sacramento, California 95826.

Funding Policy Active plan members are required to contribute 8.0 percent of their salary and the Kern High School District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers’ Retirement Board. The assumed long-term investment yield is 8.0 percent and the assumed long-term salary increase assumption for inflation is 4.25 percent. Under current law the pension obligation for STRS is not the responsibility of the District. The State of California makes annual contributions to STRS toward the unfunded obligation. The pension benefit obligation for STRS is included in the financial statements for STRS and the State of California.

The required employer contribution rate for the fiscal year 2009-10 was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by state statute. The Kern High School District’s annual STRS pension costs for the fiscal years ending June 30, 2010, 2009, and 2008 were $11,890, $12,315, and $12,306 respectively, and equal 100% of the actual and required contributions for each year.

California Public Employees Retirement System (CalPERS)

Plan description The District contributes to the School Employer Pool under the California Public Employees’ Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement, disability, and death benefits to plan members and beneficiaries.

41

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

California Public Employees Retirement System (CalPERS) (continued)

Employees are eligible for retirement at the age of 55 and are entitled to a monthly benefit of 2 percent final compensation for each year of service credit. Retirement may begin at age 50 with a reduced benefit rate, or after age 56 to 63 with an increased rate. Retirement benefits are fully vested after 5 years of credited service. Upon separation from the District, members’ accumulated contributions are refundable with interest credited through date of separation.

Benefit provisions for CalPERS are established by the Public Employees Retirement Law (Part 3 of the California Government Code, Section 20000 et seq.)

CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.

Funding policy Active plan members are required to contribute 7.0 percent of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. Significant actuarial assumptions used to compute the CalPERS pension benefit obligation include an actuarial interest rate of 7.75 percent per annum and varying projected salary increases based on duration of service and including 3.25 percent for inflation.

The required employer contribution rate for fiscal year 2009-10 was 9.709 percent of annual payroll. The contribution requirements of the plan members are established by state statute. The Kern High School District’s annual CalPERS pension costs for the fiscal years ending June 30, 2010, 2009, and 2008 were $6,108, $6,083, and $5,820 respectively, and equal 100% of the actual and required contributions for each year.

If the District’s required contribution is less than 13.02 percent, the difference between the 13.02 percent and the required contribution reduces the State’s required revenue limit payments to the District.

Commitments and contingencies

Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expense that may be disallowed by the grantor cannot be determined at this time, although the District expects such amounts, if any, to be immaterial.

42

KERN HIGH SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2010 (amounts expressed in thousands)

(Continued)

(4) Other information (continued)

Commitments and contingencies (continued)

Construction commitments Construction activity at year end includes several school site modernization projects. Open contracts on these projects total $19 million at year end.

Economic Conditions Effecting the State’s Ability to Fund Revenue Limit Income A significant amount of the unrestricted income that the District receives each year is a combination of State funding and local property taxes; this income is defined as Revenue Limit income and is based on the District’s average daily attendance (ADA). The State is currently obligated to fund the difference between total Revenue Limit income and local property taxes received by the District. Current economic conditions may limit the State’s ability to fully fund this obligation in future years, including its 2010/11 obligations. The District is unable to determine the economic impact, if any, of such deficits.

43

REQUIRED SUPPLEMENTARY INFORMATION

KERN HIGH SCHOOL DISTRICT SCHEDULE OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Original Final Budget Budget Actual

REVENUES Revenue limit sources $ 221,084 $ 212,848 $ 215,626 Federal revenues 48,059 36,035 38,385 Other state revenues 79,807 77,841 83,876 Other local revenues 6,280 5,533 5,914 Total revenues 355,230 332,257 343,801

EXPENSES Instruction 191,476 181,300 175,180 Instruction - related services 44,916 44,424 42,988 Pupil services 35,765 36,340 34,629 Ancillary services 7,030 7,342 7,342 Community services 63 63 36 Enterprise - - (4) General administration 12,886 15,252 15,252 Plant services 45,534 44,436 41,286 Other outgo 5,642 5,642 3,735

Total expenses 343,312 334,799 320,444

Excess of revenues over expenses 11,918 (2,542) 23,357

OTHER FINANCING SOURCES (USES) Transfers In 3,942 3,942 - Transfers out (10,912) (10,762) (10,762) Other sources 5,209 4,559 - Total other financing sources (1,761) (2,261) (10,762) Net change in fund balances 10,157 (4,803) 12,595 Fund balances at beginning of year 79,602 79,602 79,602 Fund balances at end of year$ 89,759 $ 74,799 $ 92,197

45

KERN HIGH SCHOOL DISTRICT SCHEDULE OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL SPECIAL RESERVE FUND FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Original Final Budget Budget Actual

REVENUES Other local revenues $ 340 $ 340 $ 698 Total revenues 340 340 698 Excess of revenues over expenses 340 340 698

OTHER FINANCING SOURCES (USES) Operating transfers out (386) (386) -

Total other financing uses (386) (386) -

Net change in fund balances (46) (46) 698

Fund balances at beginning of year 25,830 25,830 25,830

Fund balances at end of year$ 25,784 $ 25,784 $ 26,528

46

KERN HIGH SCHOOL DISTRICT POSTEMPLOYMENT HEALTHCARE PLAN FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Schedules of Funding Progress

Actuarial UAAL as a Actuarial Accrued Unfunded Percentage of Actuarial Value of Liability (AAL) AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b - a) (a / b) (c) ( [b - a] / c) 6/30/2010 $ 42,872 $ 93,439 $ 50,567 45.9% $ 206,000 24.5% 6/30/2009 35,329 99,975 64,646 35.3% 211,000 30.6% 6/30/2008 30,230 92,322 62,092 32.7% 209,000 29.7%

47

SUPPLEMENTAL INFORMATION COMBINING STATEMENTS NON -MAJOR FUNDS

48

EXPLANATION OF NON -MAJOR GOVERNMENTAL FUNDS

The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted for specific purposes. The District maintains eight non-major special revenue funds:

• The Asbestos Abatement Fund is used to account for resources committed for the containment or removal of asbestos materials.

• The Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA).

• The Deferred Maintenance Fund is used for the purpose of major repair or replacement of District property.

• The Cafeteria Fund is used to account for resources committed to finance child nutrition programs and activities.

• The Child Development Fund is used to account for resources committed to child development programs maintained by the District.

• The Charter Fund is used to account for resources committed to the District’s charter school.

• The Adult Education Fund is used to account for the resources committed to adult education programs maintained by the District.

The Debt Service Fund accounts for the resources accumulated and payments made for the principal and interest on long-term general obligation debt of governmental funds.

The Capital Projects Funds are used to account for the acquisition and/or construction of all major governmental general fixed assets. The District maintains one non-major capital project fund: • The County School Facilities Fund

49

KERN HIGH SCHOOL DISTRICT COMBINING BALANCE SHEET NON -MAJOR FUNDS GOVERNMENTAL FUNDS JUNE 30, 2010 (amounts expressed in thousands)

Capital Projects/ Special Debt County School Revenue Service Facilities Funds Fund Fund Totals ASSETS Cash $ 25,469 $ 21,458 $ 2,779 $ 49,706 Investments 22,097 - - 22,097 Accounts receivable 4,191 59 13 4,263 Due from other funds 3,243 - 2,764 6,007 Inventory 72 - - 72 Total assets $ 55,072 $ 21,517 $ 5,556 $ 82,145

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities$ 648 $ - $ - $ 648 Due to other funds 9,897 - 2,764 12,661 Deferred revenue 25 - - 25 Total liabilities 10,570 - 2,764 13,334 Fund balances: Fund balances Reserved 172 21,517 - 21,689 Unreserved: Designated 44,330 - 2,792 47,122 Total fund balances 44,502 21,517 2,792 68,811 Total liabilities and fund balances$ 55,072 $ 21,517 $ 5,556 $ 82,145

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KERN HIGH SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES NON -MAJOR FUNDS GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Capital Projects/ Special Debt County School Revenue Service Facilities Funds Fund Fund Totals Revenues: Revenue limit sources$ 2,553 $ - $ - $ 2,553 Federal revenues 10,955 - - 10,955 Other state revenues 3,294 245 4,518 8,057 Other local revenues 7,637 20,682 26 28,345 Total revenues 24,439 20,927 4,544 49,910

Expenses: Instruction 7,814 - - 7,814 Instruction - related services 2,918 - - 2,918 Pupil services 13,364 - - 13,364 Community services 503 - - 503 Enterprise 195 - - 195 General administration 1,075 - - 1,075 Plant services 3,842 - 1,754 5,596 Other Outgo 1,380 20,846 - 22,226

Total expenses 31,091 20,846 1,754 53,691 Excess (deficiency) of revenues over (under) expenses (6,652) 81 2,790 (3,781) Other financing sources (uses): Operating transfers in 9,929 - - 9,929 Transfers out (43) - - (43) Total other financing sources (uses) 9,886 - - 9,886

Net change in fund balances 3,234 81 2,790 6,105

Fund balances at beginning of year 41,268 21,436 2 62,706

Fund balances at end of year$ 44,502 $ 21,517 $ 2,792 $ 68,811

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KERN HIGH SCHOOL DISTRICT COMBINING BALANCE SHEET NON -MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2010 (amounts expressed in thousands)

Asbestos Capital Deferred Abatement Facilities Maintenance Cafeteria Fund Fund Fund Fund ASSETS Cash $ 2,382 $ 9,648 $ 2,883 $ 1,398 Investments - 22,097 - - Accounts receivable 7 192 9 1,138 Due from other funds - 210 647 1,966 Inventory - - - - Total assets $ 2,389 $ 32,147 $ 3,539 $ 4,502

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ - $ - $ - $ - Due to other funds 148 - - 4,477 Deferred revenue - - - 25 Total liabilities 148 - - 4,502

Fund balances: Reserved for restricted assets - - - - Unreserved: Designated 2,241 32,147 3,539 - Total fund balances 2,241 32,147 3,539 -

Total liabilities and fund balances$ 2,389 $ 32,147 $ 3,539 $ 4,502

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KERN HIGH SCHOOL DISTRICT COMBINING BALANCE SHEET NON -MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2010 (amounts expressed in thousands)

Child Adult Development Charter Education Fund Fund Fund Totals ASSETS Cash $ 632 $ 5,111 $ 3,415 $ 25,469 Investments - - - 22,097 Accounts receivable 9 538 2,298 4,191 Due from other funds - 74 346 3,243 Inventory - - 72 72 Total assets $ 641 $ 5,723 $ 6,131 $ 55,072

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ - $ - $ 648 $ 648 Due to other funds 641 1,809 2,822 9,897 Deferred revenue - - - 25 Total liabilities 641 1,809 3,470 10,570

Fund balances: Reserved for restricted assets - 97 75 172

Designated - 3,817 2,586 44,330 Total fund balances - 3,914 2,661 44,502

Total liabilities and fund balances$ 641 $ 5,723 $ 6,131 $ 55,072

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KERN HIGH SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES NON -MAJOR SPECIAL REVENUE FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Asbestos Capital Deferred Abatement Facilities Maintenance Cafeteria Fund Fund Fund Fund REVENUES Revenue limit sources $ - $ - $ - $ - Federal revenues - - - 7,795 Other state revenues - - - 683 Other local revenues 35 4,073 44 2,836 Total revenues 35 4,073 44 11,314

EXPENSES Instruction - - - - Instruction - related services - - - - Pupil services - - - 12,777 Community services - - - - Enterprise - - - 195 General administration - - - 486 Plant services 146 1,911 713 536 Other outgo - 465 - - Total expenses 146 2,376 713 13,994 Excess (deficiency) of revenues over (under) expenses (111) 1,697 (669) (2,680)

OTHER FINANCING SOURCES (USES) Operating transfers in - - 1,381 2,680 Operating transfers out - - - - Total other financing sources - - 1,381 2,680

Net change in fund balances (111) 1,697 712 -

Fund balances at beginning of year 2,352 30,450 2,827 -

Fund balances at end of year$ 2,241 $ 32,147 $ 3,539 $ -

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KERN HIGH SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES , EXPENSES , AND CHANGES IN FUND BALANCES NON -MAJOR SPECIAL REVENUE FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 (amounts expressed in thousands)

Child Adult Development Charter Education Fund Fund Fund Totals REVENUES Revenue limit sources $ - $ 2,553 $ - $ 2,553 Federal revenues 12 16 3,132 10,955 Other state revenues 644 483 1,484 3,294 Other local revenues 11 52 586 7,637 Total revenues 667 3,104 5,202 24,439

EXPENSES Instruction 5 1,758 6,051 7,814 Instruction - related services 129 190 2,599 2,918 Pupil services - 94 493 13,364 Community services 503 - - 503 Enterprise - - - 195 General administration - 589 - 1,075 Plant services 39 243 254 3,842 Other outgo - - 915 1,380 Total expenses 676 2,874 10,312 31,091 Excess (deficiency) of revenues over (under) expenses (9) 230 (5,110) (6,652)

OTHER FINANCING SOURCES (USES) Operating transfers in 9 - 5,859 9,929 Operating transfers out - - (43) (43) Total other financing sources 9 - 5,816 9,886

Net change in fund balances - 230 706 3,234

Fund balances at beginning of year - 3,684 1,955 41,268

Fund balances at end of year$ - $ 3,914 $ 2,661 $ 44,502

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APPENDIX B

GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT

The information in this and other sections concerning the District's operations and operating budget is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Refunding Bonds is payable from the General Fund of the District. The Refunding Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See "THE REFUNDING BONDS –Security for the Refunding Bonds" in the front half of the Official Statement.

General Information

Kern High School District was created in 1916 and covers an area of approximately 3,500 square miles, which represents 43% of the total area of Kern County. The District is the State’s largest grade 9 through 12 high school district as measured by enrollment, and is made up of 18 comprehensive high schools, 5 alternative education high schools, 2 career technical education sites and 4 special education sites. More than 35,000 students are enrolled in the District for fiscal year 2010-11, and the District has approximately 3,500 employees. The schools are located in the area of metropolitan Bakersfield, Kern Valley (near Lake Isabella), Shafter and Arvin. Twenty-four elementary school districts feed into the Kern High School District.

Governing Board

The governing board of the District is called the Board of Trustees (the “Board”). The Board includes five voting members elected by the voters of the District. The current voting Trustees are as follows:

Name Board Position Term Expires Bryan Batey President November 2014 Chad Vegas Vice President November 2012 Mike Williams Clerk November 2014 William Perry Member November 2012 Martha Miller Member November 2014

The day-to-day operations are managed by a board-appointed Superintendent of Schools.

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Recent Enrollment Trends

The following table shows enrollment history (excluding charter schools) for the District for the last six fiscal years, with projected figures through fiscal year 2012-13.

KERN HIGH SCHOOL DISTRICT Annual Enrollment

School Year Enrollment 2004-05 33,776 2005-06 35,394 2006-07 36,083 2007-08 37,341 2008-09 37,783 2009-10 37,928 2010-11(1) 37,370 2011-12(2) 36,970 2012-13(2) 36,950

(1) Estimated. (2) Projected. Source: California Department of Education; Kern High School District.

Employee Relations

The following table identifies number of employees, bargaining units, and the current state of their respective contracts.

KERN HIGH SCHOOL DISTRICT Summary of Labor Organizations

Contract Labor Organization Employees Expiration Kern High School District Faculty Association 1,640 06/30/2011 California School Employees Association-125 1,130 06/30/2012

Source: Kern High School District.

District Retirement Systems

The District participates in the State of California Teacher’s Retirement System (“STRS”). This plan covers basically all full-time certificated employees. Active plan members are required to contribute 8.0% of their salary and the District is to contribute an actuarially determined rate, which is 8.25% of payroll for the 2010-11 fiscal year. The District’s contribution to STRS for fiscal year 2008-09 was $12,315,000 (audited), for fiscal year 2009-10 was $11,890,000 (audited) and for fiscal year 2010-11, $11,621,000 is estimated (2nd Interim Report).

The District also participates in the State of California Public Employees’ Retirement System (“PERS”). This plan covers all classified personnel who are employed four or more hours per day. Active plan members are required to contribute 7.00% of their salary and the District is required to contribute an actuarially determined rate, which was 9.709% of payroll for 2009-10 and is 10.707% of payroll for 2010-11. If the District’s required contribution is less than 13.02 percent, the difference between the 13.02 percent and the required contribution reduces

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the State’s required revenue limit payments to the District. The District’s contribution to PERS for fiscal year 2008-09 was $6,083,000 (audited), for fiscal year 2009-10 was $6,018,000 (audited) and for fiscal year 2010-11, $6,197,000 is estimated (2nd Interim Report).

Both the PERS and STRS systems are operated on a statewide basis. District contribution rates to these two retirement systems vary annually depending on changes in actuarial assumptions and other factors, such as liability. STRS has a substantial State unfunded liability. Since this liability has not been broken down by the state agency, information is not available showing the District's share.

Other Post-Employment Benefits

The District provides certain post-employment healthcare benefits to qualifying employees.

Plan Description. The District Early Retiree Health Benefit Plan (the “Retirement Plan”) is a single-employer defined health and welfare plan covering early retirees of the District. Employees of the District hired on or before June 6, 2006, with 10 or more years of consecutive service or employees hired after June 6, 2006 who have 20 years of service with the last 10 years being consecutive, will be eligible for the Retirement Plan at age 55. The District will contribute health and welfare benefits to eligible retirees, their spouses and dependents until the employee becomes eligible for other health and welfare benefits.

On October 2, 2006, the District joined the SISC GASB 45 Trust (the “Trust”) to pre-fund the Other Post-Employment Benefits liability. The Trust is an irrevocable trust under the law of the State and a tax-exempt governmental trust under Internal Revenue Code Section 115. The Trust funds are divided into individual employer accounts for each participating employer, which may be pooled for investment purposes. The District establishes and amends benefit provisions. The Plan issues a publicly available financial report that includes financial statements and required supplementary information for the Plan.

Funding Policy. The contribution requirements of the District are established and may be amended from time to time by the District Board. The required contribution is actuarially determined in accordance with the parameters of GASB 45, with an additional amount to prefund the unfunded actuarial accrued liability (“UAAL”) as determined annually by the District. For fiscal year 2010, the District contributed $10,347,000 to the plan for the current year annual required contribution. As of June 30, 2010, the most recent actuarial valuation date, using census data as of June, 30 2010 the plan was 45.9% funded. See “APPENDIX B – Audited Financial Statements of the District for Fiscal Year 2009-10- Note 4- Other Information” on Page 39.

The following table shows the components of the District’s OPEB cost for fiscal year 2009-10, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation.

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KERN HIGH SCHOOL DISTRICT Other Post Employment Benefit Cost - 2009-10 (Dollars in Thousands)

Annual required contribution $9,976 Prior year corrections(1) Annual required contribution 371 Amortization of prepaid contribution (876) Current year expense – net $9,471

Prepaid OPEB obligation – July 1, 2009 $17,999 Current year amortization-net correction 876 Prepaid OPEB obligation – June 30, 2010 $18,875

Year Ended Annual Percentage Net OPEB June 30 OPEB Cost Contributed Prepayment 2008 $9,671 100.0% $18,666 2009 10,452 100.0% 17,999 2010 9,471 100.0% 18,875

(1) A change from a 30 year rolling amortization of the OPEB liability to a static 30 years accounts for the corrections. As of June 30, 2010, 26 years remain in the amortization period. Source: Kern High School District.

Insurance

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the District has provided coverage by participating in Self Insured Schools of California (a self-insurance joint venture agreement).

Self Insured Schools of California (“SISC”) arranges for and provides health (SISC III), workers’ compensation (SISC I), and property and liability (SISC II) insurance for its member school districts in Kern County, Santa Barbara County and other counties. SISC is governed by a board consisting of representatives from member districts. The board controls the operations of SISC, including selection of management and approval of operating budgets, independent of any influence by the member districts beyond their representation on the board. Each member district pays a premium commensurate with the level coverage requested and share surpluses and deficits proportionate to their participation in SISC. Although the District transfers risk to the pool for SISC I and SISC II, the District maintains the risk for SISC III. As a result, SISC III is acting only as a claims administrator and reinsurer for the District. The District must repay excess claims and administrative costs over premiums. Total amount of health benefit claims for the year ended June 30, 2010 (the most recent available report) were $35,103,000.

Accounting Practices

Accounting Practices. The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the State of California Education Code, is to be followed by all California school districts.

Measurement Focus and Basis of Accounting. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded

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when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues when all eligibility requirements imposed by the provider have been met.

Governmental and fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within one year of the end of the current fiscal period. Expenses generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenses, as well as expenses related to the compensated absences and claims and judgments, are recorded only when payment is due.

The District’s fiscal year begins on July 1 and ends on June 30.

Financial Statements

The District's independent auditor for 2009-10 is Mayer Hoffman McCann P.C., Bakersfield, California. The District’s audited financial statements for the year ended June 30, 2010 are included as Appendix A hereto. The District has not requested, and the auditor has not provided, any review or update to such financial statements for inclusion in this Official Statement.

The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the District.

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The following table shows the audited fund balance, revenues and expenses statements for the District for the fiscal years 2005-06 through 2009-10.

KERN HIGH SCHOOL DISTRICT General Fund - Revenues, Expenses and Changes in Fund Balance (Dollars in thousands)

2005-06 2006-07 2007-08 2008-09 2009-10 Audited Audited Audited Audited Audited Revenues Revenue Limit Income $207,557 $228,982 $241,702 $241,063 $215,626 Federal Income 25,081 24,509 23,607 45,622 38,385 State Income 43,403 62,506 71,472 66,685 83,876 Local Income 4,979 5,213 6,204 5,103 5,914 Total Revenue 281,020 321,210 342,985 358,473 $343,801

Expenses Instruction 150,637 166,323 181,306 177,466 175,180 Instruction – Related Services 38,660 42,687 47,349 44,093 42,988 Pupil Services 28,550 32,636 37,241 37,611 34,629 Ancillary Services 5,438 6,112 7,062 7,441 7,342 Community Services 45 67 63 12 36 Enterprise ------(4) General Administration 13,007 13,806 13,623 16,038 15,252 Plant Services 38,421 42,228 44,963 44,216 41,286 Other Outgo 3,829 4,964 5,532 2,691 3,735 Total Expenses 278,587 308,823 337,139 329,568 320,444

Other Finan. Sources (Uses) (2,178) (4,207) (4,811) 5,186 (10,762)

Net Change in Fund Balances 255 8,180 1,035 34,091 12,595

Fund Balance – Beg. of Year $36,041 $36,296 $44,476 $45,511 $79,602 (as adjusted) Fund Balance at End of Year $36,296 $44,476 $45,511 $79,602 $92,197 Source: Kern High School District

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The following table shows the District’s 2010-11 budget, as adopted by the Board of Education, for fiscal year 2010-11, compared to Second Interim Report projections for fiscal year 2010-11.

KERN HIGH SCHOOL DISTRICT 2010-11 Budget and Second Interim Projections (Dollars in thousands)

Adopted Budget 2nd Interim 2010-11 2010-11 Revenues

Revenue Limit Sources $210,887 $222,402 Federal revenues 27,674 27,675 Other state revenues 76,963 74,154 Other local revenues 5,533 6,284 Total Revenues 321,057 330,515

Expenses (1) Certificated Salaries 148,285 144,400 Classified Salaries 60,415 62,884 Employee Benefits 75,604 77,266 Books and Supplies 15,297 15,510 Services and Other Operating Expenses 26,171 29,074 Capital Outlay 4,298 4,781 Other Outgo 5,713 5,721 Transfers of Indirect Costs (1,199) (1,098) Total Expenses 334,584 338,538

Excess of Revenues Over/(Under) Expenses (13,527) (8,023)

Other Financing Sources (Uses) Operating Transfers In 2,042 2,042 Operating Transfers Out (13,025) (11,531) Other Sources (Uses) 5,059 5,059 Total Other Financing Sources (Uses) (5,924) (4,430)

Net Change in Fund Balance (19,451) (12,453)

Fund Balance, July 1 (1) 92,197 92,197

Fund Balance, June 30 $72,746 $79,744

(1) Beginning fund balance for 2010-11 is taken from the 2nd Interim Report. Source: Kern High School District.

Reserve Levels. The District has successfully maintained its reserve for economic uncertainties above the 2 percent State requirement, and the District’s multi-year projections for 2011-12 and 2012-13 set forth in the Second Interim Report for 2010-11 indicate that the District will continue to maintain its reserves above the State standard.

District Budget and Interim Financial Reporting

Budgeting - Education Code Requirements. The District is required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-

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over fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 (“AB 1200”), which became State law on October 14, 1991. Portions of AB 1200 are summarized below.

School districts must adopt a budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget option requires a revised and readopted budget by September 1 that is subject to State-mandated standards and criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The single budget is only readopted if it is disapproved by the county office of education, or as needed. The District is on a single budget cycle and adopts its budget on or before July 1. The District adopted its 2010-11 Budget on June 29, 2010.

For both dual and single budgets submitted on July 1, the county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the district to meet its current obligations and will determine if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. On or before August 15, the county superintendent will approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district board must be notified by August 15 of the county superintendent's recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent's recommendations. The committee must report its findings no later than August 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. The law does not provide for conditional approvals; budgets must be either approved or disapproved. No later than August 20, the county superintendent must notify the Superintendent of Public Instruction of all school districts whose budget has been disapproved.

For all dual budget options and for single and dual budget option districts whose budgets have been disapproved, the district must revise and readopt its budget by September 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent's recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final district budgets and not later than October 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section 42127.1. Until a district's budget is approved, the district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year.

Interim Certifications Regarding Ability to Meet Financial Obligations. Under the provisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then- current fiscal year and, based on current forecasts, for the subsequent two fiscal years. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned

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to any school district that may not meet its financial obligations for the current fiscal year or subsequent two fiscal years.

Under California law, any school district and office of education that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the district, unless the applicable county superintendent of schools determines that the district’s repayment of indebtedness is probable.

District’s Budget Approval/Disapproval and Certification History. The District has not received any qualified or negative certifications of its financial reports in the past five years, nor have any of its budgets been disapproved. The District’s most recent interim report, the Second Interim for fiscal year 2010-11, received a positive certification.

Copies of the District’s budget, interim reports and certifications may be obtained upon request from the District Office at Kern High School District, 5801 Sundale Avenue, Bakersfield, California 93309. The District may impose charges for copying, mailing and handling.

Long-Term Debt

The District has never defaulted on the payment of principal or interest on any of its indebtedness.

General Obligation Bonds. The District has issued general obligation bonds which are described in the following table. Such general obligation bonds are payable from ad valorem property taxes levied for that purpose on taxable properties within the District.

KERN HIGH SCHOOL DISTRICT Long Term General Obligation Bonds

Interest Original Outstanding Date of Issue Rate Maturity Date Par Amount March 1, 2011

March 15, 1996 (Refunding Bonds) 5.80-6.60% August 1, 2017 $ 74,735,000 $38,800,000* June 9, 2004 (Election 1990, Series E) 4.00-6.00% August 1, 2033 22,500,000 20,045,000 May 12, 2005 (Election 2004, Series A) 3.00-5.00% August 1, 2029 50,000,000 43,685,000 July 13, 2006 (Election 2004, Series B) 4.00-5.00% August 1, 2030 70,000,000 62,915,000 July 11, 2007 (Election 2004, Series C) 3.63-5.00% August 1, 2036 50,000,000 47,495,000 Total $267,235,000 $212,940,000

*To be refunded in whole or in part as described herein under “THE REFUNDING BONDS – Financing Plan.” Source: Kern High School District

Long-Term Lease Obligations. On April 22, 2010, the Golden Empire Schools Financing Authority issued its 2010 Lease Revenue Refunding Notes in the principal amount of $118,850,000, which are secured by payments to be made by the District pursuant to a lease agreement. For the year ended June 30, 2010, $118,850,000 was outstanding. Of this debt, $39,796,000 is the responsibility of the governmental activities, and the remaining $79,054,000 is to be paid from the business-type activities. The Notes mature on May 1, 2012.

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State Funding of Education and Revenue Limitations

Annual State apportionments of basic and equalization aid to school districts for general purposes are computed up to a revenue limit per unit of average daily attendance (“A.D.A.”). Such apportionments will, generally speaking, amount to the difference between the District's revenue limit and the District's local property tax allocation. Revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among California school districts.

In the event that a school district's property tax revenue exceeds its calculated revenue limit entitlement, that school district retains all of its property tax revenue, and State apportionments to that district are limited to the minimum “basic aid” amount of $120 per A.D.A. set forth in the Constitution. Currently the State allocates basic aid funding to categorical entitlements that would have been received in any event. Such districts are commonly known as “Basic Aid Districts.” The District is not a Basic Aid district.

A schedule of the District's A.D.A. and revenue limit is set forth below.

KERN HIGH SCHOOL DISTRICT Revenue Limit and Average Daily Attendance (1)

Base Revenue Limit (2) Total per Unit of Average Average Daily Net Revenue Limit Fiscal Year Daily Attendance Attendance ($millions) 2000-01 $5,362 26,227 $147,383 2001-02 5,562 26,942 157,364 2002-03 5,670 27,802 169,337 2003-04 5,773 29,103 175,325 2004-05 5,907 30,418 190,611 2005-06 6,150 31,822 207,557 2006-07 6,504 32,992 228,982 2007-08 6,795 33,711 241,702 2008-09 7,173 34,322 241,063 2009-10 7,474 34,538 215,626 2010-11(3) 7,445 34,331 214,470

(1) Revenue limit total pertains to general education purposes and excludes categorical aid programs, certain capital outlays, and other special purposes. (2) Base revenue limit times average daily attendance will not equal net revenue limit. The net Revenue Limit includes miscellaneous adjustments plus deficit adjustments. (3) Estimate. Source: Kern High School District

California school districts receive a significant portion of their funding from State appropriations. As a result, decreases in State revenues may affect appropriations made by the Legislature to school districts.

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Revenue Sources

The District categorizes its general fund revenues into four sources:

KERN HIGH SCHOOL DISTRICT District Revenue Sources

Percentage of Total District General Fund Revenues Revenue Source 2007-08 2008-09 2009-10 2010-11(1) Revenue limit sources 70.5% 67.2% 62.7% 63.7% Federal revenues 6.9 12.7 11.2 12.3 Other State revenues 20.8 18.6 24.4 22.0 Other local revenues 1.8 1.4 1.7 2.0

(1) Second Interim Projections. Source: Kern High School District.

Revenue Limit Sources. Since fiscal year 1973-74, California school districts have operated under general purpose revenue limits established by the State Legislature. In general, revenue limits are calculated for each school district by multiplying (1) the average daily attendance for such district by (2) a base revenue limit per unit of A.D.A. The revenue limit calculations are adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type.

Funding of the District's revenue limit is provided by a mix of local property taxes and State apportionments of basic and equalization aid. Generally, the State apportionments will amount to the difference between the District's revenue limit and its local property tax revenues.

Beginning in 1978-79, Proposition 13 and its implementing legislation provided for each county to levy and collect all property taxes, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.

Federal Revenues. The federal government provides funding for several District programs, including special education programs.

Other State Revenues. As discussed above, the District receives State apportionment of basic and equalization aid in an amount equal to the difference between the District's revenue limit and its property tax revenues. In addition to such apportionment revenue, the District receives substantial other State revenues.

These other State revenues are primarily restricted revenues funding items such as the Special Education Master Plan, home-to-school transportation, Economic Impact Aid, and mandated cost reimbursements.

The District receives State aid from the California State Lottery (the "Lottery"), which was established by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non- instructional purposes such as real property acquisition, facility construction, or the financing of research. Moreover, State Proposition 20 approved in March 2000 requires that 50% of the increase in lottery revenues over 1997-98 levels must be restricted to use on instructional materials. Lottery revenues generally comprise approximately 2% of general fund revenues.

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Other Local Revenues. In addition to property taxes, the District receives additional local revenues from items such as interest earnings, leases and rentals, and other local sources.

Investment of District Funds

In accordance with Government Code Section 53600 et seq., the Kern County Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections 53601 et seq. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code.

State Funding of Education and Recent State Budgets

General. The State requires that from all State revenues there first shall be set apart the moneys to be applied for support of the public school system and public institutions of higher education. Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts receive an average of about 55% of their operating revenues from various State sources. The primary source of funding for school districts is the revenue limit, which is a combination of State funds and local property taxes (see “– State Funding of Education and Revenue Limitations” above). State funds typically make up the majority of a district’s revenue limit. School districts also receive substantial funding from the State for various categorical programs.

The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenses (see “LIMITATIONS ON TAX REVENUES”), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. Decreases in State revenues may significantly affect appropriations made by the legislature to school districts.

The following information concerning the State’s budgets for the current and most recent preceding years has been compiled from publicly-available information provided by the State. Neither the District nor the County is responsible for the information relating to the State’s budgets provided in this section. Further information is available from the Public Finance Division of the State Treasurer’s Office.

The Budget Process. The State’s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the “Governor’s Budget”). Under State law, the annual proposed Governor’s Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor’s Budget, the Legislature takes up the proposal.

Under the State Constitution, money may be drawn from the State Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a two-thirds majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two- thirds vote of each House of the Legislature.

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Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (except for K-14 education) must be approved by a two-thirds vote in each House of the Legislature and be signed by the Governor. Bills containing K-14 education appropriations only require a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution.

Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt.

Recent State Budgets. Certain information about the State budgeting process and the State Budget is available through several State of California sources. A convenient source of information is the State’s website, where recent official statements for State bonds are posted. The references to internet websites shown below are shown for reference and convenience only, the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference.

1. The California State Treasurer Internet home page at www.treasurer.ca.gov, under the heading “Bond Information”, posts various State of California Official Statements, many of which contain a summary of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State.

2. The California State Treasurer’s Office Internet home page at www.treasurer.ca.gov, under the heading “Financial Information”, posts the State’s audited financial statements. In addition, the Financial Information section includes the State’s Rule 15c2-12 filings for State bond issues. The Financial Information section also includes the Overview of the State Economy and Government, State Finances, State Indebtedness, Litigation from the State’s most current Official Statement, which discusses the State budget and its impact on school districts.

3. The California Department of Finance’s Internet home page at www.dof.ca.gov, under the heading “California Budget”, includes the text of proposed and adopted State Budgets.

4. The State Legislative Analyst’s Office prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the Legislative Analyst’s Internet home page at www.lao.ca.gov under the heading “Subject Area – Budget (State)”.

Tax Shifts and Triple Flip. Assembly Bill No. 1755 (“AB 1755”), introduced March 10, 2003 and substantially amended June 23, 2003, requires the shifting of property taxes between redevelopment agencies and schools. On July 29, 2003, the Assembly amended Senate Bill No. 1045 to incorporate all of the provisions of AB 1755, except that the Assembly reduced the amount of the required ERAF shift to $135 million. Legislation commonly referred to as the "Triple Flip," was approved by the voters on March 2, 2004, as part of a bond initiative formally known as the "California Economic Recovery Act." This act authorized the issuance of $15 billion in bonds to finance the 2002-03 and 2003-04 State budget deficits, which are payable from a fund established by the redirection of tax revenues through the "Triple Flip." Under the "Triple Flip", one-quarter of local governments' one percent share of the sales tax imposed on taxable transactions within their jurisdiction are redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation

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redirects property taxes in the ERAF to local government. Because the ERAF monies were previously earmarked for schools, the legislation provides for schools to receive other state general fund revenues. It is expected that the swap of sales taxes for property taxes would terminate once the deficit financing bonds are repaid.

2010-11 State Budget.

October 8, 2010 – 2010-11 Budget Adopted. The Legislature passed the $87.5 billion 2010-11 Budget on the morning of October 8, 2010 and the Governor signed it that night, exercising his line-item veto authority to reduce spending by $963 million in order to raise the reserve level from $375 million to $1.3 billion. Total expenditure reductions were $8.4 billion. The 2010-11 Budget assumed federal funds of $5.4 billion and other solutions of almost $5.5 billion. These steps were taken to address a $20 billion projected deficit in fiscal year 2010-11.

November 10, 2010 LAO Report. The LAO forecast in its November 10, 2010 report, that the State’s General Fund revenues and expenditures showed a budget problem of $25.4 billion, consisting of a $6 billion projected deficit for fiscal year 2010-11 and a $19 billion gap between projected revenues and spending for fiscal year 2011-12. The LAO projected that the State would continue to face annual budget problems of approximately $20 billion each year through fiscal year 2015-16, and recommended that the Legislature initiate a multi-year approach to solving the State’s recurring structural budget deficit, addressing permanent revenue and expenditure actions each year, together with temporary budget solutions, until the structural deficit is eliminated.

November 11, 2010 – Governor Calls Special Session. Governor Schwarzenegger called a special legislative session to commence on December 6, 2010, when new lawmakers were sworn into office in order to address the $6 billion projected deficit for fiscal year 2010-11. In November, State voters approved a constitutional initiative to lower the legislative threshold to pass the State budget from two-thirds to a simple majority, however, a two-thirds vote is still required to raise taxes and fees.

2011-12 Proposed State Budget. On January 10, 2011, Governor Jerry Brown announced a budget proposal to bridge the State’s estimated $28 billion budget deficit. The proposed budget delivered cuts across a wide spectrum of programs, calling for $84.6 billion in general fund spending in fiscal 2012, down from about $92.2 billion in 2010-11. At the same time, the Governor’s budget plan proposed asking voters to approve a five-year extension of temporary income, sales and vehicle taxes before they expire at the end of June 2011 in a proposed special statewide election to be held in June, 2011. Governor Brown’s proposed budget includes cuts to welfare programs, health care programs for the poor and higher education. In addition, the proposal included the elimination of California redevelopment agencies and re-directing property tax revenues from redevelopment to cities, counties and schools. Cuts to K-12 education were not included, unless the tax extensions are not approved at a special June election.

Following the introduction of the 2011-12 Budget, the Legislature passed and the Governor signed budget bills which include $1.7 billion in reductions to services and coverage under Medi-Cal, $1 billion in reductions to CalWORKs (a low income financial and employment assistance program), $1.1 billion in cuts to higher education, $1 billion in cuts to First 5 (an early childhood program), $862 million in cuts to mental health programs, and $192 million in cuts to Supplemental Security Income and State Supplementary Payments for low-income disabled and elderly residents. The Governor was unable to obtain the votes of the California Legislature

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needed to call a special statewide election in June for voters to consider the tax extensions included in the Governor’s proposed 2011-12 Budget.

May Revision On May 16, 2011, the Governor introduced the May Revise to the 2011- 12 Budget to the Legislature. The May Revise assumes $6.6 billion more in tax revenue through June 2012, reducing the possible deficit to $9.6 billion and providing education funding at a level at least equal to 2010-11 funding, continues to propose the extension of sales and vehicle taxes for five years, but shortens the income tax extension to four years, maintains the plan to eliminate redevelopment agencies, tightens rules for job-creation tax credits in enterprise zones, eliminates 43 boards and commissions and sells numerous “nonessential” properties. June 15, 2011 is the constitutional deadline for the Legislature to pass a 2010-11 budget bill, although historically, passage frequently occurs after such deadline.

LAO Report. The LAO’s May 19, 2011 report on the Governor’s May Revision concludes that the Governor’s budget estimates in the May Revision are based on reasonable assumptions. However, the LAO notes, school districts, counties and the State face uncertainty as to funding levels in the fiscal year because the Governor’s revenue assumptions rely on the extension of temporary increases in personal income tax, sales and use tax and vehicle license fees to be approved by the voters. The LAO deems the Governor’s proposals worthy of legislative consideration, noting that in past budgets the State was unable to make significant inroads into its underlying operating shortfall due to a reliance on one-time and short-term solutions; whereas, this year, an estimated $6.6 billion improvement in state tax collections, and $13 billion in budgetary solutions already adopted by the Legislature, puts the State in the position to dramatically reduce its budget problem in coming years.

June 15, 2011 Legislative Action. Facing a constitutional deadline, legislative democrats sent Governor Brown a budget package to bridge the remaining $9.6 billion deficit. Key budget- related measures included:

• Raising the sales tax by one-quarter of a cent.

• Raising vehicle registration fees by $12 a vehicle.

• Adopting tax requiring online retailers to collect sales taxes.

• Resurrecting abandoned plan to sell and lease back 11 State properties.

• Adopting firefighting fee for rural homeowners.

• Cutting the University of California and California State University systems by another $150 million each, on top of $500 million each took in earlier cutting.

• Deferring $3.4 billion in payments to schools, community colleges and the University of California, forcing them to borrow to maintain programs.

• Taking $1 billion from First 5 commissions, a move already under legal challenge.

June 16, 2011 Governor Veto. On June 16 Governor Brown stated that he would not sign Senate Bill 69 and Assembly Bill 98, which together comprise the State budget passed by the Legislature on June 15, 2011. The result is that the 2011-12 Budget remains unresolved, and the State legislature will have to either override the veto with a two-thirds vote, or present a revised proposal to the Governor.

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Uncertainty Regarding Future State Budgets. The District cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State’s current or future budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the District has no control. The District cannot predict what impact any future budget proposals will have on the financial condition of the District. To the extent that the State budget process results in reduced revenues to the District, the District will be required to make adjustments to its budgets. The budget proposal could be approved by the end of March.

The State has not entered into any contractual commitment with the District, the County, or the Owners of the Bonds to provide State budget information to the District or the owners of the Bonds. Although they believe the State sources of information listed above are reliable, neither the District nor the Underwriter assumes any responsibility for the accuracy of the State Budget information set forth or referred to in this Official Statement or incorporated herein.

2010 Legal Challenge to State Funding of Education

The application of Proposition 98 and other statutory regulations has become increasingly difficult to predict accurately in recent years. For a discussion of how the provisions of Proposition 98 have been applied to school funding see “- CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below.

On May 20, 2010, a plaintiff class of numerous current California public school students and the Alameda Unified, Alpine Union, Del Norte County Unified, Folsom Cordova Unified, Hemet Unified, Porterville Unified, Riverside Unified, San Francisco Unified, and Placentia- Yorba Linda Unified School Districts, together with the California Congress of Parents, Teachers & Students, the Association of California School Administrators and the California School Boards Association filed suit in Alameda County Superior Court challenging the system of financing for public schools in California as unconstitutional. In Maya Robles-Wong, et al. v. State of California, plaintiffs seek declaratory and injunctive relief, including a permanent injunction compelling the State to abandon the existing system of public school finance. The District cannot predict the outcome of the Robles-Wong litigation, however, if successful, the lawsuit could result in a change in how school finance is implemented in the State of California.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Principal of and interest on the Refunding Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof. (See “SECURITY FOR THE REFUNDING BONDS” in the Official Statement.) The provisions of law discussed below are included in this section to describe the potential effect of Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes. It should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the District to levy taxes for payment of the Refunding Bonds. The tax levied by the County for payment of the Refunding Bonds was approved by the District’s voters in compliance with all applicable laws.

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Article XIIIA of the California Constitution

Proposition 13-Article XIIIA. On June 6, 1978, California voters approved Proposition 13 (“Proposition 13”), which added Article XIIIA to the State Constitution (“Article XIIIA”). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978.

Proposition 46. Under Proposition 46, approved by the voters on June 3, 1986, Article XIIIA was amended to allow the property tax rate to exceed 1% to repay bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-third of the voters on such indebtedness.

Proposition 39. Proposition 39, approved by voters on November 7, 2000, further amended Article XIIIA to permit bonded indebtedness to be incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, if approved by 55% of the voters of the district voting at the election, but only if certain accountability measures are included in the proposition.

“Cash Value.” Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies (such as the District) are no longer permitted to levy directly any property tax (except to pay voter- approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies in the county. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed as $4 per $100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

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Article XIIIB of the California Constitution

An initiative to amend the State Constitution entitled “Limitation of Government Appropriations” was approved on September 6, 1979, thereby adding Article XIIIB to the State Constitution (“Article XIIIB”). Under Article XIIIB state and local governmental entities have an annual “appropriations limit” and are not permitted to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

The District’s budgeted appropriations from “proceeds of taxes” for the current fiscal year are equal to the allowable limit. Any proceeds of taxes received by the District in excess of the allowable limit are absorbed into the State’s allowable limit.

Articles XIIIC and XIIID of the California Constitution

Proposition 218 – Articles XIIIC and XIIID. On November 5, 1996, the voters approved Proposition 218, the “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, containing provisions affecting the ability of local agencies, including cities, to levy and collect both existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes); prohibits special purpose government agencies, such as the District, from levying general taxes; and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote. Article XIIIC also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4.

Article XIIIC also provides that the initiative power is not limited in matters of reducing or repealing local taxes, assessments, fees and charges. The State Constitution and the laws of the State impose a mandatory, statutory duty on the County Treasurer to levy a property tax sufficient to pay debt service on any bonds coming due in each year. The initiative power cannot be used to reduce or repeal the Authority and obligation to levy such taxes or to otherwise interfere with performance of the mandatory, statutory duty of the District and the County with respect to such taxes which are pledged as security for payment of the District Bonds. Legislation adopted in 1997 provides that Article XIIIC shall not be construed to mean that any owner or beneficial owner of a municipal security assumes the risk of or consents to any initiative measure which would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution.

Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; no

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such fees or charges are imposed by the District and pledged or expected to be used to pay the District Bonds.

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

Unitary Property

Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formula generally based on the distribution of taxes in the prior year.

The California electric utility industry has been undergoing significant changes in its structure and in the way in which components of the industry are regulated and owned. Sale of electric generation assets to largely unregulated, non-utility companies may affect how those assets are assessed and which local agencies are to receive the property taxes. The California energy markets have also experienced recent and severe disruption, which has and will affect State finances. The District is unable to predict the impact of these changes and events on its utility property tax revenues, or whether legislation may be proposed or adopted in response to industry restructuring or the market disruption, or whether any future litigation may affect ownership of utility assets or the State’s methods of assessing utility property and the allocation of assessed value to local taxing agencies, including the District. Because the District is not a basic aid district, taxes lost through any reduction in assessed valuation will be compensated by the State as equalization aid under the State’s school financing formula.

Propositions 98 and 111

Proposition 98. On November 8, 1988, the voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). The Accountability Act changes State funding of public education below the university level, and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (collectively, “K-14 districts”) at a level equal to the greater of (a) the same percentage of General fund revenues as the percentage appropriated to such districts in 1986-87, which percentage is equal to 40.9%, or (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for growth in enrollment and inflation.

Since the Accountability Act is unclear in some details, there can be no assurance that the Legislature or a court might not interpret the Accountability Act to require a different percentage of general fund revenues to be allocated to K-14 districts than the 40.9% percentage, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s Budget. In any event, the Governor and other fiscal observers expect the Accountability Act to place increasing pressure on the State’s budget over future years, potentially reducing resources available for other State programs, especially to the extent

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the Article XIIIB spending limit would restrain the State’s ability to fund such other programs by raising taxes.

The Accountability Act also changes how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 districts. Such transfer would be excluded from the appropriations limit for K-14 districts and the K-14 school appropriations limits for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to schools is 4% of the minimum State spending for education mandated by the Accountability Act, as described above.

Proposition 111. On June 5, 1990, California voters approved Proposition 111 which further modified the State Constitution to alter the spending limit and education funding provisions of Proposition 98. Most significantly, Proposition 111 (1) liberalized the annual adjustments to the spending limit by measuring the “change in the cost of living” by the change in State per capita personal income rather than the Consumer Price Index, and specified that a portion of the State’s spending limit would be adjusted to reflect changes in school attendance; (2) provided that 50% of the “excess” tax revenues, determined based on a two-year cycle, would be transferred to K-14 districts with the balance returned to taxpayers (rather than the previous 100% but only up to a cap of 4% of the districts’ minimum funding level), and that any such transfer to K-14 districts would not be built into the school districts’ base expenditures for calculating their entitlement for State aid in the following year and would not increase the State’s appropriations limit; (3) excluded from the calculation of appropriations that are subject to the limit appropriations for certain “qualified capital outlay projects” and certain increases in gasoline taxes, sales and use taxes, and receipts from vehicle weight fees; (4) provided that the appropriations limit for each unit of government, including the State, would be recalculated beginning in the 1990-91 fiscal year, based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if SCA 1 had been in effect; and (5) adjusted the Proposition 98 formula that guarantees K-14 districts a certain amount of general fund revenues, as described below.

Under prior law, K-14 districts were guaranteed the greater of (a) 40.9% of general fund revenues (the “first test”) or (b) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”). Under Proposition 111, school districts would receive the greater of (a) the first test, (b) the second test or (c) a third test, which would replace the second test in any year when growth in per capita general fund revenues from the prior year was less than the annual growth in State per capita personal income. Under the third test, school districts would receive the amount appropriated in the prior year adjusted for change in enrollment and per capita general fund revenues, plus an additional small adjustment factor. If the third test were used in any year, the difference between the third test and the second test would become a “credit” to be paid in future years when general fund revenue growth exceeds personal income growth.

Proposition 1A

On November 2, 2004, California voters approved Proposition 1A, which amends the State Constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State can not (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from

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local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Beginning, in 2008-09, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Proposition 22

On November 2, 2010, California voters approved Proposition 22, a constitutional initiative entitled the “Local Taxpayer, Public Safety, and Transportation Protection Act of 2010.” This initiative amends the State Constitution to prohibit the Legislature from diverting or shifting revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services. Under this proposition, the State is not allowed to take revenue derived from locally imposed taxes, such as hotel taxes, parcel taxes, utility taxes and sales taxes, and local public transit and transportation funds. Further, in the event that a local governmental agency sues the State alleging a violation of these provisions and wins, then the State must automatically appropriate the funds needed to pay that local government.

Application of Constitutional and Statutory Provisions

The application of Proposition 98 and other statutory regulations has become increasingly difficult to predict accurately in recent years. For a discussion of how the provisions of Proposition 98 have been applied to school funding, see “DISTRICT FINANCIAL INFORMATION.”

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98, 111, 1A and 22 were each adopted as measures that qualified for the ballot under the State’s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.

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APPENDIX C

GENERAL INFORMATION ABOUT THE CITY OF BAKERSFIELD AND KERN COUNTY

The following information concerning the County and the City listed above is included only for the purpose of supplying general information regarding the area of the District. The Refunding Bonds are not a debt of the County, the City, the State or any of its political subdivisions, and neither the said County, the City, said State nor any of its political subdivisions is liable therefor.

General

Kern County (the “County”) is located approximately 100 miles north of Los Angeles County in south-central California. The County is the third largest county in California, covering 8,073 square miles. Surrounded by three major mountain ranges, the County has three climatic zones; valley, mountain and high desert. Bordered on the west by San Luis Obispo and Santa Barbara Counties, to the east by San Bernardino County and on the north by Kings, Tulare and Inyo Counties, the County measures 120 miles east to west and 67 miles north to south.

The City of Bakersfield (the “City”) is the largest city in the County and serves as the county seat.

Population

The following table lists population estimates for the County, the City, and the other major cities in the County as of January 1 each year for the last five calendar years.

COUNTY OF KERN CITY OF BAKERSFIELD Population Estimates Calendar Years 2007 through 2011

Area 2007 2008 2009 2010 2011

Total County 798,784 815,023 827,475 837,074 846,883 Total Unincorporated 291,906 297,651 301,043 295,609 301,255

Arvin 16,078 16,465 16,682 19,345 19,596 Bakersfield 322,008 327,650 333,847 347,029 351,443 California City 13,084 14,332 14,835 14,166 12,858 Delano 52,877 53,714 53,985 53,128 53,155 McFarland 12,670 13,379 13,564 1,157 1,161 Maricopa 1,132 1,131 1,142 12,783 12,739 Ridgecrest 27,841 27,950 28,362 27,540 27,768 Shafter 14,930 15,562 15,818 16,939 17,283 Taft 9,138 9,188 9,119 9,308 9,321 Tehachapi 13,032 13,062 13,636 14,503 14,523 Wasco 24,088 24,939 25,442 25,567 25,781

Source: California Department of Finance, Demographic Research Unit.

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Industry and Employment

The unemployment rate in Kern County was 17.5% in March 2011, up from a revised 17.0% in February 2011, and below the year-ago estimate of 17.8%. This compares with an unadjusted unemployment rate of 12.3% for California and 9.2% for the nation during the same period. The table below provides information about employment rates and employment by industry type for the County for calendar years 2006 through 2010.

Unemployment rates are not available for the District.

COUNTY OF KERN Civilian Labor Force, Employment and Unemployment Calendar Years 2006 through 2010 Annual Averages

2006 2007 2008 2009 2010 Civilian Labor Force (1)(2) 338,000 347,200 361,100 365,600 368,400 Employment 312,500 318,900 326,000 313,300 309,800 Unemployment 25,500 28,300 35,200 52,300 58,600 Unemployment Rate 7.5% 8.1% 9.7% 14.3% 15.9% Wage and Salary Employment: (3) Agriculture 45,300 45,600 49,600 42,800 44,900 Natural Resources and Mining 9,400 9,800 10,700 9,800 10,000 Construction 20,000 18,400 16,500 13,100 12,200 Manufacturing 13,000 13,300 13,700 13,200 12,800 Wholesale Trade 7,600 8,000 7,700 7,200 6,900 Retail Trade 29,300 28,900 27,400 25,600 25,700 Transportation, Warehousing, Utilities 9,400 9,600 9,600 8,900 8,500 Information 2,700 2,800 3,000 2,800 2,600 Finance and Insurance 5,700 5,700 5,500 5,400 5,200 Real Estate and Rental and Leasing 3,200 3,400 3,300 3,100 3,000 Professional and Business Services 25,000 26,100 25,000 23,700 23,700 Educational and Health Services 23,000 24,500 25,500 25,800 25,600 Leisure and Hospitality 20,700 21,500 21,500 20,900 20,600 Other Services 6,800 6,700 7,000 6,700 6,800 Federal Government 9,400 9,500 9,800 10,200 10,900 State Government 8,900 9,400 10,000 10,100 9,800 Local Government 39,400 41,000 41,700 40,400 40,000 Total all Industries (4) 278,600 284,300 287,600 269,900 269,200

(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. March 1, 2010 benchmark. (2) Civilian Labor Force numbers for years 2006-2008 will be recalculated by the State of California Employment Development Department. (3) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (4) Totals may not add due to rounding. Source: State of California Employment Development Department.

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Largest Employers

The following tables list the largest manufacturing and non-manufacturing employers within the County as of 2011:

COUNTY OF KERN Largest Employers January 2011 (In Alphabetical Order)

Employer Name Location Industry Bakersfield Memorial Hospital Bakersfield Hospitals Bolthouse Farms Bakersfield Fruits & Vegetables-Brokers (Whls) Chevron Corp Bakersfield Oil Refiners (Mfrs) Edwards AFB Edwards AFB Federal Government-National Security Frito-Lay Inc Bakersfield Potato Chip Factories (Mfrs) Giumarra Vineyards Corp Bakersfield Wineries (Mfrs) Grimmway Farms Arvin Fruits & Vegetables-Brokers (Whls) Human Services Dept Bakersfield County Government-Social/Human Resources Kern County Human Svc Dept Bakersfield County Government-Social/Human Resources Kern County School Supt Bakersfield Schools Kern Medical Ctr Bakersfield Hospitals Marko Zaninovich Inc Delano Fruits & Vegetables-Growers & Shippers Mercy Hospital Bakersfield Hospitals Nabors Well Svc Co Bakersfield Oil Well Services Naval Air Warfare Ctr Ridgecrest Military Bases Paramount Citrus Delano Food Products (Whls) Paramount Farms Lost Hills Fruits & Vegetables-Growers & Shippers San Joaquin Community Hospital Bakersfield Hospitals Sears Logistics Svc Delano Distribution Centers (Whls) State Farm Operations Ctr Bakersfield Management Services Sun Pacific Farming Bakersfield General Farms-Primarily Crop TUV Industry Svc Ridgecrest Contractors-Engineering General US Borax Inc Boron Mining Companies US Naval Air Weapons Station Ridgecrest Federal Government-National Security US Navy Public Affairs Office Ridgecrest Federal Government-National Security

Source: State of California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database, 2011 1st edition.

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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 KERN Effective Buying Income As of January 1, 2005 through 2009

Total Effective Median Household Buying Income Effective Buying Year Area (000’s Omitted) Income 2005 City of Bakersfield $4,655,155 $38,824 Kern County 10,208,275 34,883 California 720,798,106 44,681 United States 5,894,663,364 40,529

2006 City of Bakersfield $5,153,503 $40,677 Kern County 11,199,258 $36,344 California 764,120,963 46,275 United States 6,107,092,244 41,255

2007 City of Bakersfield $5,568,748 $42,613 Kern County 12,034,135 37,892 California 814,894,438 48,203 United States 6,300,794,040 41,792

2008 City of Bakersfield $5,927,065 $44,357 Kern County 12,657,070 39,256 California 832,531,445 48,952 United States 6,443,994,426 42,303

2009 City of Bakersfield $6,064,508 $43,565 Kern County 12,716,201 39,038 California 844,823,319 49,736 United States 6,571,536,768 43,252

Source: The Nielsen Company (US), Inc.

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Commercial Activity

In 2009, the State Board of Equalization converted the business codes of sales and use tax permit holders to North American Industry Classification System codes. As a result of the coding change, data for 2009 is not comparable to that of prior years. A summary of historic taxable sales within the City during the past five years in which data is available is shown in the following table.

Total taxable sales during calendar year 2009 in the City were reported to be $4,422,123,000, a 16.78% decrease over the total taxable sales of $5,314,000,000 reported during calendar year 2008. Figures are not yet available for 2010.

CITY OF BAKERSFIELD Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions Calendar Years 2005 through 2009 (Dollars in Thousands)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions

2005 4,140 $4,485,156 7,024 $5,447,738 2006 4,145 4,625,005 6,901 5,750,771 2007 4,150 4,500,779 6,965 5,590,533 2008 4,183 4,055,211 7,148 5,314,000 2009 (1) 4,771 3,491,649 6,929 4,422,123

(1) Data for retail stores not comparable to prior years. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

Total taxable sales during calendar year 2009 in the County were reported to be $9,932,101,000, a 17.82% decrease over the total taxable sales of $12,085,853,000 reported during calendar year 2008. Figures are not yet available for 2010.

COUNTY OF KERN Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions Calendar Years 2005 through 2009 (Dollars in Thousands)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions

2005 9,147 $7,146,289 16,341 $10,651,857 2006 9,352 7,595,418 16,402 11,975,693 2007 9,479 7,510,741 16,679 11,874,302 2008 9,404 6,981,166 16,917 12,085,853 2009 (1) 10,327 6,026,769 15,331 9,932,101

(1) Data for retail stores not comparable to prior years. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

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Construction Activity

Construction activity in the City and the County for the past five years for which data is available is shown in the following tables.

CITY OF BAKERSFIELD Total Building Permit Valuations Calendar Years 2006 through 2010 (valuations in thousands)

2006 2007 2008 2009 2010 Permit Valuation New Single-family $525,689.0 $273,107.4 $194,456.1 $225,635.4 $166,160.4 New Multi-family 38,410.1 23,680.9 46,863.4 6,639.3 28,824.3 Res. Alterations/Additions 21,065.6 19,777.1 18,603.5 17,495.9 17,894.1 Total Residential 585,164.7 316,565.4 259,923.0 249,770.6 212,878.8

New Commercial 82,996.9 64,516.1 53,589.6 48,984.8 8,469.7 New Industrial 2,400.0 0.0 0.0 0.0 0.0 New Other 22,179.3 19,339.9 11,640.6 12,496.9 6,306.5 Com. Alterations/Additions 54,546.2 66,867.9 63,138.7 60,425.5 67,913.2 Total Nonresidential $162,122.4 $150,723.9 $128,369.0 $121,907.3 $82,689.4

New Dwelling Units Single Family 3,379 1,820 991 1,087 816 Multiple Family 574 312 526 89 258 TOTAL 3,953 2,132 1,517 1,176 1,074

Source: Construction Industry Research Board, Building Permit Summary.

COUNTY OF KERN Total Building Permit Valuations Calendar Years 2006 through 2010 (valuations in thousands)

2006 2007 2008 2009 2010 Permit Valuation New Single-family $907,665.4 $513,624.6 $280,091.2 $298,468.0 $229,773.6 New Multi-family 85,343.9 67,108.9 68,402.5 9,989.3 49,961.4 Res. Alterations/Additions 64,688.8 62,607.7 49,158.2 36,794.3 42,433.8 Total Residential 1,057,698.2 643,341.2 397,651.9 345,251.6 322,168.7

New Commercial 119,353.3 105,882.7 102,954.7 67,991.6 12,015.1 New Industrial 23,698.3 11,178.3 31,711.2 11,287.2 4,869.1 New Other 76,006.2 78,057.7 49,236.3 44,831.2 37,074.9 Com. Alterations/Additions 90,930.8 107,441.3 129,373.0 91,438.3 117,575.4 Total Nonresidential $309,988.6 $302,560.0 $313,275.2 $215,548.3 $171,534.5

New Dwelling Units Single Family 6,358 3,669 1,627 1,676 1,313 Multiple Family 1,333 939 931 192 607 TOTAL 7,691 4,608 2,558 1,868 1,920

Source: Construction Industry Research Board, Building Permit Summary.

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APPENDIX D

FORM OF OPINION OF BOND COUNSEL

June 29, 2011

Board of Trustees Kern High School District 501 Sundale Avenue Bakersfield, California 93309

OPINION: $37,225,000 Kern High School District (Kern County, California) 2011 Taxable General Obligation Refunding Bonds

Ladies and Gentlemen:

We have acted as bond counsel to the Kern High School District (the “District”) in connection with the issuance by the District of its Kern High School District (Kern County, California) 2011 Taxable General Obligation Refunding Bonds in the aggregate principal amount of $37,225,000 (the “Bonds”). The Bonds have been authorized to be issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53550 of said Code (the “Bond Law”), and a resolution of the Board of Trustees of the District (the “Board”) adopted on May 24, 2011 (the “Bond Resolution”). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the Board contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation.

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

1. The District is duly established and validly existing as a high school district with the power to issue the Bonds, and to perform its obligations under the Bond Resolution and the Bonds.

2. The Bond Resolution has been duly adopted by the Board, and constitutes a valid and binding obligation of the District enforceable against the District in accordance with its terms.

3. The Bonds have been duly issued and sold by the District, and are valid and binding general obligations of the District, and the Board of Supervisors of Kern County is obligated under the laws of the State of California to cause to be levied an ad valorem tax without limit as

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to rate or amount upon the taxable property in the District for the payment when due of the principal of and interest on the Bonds.

The rights of the owners of the Bonds, and the enforceability of the Bonds and the Paying Agent Agreement, may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases.

To ensure compliance with requirements imposed by the United States Internal Revenue Service, we inform you that any U.S. federal tax advice contained herein for the Bonds (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code of 1986, as amended, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Respectfully submitted,

Jones Hall, A Professional Law Corporation

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APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATE

$37,225,000 KERN HIGH SCHOOL DISTRICT (Kern County, California) 2011 Taxable General Obligation Refunding Bonds

CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Kern High School District (the “District”) in connection with the issuance of $37,225,000 aggregate principal amount of Kern High School District School District (Kern County, California) 2011 Taxable General Obligation Refunding Bonds (the “Bonds”). The Bonds are being issued under a Resolution adopted by the Board of Trustees of the District on May 24, 2011 (the “Bond Resolution”). The District 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 Underwriters in complying with S.E.C. Rule 15c2- 12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms have the following meanings:

“Annual Report” means any Annual Report provided by the District under and as described in Sections 3 and 4.

“Annual Report Date” means the date that is nine months after the end of the District’s fiscal year (currently March 31 based on the District’s fiscal year end of June 30).

“Dissemination Agent” means the District or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Listed Events” means any of the events listed in Section 5(a).

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.

“Participating Underwriter” means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

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

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Section 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to provide, not later than nine months after the end of the District’s fiscal year (which currently would be March 31), commencing no later than March 31, 2012 with the report for the 2010-11 Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. 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). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District hereunder.

(b) If the District does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

(c) With respect to the Annual Report, the Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following:

(a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, financial information and operating data with respect to the District for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement:

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(i) the average daily attendance in District schools on an aggregate basis for the preceding fiscal year;

(ii) pension plan contributions made by the District for the preceding fiscal year;

(iii) aggregate principal amount of short-term borrowings, lease obligations and other long-term borrowings of the District as of the end of the preceding fiscal year;

(iv) description of amount of general fund revenues and expenditures which have been budgeted for the current fiscal year, together with audited actual budget figures for the preceding fiscal year;

(v) the District’s total revenue limit for the preceding fiscal year; and

(vi) current fiscal year assessed valuation of taxable properties in the District.

(c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) 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.

(d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission.

Section 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:

(1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material.

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(11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the District. (13) The consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, and, if the Listed Event is described in subsections (a)(2), (a)(6), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13) or (a)(14) above, 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 (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above 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.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The 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 5(c).

Section 8. 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.

Section 9. Amendment; Waiver. Notwithstanding any other provision hereof, 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 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

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(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Bond Resolution for amendments to the Bond Resolution 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.

If the annual financial information or operating data to be provided in the Annual Report is amended under 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 filed in the same manner as for a Listed Event under Section 5(c).

Section 9. Additional Information. Nothing in this Disclosure Certificate prevents 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. If the District fails to comply with any provision of this Disclosure Certificate, 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 Bond Resolution, 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. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

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Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Date: June 29, 2011

KERN HIGH SCHOOL DISTRICT

By: Superintendent

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Obligor: Kern High School District

Name of Bond Issue: $37,225,000 aggregate principal amount of Kern High School District (Kern County, California) 2011 Taxable General Obligation Refunding Bonds Date of Issuance: June 29, 2011

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the resolution adopted by the Board of Trustees of the District authorizing the issuance of the Bonds. The District anticipates that the Annual Report will be filed by ______.

Dated:

KERN HIGH SCHOOL DISTRICT

By: Authorized Officer

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APPENDIX F

BOOK-ENTRY ONLY SYSTEM

The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Refunding Bonds, payment of principal, interest and other payments on the Refunding Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Refunding Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the District nor the Paying Agent take any responsibility for the information contained in this Section.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Refunding Bonds, (b) Refunding Bonds representing ownership interest in or other confirmation or ownership interest in the Refunding Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Refunding Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (in this Appendix, the “Bonds”). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is

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the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Certificate (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

Redemption notices will be sent to DTC. If less than all of the Bonds within an issue are being redeemed, the Bonds will be redeemed on a pro rata basis.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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Redemption proceeds, distributions, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from District or Paying Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, Paying Agent, or District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to District or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT DISTRICT BELIEVES TO BE RELIABLE, BUT DISTRICT TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF.

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