General Obligation Bonds, Election of 2004, Series B General Obligation Bonds, Election of 2004, Series C

NEW ISSUE-FULL BOOK-ENTRY RATINGS: Insured Ratings: S&P: "AAA"; Moody's: "Aaa" Underlying Ratings: S&P: "AA-"; Moody's: "Aa3" (See "MISCELLANEOUS" - Ratings herein.) In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California ("Bond Counsel"), under existing statutes, regulations, mlings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excludedfrom gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion ofBond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. In addition, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Bond constitutes original issue discount. (See "TAX MATTERS" herein with respect to tax consequences relating to the Bonds.) $52,536,256.40 $56,460,276.45 Antelope Valley Community College District Antelope Valley Community College District (Kem and Los Angeles Counties, California) (Kem and Los Angeles Counties, California) General Obligation Bonds, Election of 2004, Series B General Obligation Bonds, Election of 2004, Series C

Dated: Date of Delivery Due: August 1, as shown on inside cover page This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page not otherwise defined shall have the meanings set forth herein. Both the Antelope Valley Community College District (Kem and Los Angeles Counties, California) General Obligation Bonds, Election of 2004, Series B (the "Series B Bonds") and the Antelope Valley Community College District (Kern and Los Angeles Counties, California) General Obligation Bonds, Election of 2004, Series C (the " Series C Bonds" and together with the Series B Bonds, the "Bonds") were authorized at an election of the registered voters of the Antelope Valley Community College District (the "District") held on November 2, 2004 at which more than fifty-five percent of the persons voting on the proposition voted to authorize the issuance and sale of $139,000,000 principal amount of general obligation bonds of the District (the "Authorization"). The Bonds are being issued to finance the acquisition, construction and modernization of certain District property and facilities. The Bonds are general obligations of the District, payable solely from the proceeds of ad valorem property taxes. The Boards of Supervisors of Kern County and Los Angeles County are empowered and obligated to levy ad valorem taxes, without limitation as to rate or amount, upon all property within the District subject to taxation by the District ( except certain personal property which is taxable at limited rates), for the payment of principal and Maturity Value of and interest on the Bonds when due. The 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 The Depository Trust Company, New York, New York ( collectively referred to herein as "DIC"). Purchasers will not receive certificates representing their interest in the Bonds. The Bonds will be issued as current interest bonds (the "Current Interest Bonds") and capital appreciation bonds (the "Capital Appreciation Bonds.") Interest with respect to the Current Interest Bonds accrues from the date of their delivery and is payable semiannually on February 1 and August 1 of each year, commencing on February!, 2008. The Current Interest Bonds are issuable in denominations of $5,000 or any integral multiple thereof. The Capital Appreciation Bonds are dated the date of delivery of the Bonds and accrete interest from such date, compounded semiannually on February 1 and August 1 of each year, commencing on February 1, 2008. The Capital Appreciation Bonds are issuable in denominations $5,000 Maturity Value or any integral multiple thereof. Payments of principal and Maturity Value of and interest on the Bonds will be made by The Treasurer and Tax Collector of Los Angeles County, as the designated Paying Agent, Bond Registrar and Transfer Agent (the "Paying Agent"), to DIC for subsequent disbursement to DIC Participants (defined herein) who will remit such payments to the beneficial owners of the Bonds. (See "APPENDIX D -Book-Entry Only System.") The Bonds are subject to redemption prior to maturity as described herein. The scheduled payment of principal and Maturity Value of and interest on the Bonds when due will be guaranteed under a financial guaranty insurance policy to be issued simultaneously with the delivery of the Bonds by MBIA Insurance Corporation ("MBIA" or the "Insurer"). (See "THE BONDS -Bond Insurance" and "APPENDIX E -Form of Financial Guaranty Insurance Policy.")

Qbia

MATURITY SCHEDULE (See inside cover)

The Bonds will be offered when, as and ifissued and received by the Underwriter, subject to the approval oflegality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel. Certain matters will be passed upon for the Underwriter by Nossaman Guthner Knox & Elliot LLP, Irvine, California. The Bonds, in book-entry form, will be available for delivery through the facilities of DTC in New York, New York on or about September 13, 2007.

UBS INVESTMENT BANK Dated: August 28, 2007 MATURITY SCHEDULE $52,536,256.40 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT (Kern and Los Angeles Connties, California) General Obligation Bonds, Election of 2004, Series B

$12,231,256.40 Capital Appreciation Serial Bonds

Maturity Denominational Accretion Reoffering Maturity (August 1) Amount Rate Yield Value 2032 $2,367,371.50 5.630% 5.630% $9,425,000 2033 2,557,337.90 5.640 5.640 10,790,000 2034 2,496,605.65 5.650 5.650 11,165,000 2035 2,434,955.95 5.660 5.660 11,545,000 2036 2,37 4,985.40 5.670 5.670 11,940,000

$40,305,000 5.250o/o Current Interest Term Bonds due August 1, 2039 - Yield 4.900o/o (1)

(1) Yield to call at par on August 1, 2017.

$56,460,27 6.45 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT (Kern and Los Angeles Connties, California) General Obligation Bonds, Election of 2004, Series C $42,085,000.00 Current Interest Serial Bonds

Maturity Principal Interest Maturity Principal Interest (August 1) Amount Rate Yield (August 1) Amount Rate Yield

2 2008 $570,000 4.000% 3.510% 2018 $1,230,000 5.250% 4.310%( ) 2 2009 150,000 4.000 3.520 2019 1,390,000 5.250 4.400( ) 2010 250,000 4.000 3.600 2020 1,565,000 5.250 4.470(2) 2011 345,000 4.125 3.650 2021 1,745,000 5.250 4.520(2) 2012 455,000 4.125 3.750 2022 1,935,000 5.000 4.660(2) 2 2013 565,000 4.250 3.830 2023 6,175,000 5.000 4.690( ) 2014 680,000 4.250 3.930 2024 6,760,000 5.000 4.120(2) 2015 810,000 4.250 4.000 2025 7,390,000 5.000 4.750(2) 2 2016 935,000 5.000 4.060 2026 8,055,000 5.000 4.790( ) 2017 1,080,000 5.000 4.160

(2) Yield to call at par on August 1, 2017.

$14,375,276.45 Capital Appreciation Serial Bonds

Maturity Denominational Accretion Reoffering Maturity (August 1) Amount Rate Yield Value 2027 $2,97 4,315.10 5.510% 5.510% $8,765,000 2028 2,898,827.25 5.540 5.540 9,075,000 2029 2,818,872.00 5.580 5.580 9,400,000 2030 2, 750,721.60 5.600 5.600 9,735,000 2031 2,681,360.50 5.620 5.620 I0,075,000 2032 251,180.00 5.630 5.630 1,000,000 This Official Statement does not constitute an offering of any security other than the original offering of the Bonds of the District. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the District.

The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Certain information set forth herein has been obtained from sources outside the District which are believed to be reliable. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

When used in this Official Statement and in any continuing disclosure by the District in any press release and in any oral statement made with the approval of an authorized officer of the District or any other entity described or referenced in this Official Statement, the words or phrases "will likely result," ''are expected to," ''will continue," ''is anticipated," ''estimate," ''project," ''forecast," ''expect," ''intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

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

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREY AIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. (THIS PAGE INTENTIONALLY LEFT BLANK) ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

Board of Trustees

Earl J Wilson, President Betty Wienke, Vice President Steve Fox, Clerk Jack Seefus, Member Steve Buffalo, Member

District Administration

Jackie Fisher, Superintendent/President Deborah Wallace, Vice President, Business Services

PROFESSIONAL SERVICES

Underwriter

UBS Securities LLC San Francisco, California

Bond Counsel

Stradling Y occa Carlson & Rauth, a Professional Corporation San Francisco, California

Paying Agent, Registrar and Transfer Agent

Treasurer and Tax Collector of Los Angeles County (THIS PAGE INTENTIONALLY LEFT BLANK) TABLE OF CONTENTS PAGE

INTRODUCTION ...... 1

THE DIS1RICT ...... I PURPOSE OF THE BONDS ...... ] AUTHORITY FOR ISSUANCE OF THE BONDS ...... 1 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ...... 2 DESCRIPTION OF THE BONDS ...... 2 TAX MATTERS ...... 3 OFFERING AND DELIVERY OF THE BONDS ...... 3 PAYING AGENT ...... 3 BONDOWNER'S RISKS ...... 3 CONTINUING DISCLOSURE ...... 3 PROFESSIONALS ]NVOL VED IN THE OFFERING ...... 3 OTHER INFORMATION ...... 4 THEBONDS ...... 4

AUTHORITY FOR ISSUANCE ...... 4 SECURITY AND SOURCES OF PAYMENT ...... 5 BOND INSURANCE ...... 5 GENERAL PROVISIONS ...... 8 ANNUAL DEBT SERVICE ...... 10 APPLICATION OF SERIES B BOND PROCEEDS ...... ]] APPLICATION OF SERIES C BOND PROCEEDS ...... ]] INVESTMENT OF BOND PROCEEDS ...... 12 REDEMPTION ...... 12 TRANSFER AND EXCHANGE ...... 14 DEFEASANCE ...... 14 ESTIMATED SOURCES AND USES OF FUNDS ...... 15

SERIES B BONDS ...... 15 SERIES C BONDS ...... 16 LOS ANGELES COUNTY TREASURY POOL ...... 16

THE Los ANGELES COUNTY POOLED SURPLUS INVESTMENTS ...... 16 FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA ...... 18

MAJOR REVENUES ...... 18 TAX SHIFTS AND TRIPLE FLIP ...... 19 BUDGET PROCEDURES ...... 20 ACCOUNTING PRACTICES ...... 20 MINIMUM FUNDING GUARANTEES FOR CALIFORNIA COMMUNITY COLLEGE DISTRICTS UNDER PROPOSITIONS 98 AND ]]J ...... 22 STATE ASSISTANCE ...... 23 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ...... 25

ARTICLEXIIIA OF THE CALIFORNIA CONSTITUTION ...... 25 LEGISLATION IMPLEMENTING ARTICLEXIIIA ...... 26 UNITARY PROPERTY ...... 26 ARTICLEXIIIB OF THE CALIFORNIA CONSTITUTION ...... 27 ARTICLEXIIIC AND ARTICLEXIIID OF THE CALIFORNIA CONSTITUTION ...... 28 PROPOSITIONS 98 AND ] ] ] ...... 28 PROPOSITION 39 ...... 30 PROPOSITION IA ...... 30 KINDERGARTEN-UNIVERSITY PUBLIC EDUCATION FACILITIES BOND ACT OF 2006 ...... 31 FUTURE INITIATIVES ...... 32 TABLE OF CONTENTS (cont'd) PAGE

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT ...... 32

GENERAL ...... 32 ADMINISTRATION ...... 33 ENROLLMENT ...... 34 EMPLOYEE RELATIONS ...... 34 RETIREMENT PROGRAMS ...... 34 OTHER POST EMPLOYMENT BENEFITS ...... 35 INSURANCE ...... 35 DISTRICT TINANCIAL MATTERS ...... 35

DIS1RICTFINANCIAL STATEMENTS ...... 35 ACCOUNTING PRACTICES ...... 35 COMPARATIVE FINANCIAL STATEMENTS ...... 36 AD VALOREMPROPERTY TAXATION ...... 36 PRINCIPAL TAXPAYERS ...... 39 TAX LEVIES, COLLECTIONS AND DELINQUENCIES ...... 39 TEETER PLAN ...... 40 DIS1RICTDEBT STRUCTURE ...... 41 STATEMENT OF DIRECT AND OVERLAPPING DEBT ...... 42 TAX MATTERS ...... 45 LEGAL MATTERS ...... 46

LEGALITY FOR INVESTMENT IN CALIFORNIA ...... 46 CONTINUING DISCLOSURE OF MATERIAL EVENTS ...... 46 No LITIGATION ...... 47 NEW INFORMATION REPORTING REQUIREMENTS ...... 47 LEGAL OPINION ...... 47 MISCELLANEOUS ...... 47

RATINGS ...... 47 UNDERWRITING ...... 48 ADDITIONAL INFORMATION ...... 48

APPENDIX A FORM OF OPINION OF BOND COUNSEL ...... A-] APPENDIXB EXCERPTS FROM THE DIS1RICT'S 2005-06 AUDITED FINANCIAL STATEMENTS ...... B-1 APPENDIXC FORM OF CONTINUING DISCLOSURE CERTIFICATE ...... C-1 APPENDIXD BOOK-ENTRY ONLY SYSTEM ...... D-1 APPENDIXE FORM OF MUNICIPAL BOND INSURANCE POLICY ...... E-1 APPENDIXF ACCRETED VALUE TABLES ...... F-1

11 $52,536,256.40 $56,460,276.45 Antelope Valley Community College District Antelope Valley Community College District (Kern and Los Angeles Counties, California) (Kern and Los Angeles Counties, California) General Obligation Bonds, Election of 2004, Series B General Obligation Bonds, Election of 2004, Series C

INTRODUCTION

This Official Statement, which includes the cover page and appendices hereto, provides information in connection with the sale of Antelope Valley Community College District (Kern and Los Angeles Counties, California) General Obligation Bonds, Election of 2004, Series B (the "Series B Bonds") and the Antelope Valley Community College District (Kem and Los Angeles Counties California) General Obligation Bonds, Election of 2004, Series C (the "Series C Bonds," and together with the Series B Bonds, the "Bonds").

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

The District

The Antelope Valley Community College District (the "District") was established in 1929 and provides higher education in Kern County and a portion of Los Angeles County (the "County"). The Antelope Valley College is situated on a 135-acre campus located in the City of Lancaster, California. The total assessed valuation of the District for fiscal year 2006-07 was $27, 771,243,982.

The District is governed by a five-member Board of Trustees (the "Board of Trustees"), each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between two and three available positions. The District's administrative and financial staff includes a Superintendent/President and Vice President, Business Services. Jackie Fisher is the District Superintendent/President. See "ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT" herein.

Purpose of the Bonds

The proceeds from the sale of the Bonds will be used by the District to finance the acquisition, construction and modernization of certain District property and facilities, as specified in a list submitted to and approved by the voters of the District, and pay certain costs of issuance of the Bonds.

Authority for Issuance of the Bonds

The Series B Bonds are issued pursuant to certain prov1S1ons of the State of California Government Code and pursuant to resolutions adopted by the Board of Trustees of the District.

The Series C Bonds are issued pursuant to certain provisions of the State of California Education Code and pursuant to resolutions adopted by the Board of Trustees of the District and the Board of Supervisors of the County. See "THE BONDS -Authority for Issuance" herein.

1 Security aud Sources of Paymeut for the Bouds

The Bonds are general obligations of the District, payable solely from the proceeds of ad valorem taxes. The Boards of Supervisors of Kern County and the County (together, the "Counties") are empowered and obligated to annually levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount, for the payment of principal of and interest on the Bonds when due (except certain personal property which is taxable at limited rates). See "ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT" and "THE BONDS - Security and Sources of Payment" herein.

Descriptiou of the Bouds

Current Interest and Capital Appreciation Bonds. The Bonds will be issued as current interest bonds (the "Current Interest Bonds") and capital appreciation bonds (the "Capital Appreciation Bonds"). The Current Interest Bonds mature on August I in the years indicated on the inside cover page hereof. The Capital Appreciation Bonds are payable only at maturity and equal to its accreted value upon the maturity thereof (the "Maturity Value"), being composed of its initial principal amount (the "Denominational Amount") and the interest accreting thereon between the delivery date thereof and its respective maturity date.

Form Registration, and Denominations. The Bonds will be issued in fully registered form only, without coupons. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the Bonds. See "THE BONDS - General Provisions" herein and "APPENDIX D - Book-Entry Only System." In the event that the book-entry only system described below is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolutions described herein. Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 Maturity Value, as applicable, or any integral multiple thereof.

Redemption. The Current Interest Bonds maturing on or after August I, 2018 may be redeemed before maturity at the option of the District from any source of funds, on August I, 2017 or any date thereafter as a whole, or in part. The Capital Appreciation Bonds may be redeemed before maturity at the option of the District from any source of funds on August I, 2017 or any date thereafter, as a whole or in part. The Current Interest Term Bonds maturing on August I, 2039 are subject to mandatory sinking fund redemption as described herein. The Capital Appreciation Bonds are not subject to mandatory sinking fund redemption prior to their stated maturity dates. See "THE BONDS - Redemption" herein.

Payments. Interest on the Current Interest Bonds accrues from their initial date of delivery, and is payable semiannually on each February I and August I ( each a "Bond Payment Date"), commencing February I, 2008. Principal on the Current Interest Bonds is payable on August I in the amounts and years as set forth on the inside cover page hereof. Each Capital Appreciation Bonds accretes in value from its initial principal amount on the date of delivery to its Maturity Value on the maturity thereof at the Accretion Rate per annum set forth on the inside cover page hereof, compounded semiannually on February I and August I of each year commencing on February I, 2008 , and is payable only at maturity according to the amounts set forth in the Accreted Value Tables as shown in APPENDIX F. Payments of the principal and Maturity Value of and the interest on the Bonds will be made by the Treasurer and Tax Collector of the County of Los Angeles, the designated paying agent, registrar and transfer agent for the Bonds (the "Paying Agent"), to DTC for subsequent disbursement through DTC Participants (defmed in APPENDIX D) to the Beneficial Owners (defined in APPENDIX D) of the Bonds herein.

2 Bond Insurance. The scheduled payment of principal and Maturity Value of and interest on the Bonds when due will be insured by MBIA Insurance Corporation ("MBIA" or the "Insurer"). See "THE BONDS -Bond Insurance" and "MISCELLANEOUS -Ratings" herein.

Tax Matters

In the opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, San Francisco, California ("Bond Counsel"), based on existing statutes, regulations, rulings and judicial decisions and assuming the accuracy and truthfulness of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See "TAX MATTERS" herein.

Offering and Delivery of the Bonds

The Bonds are offered when, as and if issued, subject to approval as to their legality by Bond Counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through DTC in New York, New York on or about September 13, 2007.

Paying Agent

Paying Agent means the County of Los Angeles Treasurer and Tax Collector (the "Treasurer") and its designated agents or his successors, or assigns, acting in the capacity of paying agent, registrar, authenticating agent and transfer agent. The Treasurer is authorized to contract with any third party to perform the service of Paying Agent.

Bondowner's Risks

The Bonds are general obligations of the District payable from the proceeds of ad valorem taxes which may be levied without limitation as to rate or amount ( except with respect to certain personal property which is taxable at limited rates) on all taxable property in the District. For more complete information regarding the District's financial condition and taxation of property within the District. See "ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT" herein.

Continuing Disclosure

The District has covenanted that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate relating to disclosure of annual financial information and notices of certain material events, which the District will execute concurrently with the issuance of the Bonds. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2- 12(b )(5)(i)(C) promulgated under the Securities Exchange Act of 1934, as amended. See "LEGAL MATTERS - Continuing Disclosure" herein and "APPENDIX C - Form of Continuing Disclosure Certificate."

Professionals Involved in the Offering

Stradling Y occa Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Bond Counsel to the District with respect to the Bonds. Stradling Y occa Carlson & Rauth will receive compensation from the District contingent upon the sale and delivery of the Bonds. Certain legal matters will be passed upon for the Underwriter by Nossaman, Guthner, Knox & Elliot LLP, Irvine, California.

3 Other Information

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

Copies of documents referred to herein and information concerning the Bonds are available from Antelope Valley Community College District, 3041 West Avenue K, Lancaster, California 93536, telephone: (661) 722-6300. The District may impose a charge for copying, mailing and handling.

No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each such documents, statutes and constitutional provisions.

Certain information set forth herein, other than that provided by the District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

THE BONDS

Authority for Issuance

The Series B Bonds are issued pursuant to the provisions of Article 4.5 of Chapter 3 of Part I of Division 2 of Title 5 of the Government Code of the State of California, commencing with Section 53506, as amended, Article XIIIA of the California Constitution and pursuant to a resolution adopted by the Board of Trustees of the District on July 9, 2007 (the "Series B Resolution").

The Series C Bonds are issued pursuant to the provisions of Chapter I. 5 of Part IO of Division I of Title I of the Education Code of the State of California (the "Act"), commencing with Section 15264 as amended, Article XIIIA of the California Constitution and pursuant to resolutions adopted by the Board of Trustees of the District on July 9, 2007 and the Board of Supervisors of the County on August 21, 2007 (collectively the "Series C Resolutions" and, together with the Series B Resolution, the ''Resolutions").

The District received authorization at an election held on November 2, 2004, by more than fifty five percent of the votes cast by eligible voters within the District, to issue not to exceed $139,000,000 of

4 general obligation bonds (the "Authorization"). The Bonds represent the second and third and final series of bonds sold within the Authorization.

Security and Sources of Payment

The Bonds are general obligations of the District, payable solely from the proceeds of ad valorem taxes. The Boards of Supervisors of the Counties are empowered and obligated to levy ad valorem taxes, without limitation as to rate or amount, for the payment of the principal of and interest on the Bonds when due, upon all property subject to taxation by the District ( except certain personal property which is taxable at limited rates). Such taxes, when collected, will be placed in the District's General Obligation Bonds, Election of 2004, Series B Debt Service Fund (as defmed herein) and General Obligation Bonds, Election of 2004, Series C Debt Service Fund (as defined herein), which are segregated and maintained by the County and which are irrevocably pledged for the payment of the Series B Bonds and the Series C Bonds respectively, and interest thereon due. Although the Counties are obligated to levy an ad valorem tax for the payment of the Bonds and the County will maintain the Debt Service Funds pledged to the repayment of the Bonds, the Bonds are not a debt of either county. See "ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT -Ad Valorem Property Taxation" herein for information on the District's tax base.

The amount of the annual ad valorem tax levied by the Counties to repay the 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 Bonds. A reduction in the assessed valuation of taxable property in the District due to economic factors and other factors outside the District's control, such as economic recession, 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 annual tax levy.

Bond Insurance

The following information has been provided by the Insurer for use in this Official Statement. No representation is made by the District or the Underwriter as to the accuracy, completeness or adequacy of such information, or as to the absence of material adverse changes in the condition of the Insurer subsequent to the date hereof, including but not limited to a downgrade in the credit ratings of the Insurer. Reference is made to APPENDIX Efor a specimen ofthe Insurer's policy.

The MBIA Insurance Corporation Insurance Policy. The following information has been furnished by MBIA Insurance Corporation ("MBIA") for use in this Official Statement. Reference is made to APPENDIX E for a specimen ofMBIA's policy (the "Policy").

MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading "THE BONDS - Bond Insurance." Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds.

The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the District to the Paying Agent or its successor of an amount equal to (i) the principal of ( either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid ( except that in the event of any acceleration of the due date of such principal by reason of

5 mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law ( a "Preference").

MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds.

Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor.

MBIA Insurance Corporation. MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA Mexico, S.A. de C.V. ("MBIA Mexico"), through which it intends to write financial guarantee insurance in Mexico beginning in 2007. To date, MBIA Mexico has had no operating activity.

The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273-4545.

Regulation. As a fmancial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and 6 forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates.

The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law.

Financial Strength Ratings of MBIA. Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa."

Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the financial strength of MBIA "AAA."

Fitch Ratings rates the financial strength of MBIA "AAA."

Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency.

The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn.

MBIA Financial Information. As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2007, MBIA had admitted assets of $10.8 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and surplus of $4.0 billion ( unaudited), each as determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities.

For further information concerning MBIA, see the consolidated fmancial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of June 30, 2007 and for the six month periods ended June 30, 2007 and June 30, 2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof.

Copies of the statutory fmancial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at http://www.mbia.com and at no cost, upon request to MBIA at its principal executive offices.

Incorporation of Certain Documents by Reference. The following documents filed by the Company with the Securities and Exchange Commission (the "SEC") are incorporated by reference into this Official Statement:

7 (1) The Company's Annual Report on Form 10-K for the year ended December 31, 2006; and

(2) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.

Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement.

The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the Company's SEC filings (including (1) the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007) are available (i) over the Internet at the SEC's web site at http://www.sec.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA at its principal executive offices.

In the event MBIA were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code.

General Provisions

The 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 certificates representing their interest in the Bonds.

Interest with respect to the Current Interest Bonds accrues from their date of delivery, and is payable semiannually on February 1 and August 1 of each year commencing February 1, 2008. Interest on the Current Interest Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. Each Current Interest Bond shall bear interest from the Bond Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 15th day of the month next preceding any Bond Payment Date to that Bond Payment Date, inclusive, in which event it shall bear interest from such Bond Payment Date, or unless it is authenticated on or before January 15, 2008, in which event it shall bear interest from its date of delivery. The Current Interest Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The Current Interest Bonds mature on August 1, in the years and amounts set forth on the inside cover page hereof.

The Capital Appreciation Bonds are payable only at maturity, and will not pay interest on a current basis. The Capital Appreciation Bonds accrete in value from the Date of Delivery at the accretion rates per annum set forth on the inside cover hereof, compounded semiannually on February 1 and August 1 of each year commencing on February 1, 2008. The Maturity Value of a Capital Appreciation Bond is its Accreted Value at its maturity date ("Maturity Value"). Interest with respect to each Capital

8 Appreciation Bond is represented by the amount each Capital Appreciation Bond accretes in value from its initial principal amount on the Date of Delivery (the "Denominational Amount") to the date for which Accreted Value is calculated. The Accreted Value (the "Accreted Value") of a Capital Appreciation Bond is calculated by discounting on a 30-day month, 360-day year basis its Maturity Value on the basis of a constant interest rate (the "Accretion Rate") compounded semiannually on February I and August I, of each year to the date for which an Accreted Value is calculated, and if the date for which Accreted Value is calculated is between February I and August I, by pro-rating the Accreted Values to the closest prior or subsequent February I and August I. See the maturity schedule on the inside cover page hereof and "APPENDIX F -ACCRETED VALUE TABLES."

The principal of the Current Interest Bonds and the Maturity Value of the Capital Appreciation Bonds shall be payable in lawful money of the United States of America to the registered owner thereof, upon the surrender thereof at the principal corporate trust office of the Paying Agent. The interest on the Bonds shall be payable in lawful money of the United States of America to the person whose name appears on the bond registration books of the Paying Agent as the registered owner thereof as of the close of business on the 15th day of the month next preceding any Bond Payment Date (a "Record Date"), whether or not such day is a business day, such interest to be paid by check or draft mailed on such Bond Payment Date to such registered owner at such registered owner's address as it appears on such registration books or at such address as the registered owner may have filed with the Paying Agent for that purpose. The interest payments on the Bonds shall be made in immediately available funds ( e.g., by wire transfer) to any registered owner of at least $1,000,000 of outstanding Bonds who shall have requested in writing such method of payment of interest on the Bonds prior to the close of business on the Record Date immediately preceding any Bond Payment Date.

9 Annnal Debt Service

The following table summarizes the annual debt service requirements of the District for the Bonds, assuming no optional redemptions are made:

Series B Bonds Series C Bonds Current Interest Bonds Ca2ital AQQ!eciation Bonds Current Interest Bonds CaQital Am:1reciation Bonds Annual Annual Annual Annual Annual Accreted Annual Annual Annual Accreted Total Annual Period Ending Principal Interest Principal Interest Series B Principal Interest Principal Interest Series C Debt Service 1 1 August 1 Payment Paymenf J Paymenfl Paymenfl Bonds Total Payment Paymenf J Paymenf2J Paymenfl Bonds Total on the Bonds 2008 $1,869,144.38 $1,869,144.38 $570,000.00 $1,843,483.54 $2,413,483.54 $4,282,627.92 2009 2,116,012.50 2,116,012.50 150,000.00 2,064,162.50 2,214,162.50 4,330,175.00 2010 2,116,012.50 2,116,012.50 250,000.00 2,058,162.50 2,308,162.50 4,424,175.00 2011 2,116,012.50 2,116,012.50 345,000.00 2,048,162.50 2,393,162.50 4,509,175.00 2012 2,116,012.50 2,116,012.50 455,000.00 2,033,931.26 2,488,931.26 4,604,943.76 2013 2,116,012.50 2,116,012.50 565,000.00 2,015,162.50 2,580,162.50 4,696,175.00 2014 2,116,012.50 2,116,012.50 680,000.00 1,991,150.00 2,671,150.00 4,787 ,162.50 2015 2,116,012.50 2,116,012.50 810,000.00 1,962,250.00 2,772,250.00 4,888,262.50 2016 2,116,012.50 2,116,012.50 935,000.00 1,927,825.00 2,862,825.00 4,978,837.50 2017 2,116,012.50 2,ll6,012.50 1,080,000.00 1,881,075.00 2,961,075.00 5,077,087.50 2018 2,116,012.50 2,ll6,012.50 1,230,000.00 1,827 ,07 5 .00 3,057,075.00 5,173,087.50 2019 2,116,012.50 2,ll6,012.50 1,390,000.00 1,762,500.00 3,152,500.00 5,268,512.50 2020 2,116,012.50 2,ll6,012.50 1,565 ,000.00 1,689,525.00 3;254,525.00 5,370,537.50 2021 2,116,012.50 2,ll6,012.50 1,745,000.00 1,607,362.50 3,352,362.50 5,468,375.00 2022 2,116,012.50 2,ll6,012.50 1,935 ,000.00 1,515,750.00 3,450,750.00 5,566,762.50 2023 2,116,012.50 2,ll6,012.50 6,175,000.00 1,419,000.00 7,.594,000.00 9,710,012.50 2024 2,116,012.50 2,ll6,012.50 6,760,000.00 1,110,250.00 7 ,870,250.00 9,986,262.50 2025 2,116,012.50 2,116,012.50 7 ,390,000.00 772;250.00 8,162,250.00 10;278,262.50 2026 2,116,012.50 2,116,012.50 8,055,000.00 402,750.00 8,457 ,7 50.00 10,.573,762.50 2027 2,116,012.50 2,116,012.50 $2,974,315.10 $5,790,684.90 8,765,000.00 10,881,012.50 2028 2,116,012.50 2,116,012.50 2,898,827.25 6,176,172.75 9,075,000.00 11,191,012.50 2029 2,116,012.50 2,116,012.50 2,818,872.00 6,581,128.00 9,400,000.00 11,.516,012.50 2030 2,116,012.50 2,116,012.50 2,750,721.60 6,984,278.40 9,735,000.00 11,851,012.50 2031 2,116,012.50 2,116,012.50 2,681,360.50 7,393,639.50 10,075,000.00 12,191,012.50 2032 2,116,012.50 $2,367 ,371.50 $7 ,057 ,628.50 ll,541,012.50 251,180.00 748,820.00 1,000,000.00 12,541,012.50 2033 2,116,012.50 2,.557,337.90 8,232,662.10 12,906,012.50 12,906,012.50 2034 2,116,012.50 2,496,605.65 8,668,394.35 13,281,012.50 13;281,012.50 2035 2,116,012.50 2,434,955.95 9,ll0,044.05 13,661,012.50 13,661,012.50 2036 2,116,012.50 2,374,985.40 9,565,014.60 14,056,012.50 14,056,012.50 2037 $12,345,000.00 2,116,012.50 14,461,012.50 14,461,012.50 2038 13,415,000.00 1,467 ,900.00 14,882,900.00 14,882,900.00 2039 14 545 000.00 763 612.50 15 308 612.50 15 308 612.50

Totals $40 305 000.00 $65 465 019.38 $12J31 256.40 $42 633 743.60 $160 635 019.38 $42 085 000.00 $31 931 827.30 $14375 276.45 $33 674 723.55 $122 066 827.30 $282 701 846.68

(]) Interest payments on the Current Interest Bonds will be made semiannually on February 1 and August 1 of each year, conunencing February 1, 2008. (2) The Capital Appreciation Bonds are payable only at maturity on August 1 of the years indicated on the inside cover hereof, and interest on such Capital Appreciation Bonds is compollllded semiannually on February 1 and August 1, conunencing on February 1, 2008.

10 Application of Series B Bond Proceeds

The proceeds from the sale of the Series B Bonds will be used to finance the acqms1bon, construction and modernization of certain District property and facilities, as approved by the voters of the District, at an election held on November 2, 2004 and pay certain costs of issuance of the Series B Bonds.

A portion of the proceeds from the sale of the Series B Bonds shall be paid to the County to the credit of the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series B Building Fund" (the "Series B Building Fund"). The accrued interest and any premium received by the County from the sale of the Series B Bonds shall be kept separate and apart in the fund created and established and to be designated as the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series B Debt Service Fund" (the " Series B Debt Service Fund") for the Series B Bonds and used only for payment of principal or Maturity Value of and interest on the Series B Bonds. Any excess proceeds of the Series B Bonds not needed for the authorized purposes for which the Series B Bonds are being issued shall be transferred to the Series B Debt Service Fund and applied to the payment of principal or Maturity Value of and interest on the Series B Bonds. If, after payment in full of the Series B Bonds, there remain excess amounts, any such excess amounts shall be transferred to the general fund of the District. Amounts which the District determines are required to be rebated to the federal government pursuant to the tax certificate executed by the District in connection with the sale and issuance of the Bonds will be deposited in a special fund designated the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series B Rebate Fund" (the "Series B Rebate Fund") established under the Resolutions.

Application of Series C Bond Proceeds

The proceeds from the sale of the Series C Bonds will be used to finance the acqms1bon, construction, modernization, and renovation of certain District property and facilities, as approved by the voters of the District, at an election held on November 2, 2004 and pay certain costs of issuance of the Series C Bonds.

A portion of the proceeds from the sale of the Series C Bonds shall be paid to the County to the credit of the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series C Building Fund" (the "Series C Building Fund"). The accrued interest and any premium received by the County from the sale of the Series C Bonds shall be kept separate and apart in the fund created and established and to be designated as the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series C Debt Service Fund" (the " Series C Debt Service Fund") for the Series C Bonds and used only for payment of principal or Maturity Value of and interest on the Series C Bonds. Any excess proceeds of the Series C Bonds not needed for the authorized purposes for which the Series C Bonds are being issued shall be transferred to the Series C Debt Service Fund and applied to the payment of principal of and interest or Maturity Value of and interest on the Series C Bonds. If, after payment in full of the Series C Bonds, there remain excess amounts, any such excess amounts shall be transferred to the general fund of the District. Amounts which the District determines are required to be rebated to the federal government pursuant to the tax certificate executed by the District in connection with the sale and issuance of the Bonds will be deposited in a special fund designated the "Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series C Rebate Fund" (the "Series C Rebate Fund") established under the Resolutions.

11 Investment of Bond Proceeds

Moneys in the Series B Building Fund and the Series C Building Fund may be invested in any one or more investments generally permitted to community college districts under the laws of the State of California or as permitted by the Resolutions, including guaranteed investment contracts. Moneys in the Series B Building Fund, the Series C Building Fund, the Series B Debt Service Fund, and the Series C Debt Service Fund are expected to be invested through the Los Angeles County Investment Pool (the "Investment Pool"). See "LOS ANGELES COUNTY INVESTMENT POOL" herein.

Neither the District nor the Underwriter has made an independent investigation of the investments in the Los Angeles County Investment Pool and has made no assessment of the current County Investment Policy. The value of the various investments in the Investment Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the County Board of Supervisors may change the County Investment Policy at any time. Therefore, there can be no assurance that the values of the various investments in the Investment Pool will not vary significantly from the values described herein.

Redemption

Optional Redemption. The Current Interest Bonds maturing on or before August I, 2017 are not subject to redemption prior to their fixed maturity dates. The Current Interest Bonds maturing on or after August I, 2018 are subject to redemption on or after August I, 2017 at the option of the District as a whole or in part on any date, at a redemption price equal to 100% of the Principal Amount of the Current Interest Bonds called for redemption plus interest accrued thereon to the date fixed for redemption, without premium.

The Capital Appreciation Bonds are subject to redemption on or after August I, 2017 at the option of the District as a whole or in part on any date, at a redemption price equal to I 00% of the Accreted Value as of the date fixed for redemption of the Capital Appreciation Bonds called for redemption, without premium.

Mandatory Sinking Fund Redemption. The Current Interest Term Bonds maturing on August I, 2039 are subject to redemption prior to maturity from mandatory sinking fund payments on August I of each year, on and after August I, 2037, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. The principal amount represented by such Bonds to be so redeemed and the dates therefor and the final principal payment date is as indicated in the following table:

Redemption Date Principal Amount (August I) 2037 $12,345,000 2038 13,415,000 2039(l) 14 545 000 Total $40,305,000

1 < l Final Maturity.

Selection of Bonds for Redemption. Whenever provision is made for the redemption of either the Bonds and less than all of the Bonds are to be redeemed, the Paying Agent, upon written instruction from the District, shall select the Bonds for redemption as so directed and if not directed, in inverse order

12 of maturity. Within a maturity, the Paying Agent shall select Bonds for redemption by lot. Redemption by lot shall be in such manner as the Paying Agent shall determine; provided, however, that the portion of any Bond to be redeemed in part shall be in the principal amount or Maturity Value, as applicable, of $5,000 or any integral multiple thereof.

Notice of Redemption. Notice of any redemption of Bonds will be mailed, postage-prepaid, not less than thirty nor more than forty-five days prior to the redemption date (i) to the respective registered owners thereof at the addresses appearing on the bond registration books, (ii) to the Securities Depositories described below, and (iii) to one or more of the Information Services described below. Notice of redemption to the Securities Depositories and the Information Services will be given by registered mail, facsimile transmission or overnight delivery service. Each notice of redemption will specify (a) the Bonds or designated portions thereof ( in the case of redemption of the Bonds in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, ( d) the redemption price, (e) the CUSIP numbers (if any) assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate and stated maturity date of each Bond to be redeemed in whole or in part.

"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Moody's Municipal and Govermnent, 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attention: Called Bond Department; and Standard and Poor's J.J. Kenny Information Services' "Called Bond Record," 55 Water Street, 45th Floor, New York, New York 10041.

"Securities Depositories" shall mean The Depository Trust Company, 55 Water Street, New York, New York 10041, Fax (212) 855-7320.

The actual receipt by the Owner of any Bond or of any Information Service or Securities Depository of notice of such redemption shall not be a condition precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds or the cessation of interest on the date fixed for redemption.

The notice or notices required for redemption will be given by the Paying Agent or its designee. A certificate by the Paying Agent that notice of call and redemption has been given to owners of Bonds and to the appropriate Securities Depositories and Information Services shall be conclusive as against all parties, and no Bondowner whose Bond is called for redemption may object thereto or object to the cessation of interest on the fixed redemption date by any claim or showing that said Bondowner failed to actually receive such notice of call and redemption.

Payment of Redeemed Bonds. When notice of redemption has been given substantially as described above, and, when the amount necessary for the redemption of the Bonds called for redemption (principal, interest, and premium, if any) is set aside for that purpose in the respective Series B Debt Service Fund or Series C Debt Service Fund, as described below, the Bonds designated for redemption in such notice will become due and payable on the date fixed for redemption thereof and upon presentation and surrender of said Bonds at the place specified in the notice of redemption with the form of assignment endorsed thereon, said Bonds will be redeemed and paid at the redemption price out of the Series B Debt Service Fund or Series C Debt Service Fund, as applicable.

Partial Redemption of Bonds. Upon the surrender of any Bond redeemed in part only, the Paying Agent will execute and deliver to the Owner thereof a new Bond or Bonds of like tenor and

13 maturity and of authorized denominations equal in principal amount to the unredeemed portion of the Bond surrendered. Such partial redemption is valid upon payment of the amount required to be paid to such Owner, and the District will be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption. If on the applicable designated redemption date, money for the redemption of the Bonds to be redeemed, together with interest to such redemption date, is held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof will have been given substantially as described above, then from and after such redemption date, interest with respect to the Bonds to be redeemed shall cease to accrue and become payable.

Bonds No Longer Outstanding. When any Bonds ( or portions thereof), which have been duly called for redemption prior to maturity, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, in form satisfactory to it, and sufficient moneys shall be held by the Paying Agent irrevocably in trust for the payment of the redemption price of such Bonds or portions thereof, and, in the case of Current Interest Bonds, accrued interest with respect thereto to the date fixed for redemption, then such Bonds will no longer be deemed Outstanding and shall be surrendered to the Paying Agent for cancellation.

Transfer and Exchange

Any Bonds may be exchanged for Bonds of any authorized denomination upon presentation and surrender at the office of the Paying Agent, initially located in Los Angeles, California, together with a request for exchange signed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred only on the Bond registration books upon presentation and surrender of the Bond at such office of the Paying Agent together with an assignment executed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of any authorized denomination or denominations requested by the owner equal in the aggregate to the umnatured principal amount or Maturity Value as applicable, of the Bond surrendered and bearing or accreting interest at the same rate and maturing on the same date.

Neither the District, the County nor the Paying Agent will be required to exchange or transfer any Bond during the period from the 15th day of the month preceding each Bond Payment Date to such Bond Payment Date or from the sixteenth day next preceding a date for which such Bond has been selected for redemption in whole or in part.

Defeasance

All or any portion of the outstanding maturities of the Bonds may be defeased prior to maturity in the following ways:

(a) Cash: By irrevocably depositing with the County or with an independent escrow agent selected by the District, and satisfactory to the County, an amount of cash which together with amounts then on deposit in the Series B Debt Service Fund or Series C Debt Service Fund, as applicable, is sufficient to pay all Bonds outstanding and designated for defeasance, including all principal, Maturity Value and interest and premium, if any; or

(b) Government Obligations: By irrevocably depositing with the County or with an independent escrow agent selected by the District, and satisfactory to the County, noncallable Government Obligations together with cash, if required, in such amount as will, in the opinion of

14 an independent certified public accountant, satisfactory to the County, together with interest to accrue thereon and moneys then on deposit in the Series B Debt Service Fund or the Series C Debt Service Fund, as applicable, together with the interest to accrue thereon, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance (including all principal, Maturity Value, and interest represented thereby and prepayment premiums, if any) at or before their maturity date; then, notwithstanding that any Bonds shall not have been surrendered for payment, all obligations of the District and the Paying Agent with respect to all outstanding Bonds shall cease and terminate, except only the obligation of the Paying Agent to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the owners of the Bonds not so surrendered and paid all sums due with respect thereto.

"Government Obligations" means direct and general obligations of the United States of America (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips), or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, or "prerefunded" municipal obligations rated in the highest rating category by Moody's or Standard & Poor's. In the case of direct and general obligations of the United States of America, Goverrunent Obligations shall include evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and ( c) the underlying United States obligations are held in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed "Aaa" by Moody's or "AAA" by Standard & Poor's.

ESTIMATED SOURCES AND USES OF FUNDS

Series B Bonds

The proceeds of the Series B Bonds are expected to be applied as follows:

Sources of Funds

Principal Amount $52,536,256.40 Original Issue Premium 1,092,265.50 Total Sources $53,628,521.90

Uses of Funds

Series B Building Fund $52,536,256.40 Series B Debt Service Fund 304,616.80 1 Costs oflssuance < l 787 648.70 Total Uses $53,628,521.90

Cl) All costs of issuance including the bond insurance premium and Underwriter's discount.

15 Series C Bonds

The proceeds of the Series C Bonds are expected to be applied as follows:

Sources of Funds

Principal Amount $56,460,276.45 Original Issue Premium I 203 983.05 Total Sources $57,664,259.50

Uses of Funds

Series C Building Fund $56,460,276.45 Series C Debt Service Fund 427,206.01 1 Costs oflssuance < l 776 777.04 Total Uses $57,664,259.50

Cl) All costs of issuance including the bond insurance premium and Underwriter's discollllt.

LOS ANGELES COUNTY TREASURY POOL

The following information has been provided by the Treasurer of the County, and the District takes no responsibility for the accuracy or completeness thereof Further information may be obtained from the County Treasurer.

The Los Angeles County Pooled Surplus Investments

The Treasurer and Tax Collector of Los Angeles County has the delegated authority to invest funds on deposit in the County Treasury (the "Treasury Pool"). As of July 31, 2007, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts:

Invested Funds Local Agency (in billions)

County of Los Angeles and Special Districts $6.397 Schools and Community Colleges 8.845 Independent Public Agencies 1.617 Total $16.859 Of these entities, the involuntary participants accounted for approximately 90 .41 %, and all discretionary participants accounted for 9.59% of the total Treasury Pool.

Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer's prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 ( commencing with Section 53600) of Part I of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on April 10, 2007, reaffirmed the following criteria and order of priority for selecting investments: 16 1. Safety of Principal 2. Liquidity 3. Return on Investment

The Treasurer prepares a monthly Report of Investments (the Investment Report) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to the Investment Report dated August 24, 2007, the July 31, 2007 book value of the Treasury Pool was approximately $16.859 billion and the corresponding market value was approximately $16.842 billion.

An internal controls system for monitoring cash accounting and investment practices is in place. The County Treasurer's Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor's staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. The County Auditor-Controller's Office performs similar cash and investment reconciliation on a quarterly basis and regularly reviews investment transactions for conformance with the approved policies. Additionally, the County's outside independent auditor annually accounts for all investments.

The Treasury Pool is highly liquid. As of July 31, 2007, approximately 45.00% of the pool investments mature within 60 days, with an average of 547.92 days to maturity for the entire portfolio. The following table identifies the types of securities held by the Pool as of July 31, 2007.

Type oflnvestment % of Pool

U.S. Government and Agency Obligations 49.59% Certificates of Deposit 17.62 Commercial Paper 29.26 Bankers Acceptances 0.00 Municipal Obligations 0.18 Corporate Notes & Deposit Notes 3.29 Asset Backed Instruments 0.00 Repurchase Agreements 0.00 Other 0.06 Total 100.00%

Pursuant to Section 27131 of the Government Code, all counties investing surplus funds are encouraged to establish a County Treasury Oversight Committee. On January 16, 1996, the Board of Supervisors approved the establishment of the County Treasury Oversight Committee and subsequently confinned the five Committee members nominated by the Treasurer in accordance with that Section. The Committee meets quarterly to review and monitor for compliance the investment policies prepared by the Treasurer.

17 FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA

The information in this section concerning the funding of community college districts in the State of California 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 Bonds is payable from the General Fund of the District. The Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof See "THE BONDS - Security and Sources of Payment."

Major Revennes

General California community college districts ( other than Basic Aid Districts, as described below) receive, on average, approximately 52 percent of their funds from the State, 44 percent from local sources, and 4 percent from federal sources. State funds include general apportiomuent, categorical funds, capital construction, the lottery (which is less than 3 percent), and other minor sources. Local funds include property taxes, student fees, and miscellaneous sources.

In the past, a community college district determined its revenue allocation using a program-based model. The model used different factors to establish support levels for five different categories at the community college district: (1) Instruction and Instructional Administration: (2) Instructional Services, (3) Student Services; (4) Operation and Maintenance of Plants, and (5) Institutional Support. Different standards were used in each category to determine funding requirements. The target allocation was obtained by calculating the exact cost of funding the specific standards in each category, on a district by district basis. The aggregate total of the fmancial needs of the five categories established the amount of funding a district received. State general fund moneys, local property taxes, and certain other local revenues were allocated to the community college districts based on annual State apportiomuents of basic and equalization aid to community college districts for general purposes computed up to a base revenue per unit of full time equivalent students ("FTES"). Such apportionments, generally speaking, amounted to the difference between a district's base revenue and its local property tax allocation and student enrollment fees. Base revenue calculations were adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among all community college districts in the State.

A bill recently passed the State's legislature ("SB 361"), and signed by the Governor on September 29, 2006, establishes a new community college funding system with immediate effect. The new system includes allocation of state general apportiomuent revenues to community college districts based on criteria developed by the Board of Governors of the California Community Colleges (the "Board of Governors") in accordance with prescribed statewide minimum requirements. In establishing these minimum requirements, the Board of Governors will be required to acknowledge community college districts' need to receive an annual allocation based on the number of colleges and comprehensive centers in each respective district, plus funding received based on the number of credit and noncredit FTES in each district.

SB 361 also specifies that, commencing with the 2006-07 fiscal year the minimum funding per FTES will be: (a) not less than $4,367 per credit FTES (subject to cost of living adjustments funded through the budget act in subsequent fiscal years); (b) at a uniform rate of $2,626 per noncredit FTES ( adjusted for the change in cost of living provided in the budget act in subsequent fiscal years); and ( c) set at $3,092 per FTES (adjusted for the change in cost of living provided in the budget act in subsequent fiscal years) for a new instructional category of "career development and college preparation." Pursuant to SB 361, the Chancellor of the California Community Colleges (the "Chancellor") will develop criteria

18 for one-time grants for districts that would have received more funding under the prior system or a proposed rural college access grant, than under the new system and the Budget Act of 2006.

The District's base revenue, excluding adjustment for cost of living, per credit unit of FTES for fiscal years 2003-04, 2004-05, and 2005-06 were approximately $3,391, $3,456 and $3,866, respectively, and per non-credit unit of FTES for the same fiscal years were, excluding maintenance and operations appropriations, on average, approximately $1,834, $1,879 and $1,958, respectively. The District estimates, on average, that its respective base revenue, excluding adjustment for cost of living, per credit unit of FTES for fiscal year 2006-07 will be $4, 123 and per non-credit unit of FTES will be, excluding maintenance and operations appropriations, $2,4 79.

Local revenues are first used to satisfy District expenditures. The major local revenue source is local property taxes that are collected from within District boundaries. Student enrollment fees from the local community college district generally account for the remainder of local revenues for the District. Property taxes and student enrolhnent fees are applied towards fulfilling the District's fmancial need. Once these sources are exhausted, State funds are used. State aid is subject to the appropriation of funds in the State's annual budget. Decreases in State revenues may affect appropriations made by the legislature to the District. The sum of the property taxes, student enrolhnent fees, and State aid generally comprise the District's revenue limit.

"Basic Aid" community college districts are those districts whose local property tax and student enrollment fee collections exceed the revenue allocation determined by the program-based model. Basic Aid districts do not receive any funds from the State. The current law in California allows these districts to keep the excess funds without penalty. The implication for Basic Aid Districts is that the legislatively determined annual cost of living adjustment and other politically determined factors are less significant in determining such districts' primary funding sources. Rather, property tax growth and the local economy become the determinant factors. The District is not a Basic Aid District.

A small part of a community college district's budget is from local sources other than property taxes and student enrollment fees, such as interest income, donations and sales of property. Every community college district receives the same amount of lottery funds per pupil from the State, however, these are not categorical funds as they are not for particular programs or students. The initiative authorizing the lottery does require the funds to be used for instructional purposes, and prohibits their use for capital purposes.

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, including community college districts. 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 Education Revenue Augmentation Fund ("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 is redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation 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 19 property taxes would terminate once the deficit financing bonds are repaid, which is currently expected to occur in approximately 9 to 13 years.

Budget Procedures

On or before September 15, the Board of Trustees of the District is required under Section 58305 of the California Code of Regulations, Title V, to adopt a balanced budget. Each September, every State agency, including the Chancellor's Office of the California Community Colleges, submits to the Department of Finance ("DOF") proposals for changes in the State budget. These proposals are submitted in the form of Budget Change Proposals ("BCPs "), involving analyses of needs, proposed solutions and expected outcomes. Thereafter, the DOF makes recommendations to the governor, and by January 10 a proposed State budget is presented by the governor to the legislature. The Governor's Budget is then analyzed and discussed in committees and hearings begin in the State Assembly and Senate. In May, based on the debate, analysis and changes in the economic forecasts, the governor issues a revised budget with changes he or she can support. The law requires the legislature to submit its approved budget by June 15, and by June 30 the governor should announce his or her line item reductions and sign the State budget. In response to growing concern for accountability and with enabling legislation (AB 2910, Chapter 1486, Statutes of 1986), the statewide governing board of the California community colleges (the "Board of Governors") and the Chancellor's Office have established expectations for sound district fiscal management and a process for monitoring and evaluating the financial condition to ensure the financial health of California's community college districts. In accordance with statutory and regulatory provisions, the Chancellor has been given the responsibility to identify districts at risk and, when necessary, the authority to intervene to bring about improvement in their financial condition. To stabilize a district's financial condition, the Chancellor may, as a last resort, seek an appropriation for an emergency apportionment. Since the enactment of such enabling legislation (AB 2910, Chapter 1486, Statutes of 1986), no community college district in the State has sought an appropriation for an emergency apportionment.

The monitoring and evaluation process is designed to provide early detection and amelioration that will stabilize the financial condition of a district before an emergency apportionment is necessary. This is accomplished by (I) assessing the financial condition of districts through the use of various information sources and (2) taking appropriate and timely follow-up action to bring about improvement in a district's financial condition, as needed. A variety of instruments and sources of information are used to provide a composite of each district's financial condition, including quarterly financial status reports, annual financial and budget reports, attendance reports, annual district audit reports, district input and other financial records. In assessing each district's financial condition, the Chancellor will pay special attention to each district's general fund balance, spending pattern, and full-time equivalent student patterns. Those districts with greater financial difficulty will receive follow-up visits from the Chancellor's Office where financial solutions to the district's problems will be addressed and implemented.

Accounting Practices

The accounting policies of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California Community College Budget and Accounting Manual. This manual, according to Section 84030 of the California Education Code, is to be followed by all California community college districts. The Governmental Accounting Standards Board ("GASB") has released (i) Statement No. 34, which makes changes in the annual financial statements for all governmental agencies in the United States, especially in recording of fixed assets and their depreciation, and in the way the report itself is formatted, and (ii) Statement No. 35, which makes changes in the required content and format of annual financial statements for public colleges and universities. These 20 requirements became effective on June 15, 2002 for the District. Revenues are recognized in the period in which they become both measurable and available to finance expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is incurred.

The following table shows the District's adopted general fund budgets for fiscal years 2004-05, 2005-06, and 2006-07, the District's actual general fund revenues, expenditures and fund balances for fiscal years 2004-05 and 2005-06 and estimated results for fiscal year 2006-07. For further information, see also "APPENDIX B -Excerpts from the District's 2005-06 Audited Financial Statements."

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Comparison of General Fund Budgets for Fiscal Years 2004-05 through 2006-07, Audited Results for Fiscal Years 2004-05 and 2005-06 and Estimated Actuals for Fiscal Year 2006-07

Adopted Audited Adopted Audited Adopted Estimated Budget Actuals Budget Actuals Budget Actuals 2004-05 2004-05 2005-06 2005-06 2006-07 2006-0JC 1l REVENUES: Federal Revenues $).371.887 $).758.216 $1.272.832 $).326.293 $1.914.250 $).740.785 Other State Revenues 27.078.143 33.904.379 37.924.888 38.261.459 44.662.932 48.013.880 Other Local Revenues 17 592168 11 466 329 12 657 471 11170863 10 745 989 9 023 142 TOT AL REVENUES 46.042.197 47.128.924 51.855.191 50.758.615 57.323.170 58.777.807

EXPENDITURES: Certificated Salaries 21.241.664 21.472.388 23.362.852 24.321.690 27.049.163 26.549.763 Classified Salaries 8.890.173 8.419.615 9.242.917 9.283.331 10.740.744 10.892.024 Employee Benefits 8.775.056 8.779.533 9.147.203 9.390.790 10.267.108 10.448.893 Books and Supplies 2.284.500 2.542.741 2.364.500 2.156.603 2.015.000 3.094.720 Services and Operating 3.922.000 4.490.024 4.719.000 4.965.829 4.561.000 5.071.014 Expenses Other Outgo 400.000 696.920 Capital Outlay 505.000 813.677 505.000 1.499.775 505.000 1.367.208 Debt Service 209 081 209 081 209 081 TOT AL EXPENDITURES 46.018.393 46.727.059 50.038.392 51.827.099 55.138.015 57.632.703

Excess of Revenues Over/ (Under) Expenditures (Uses): 23.804 401.865 1.816.799 (1.068.484) 2.185.155 1.145.104

Other Financing Sources (Uses): Operating Transfers In 213.907 200.000 Operating Transfers Out (988.701) (143.450) (145.000) Other Sources Other Uses (400,000) (51,488) (696,920) (42,297) (696,920) (43,000) Total Other Financing Sources (Uses) (400.000) (1.040.189) (696.920) 28.160 (696.920) 12.000

Excess of Revenues and Other Financing Sources Over/(Under) Expenses and Other Uses (376.196) (638.324) 1.119.879 (1.040.324) 1.488.235 1.157.104

FUND BALANCE. BEGINNING OF YEAR 5.047.414 4.932.725 4.294.401 4.294.400 3.254.076 3.254.076 Prior Period Adjustment FUND BALANCE. END OF YEAR $4 671 218 $4 294 401 $5 414 280 $3 254 076 $4 742 311 $4 411 180

co Estimated as of Jlllle 30, 2007. Source: The District.

21 Minim nm Fnnding Gnarantees for California Commnnity College Districts Under Propositions 98 and 111

General In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual K-14 funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition 111 (Senate Constitutional Amendment 1), adopted in June 1990, among other things, changed some earlier school funding provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding "test" to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the annual cost of living adjustment ("COLA") for the minimum guarantee for annual K-14 funding would be the change in California's per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIIIB).

Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level ofK-14 funding. Under implementing legislation for Proposition 98 (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is 1989-90. Each year, each segment is entitled to the greater of the amounts separately computed for each under Test 1 or 2. Should the calculated amount Proposition 98 guarantee (K-14 aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with 1992-93. In those years, community colleges received less than was required from the statutory split.

Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in 1986-87. Initially, that share was just over 40 percent. Because of the major shifts of property tax from local govermnent to community colleges and K-12 which began in 1992-93 and increased in 1993-94, the percentage dropped to 33.0%.

Test 2 provides that K-14 education will receive as a minimum, its prior-year total funding (including State general fund and local revenues) adjusted for enrolhnent growth (ADA) and per-capita personal income COLA.

A third formula, established pursuant to Proposition 111 as "Test 3," provides an alternative calculation of the funding base in years in which State per-capita General Fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrolhnent and COLA where the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to one half of one percent of the prior-year funding level as a funding supplement.

In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 formula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income.

22 The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 98, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the annual growth rate in non-Proposition 98 per-capita appropriations exceeds the annual growth rate in per pupil total spending.

State Assistance

California community college districts' princzpal funding formulas and revenue sources are derived from the budget of the State of California. The following information concerning the State of California's budgets has been obtained from publicly available information which the District believes to be reliable; however, neither the District nor the Underwriters take any responsibility as to the accuracy or completeness thereof and has not independently verified such information.

2006-2007 Budget. The 2006-07 Budget Act was signed by the Governor on June 30, 2006 (the "2006-07 Budget"). The following information is adapted from the Legislative Analyst's budget analysis. The 2006-07 Budget assumes revenues in 2006-07 of $94.4 billion and expenditures of $101.3 billion. Proposition 98 K-14 education funding in the 2006-07 Budget increases to $55.1 billion, an increase of 10.3 percent over the revised fiscal year 2005-06 spending level.

The 2006-07 Budget provides total Higher Education funding of $10.8 billion from the State General Fund, an increase of about $931 million ( or 9.4%) over 2005-06 levels. The budget provides the California Community Colleges ("CCC") with $4.1 billion in General Fund support for 2006-07, which is $388 million, or 10.4 percent, above the revised 2005-06 level. In addition, the budget provides CCC with another $305 million in one-time funds that, for Proposition 98 purposes, will count toward prior fiscal years. Total Proposition 98 support for CCC in 2006-07 is $5.9 billion.

Significant features of the 2006-07 Budget for community colleges include:

• Enrollment Increases. The 2006-07 Budget provides CCC with $97.5 million to fund enrolhnent growth of 2 percent, or 22,688 FTE students. However, because community college enrolhnent has been declining, CCC has a similar number of unfilled, funded "slots" that also will be available for enrolling additional students in 2006-07. Thus, as a practical matter, CCC funding will grow by slightly more than 4 percent in 2006-07.

• Student Fees. The budget reduces student fees at CCC from $26 per unit to $20 per unit. effective in spring 2007. The budget provides $40 million to backfill this foregone fee revenue.

• Nursing Initiative. The 2006-07 Budget includes $10.5 million for various higher education nursing initiatives. These include $5.5 million for student services and faculty recruitment and retention at CCC. In addition, the budget authorizes 40 loan forgiveness warrants for nursing graduates who work in State facilities, such as prisons and developmental centers, contingent upon the enactment oflegislation.

• Additional Features. The 2006-07 Budget for CCC also includes:

Y $159 million for equalization. This funding is intended to fully achieve the State's equalization goal for CCC, contingent upon enactment of legislation specifying the allocation of this funding;

Y $100 million in one-time funding for general purpose block grants to districts;

23 Y $94.1 million in one-time funding for facilities maintenance and equipment.;

Y $40 million in one-time funding for career teclmical education equipment and facility upgrades; and

Y $30 million to increase the funding rate for selected noncredit enrollment, contingent upon enactment of legislation authorizing these rate enhancements.

2007-08 Budget. The 2007-08 Budget Act (the "2007-08 Budget") was signed by the Governor on August 24, 2007. The following information is adapted from the California Department of Finance's summary of the 2007-08 Budget.

The 2007-08 Budget assumes revenues in 2007-08 of $101.2 billion and expenditures of $102.3 billion. The 2007-08 Budget provides for total Higher Education funding of $19.7 billion from all sources, an increase of about $1.1 billion, or 5. 7%, over 2006-07 levels.

For California Community Colleges ("CCC"), the 2007-08 Budget provides total funding from all sources of over $8.5 billion, an increase of $315.6 million, or 3.8%, from the revised 2006-07 level. The budget provides CCC with a total of $4.5 billion in General Fund and Proposition 98 support for 2007-08, which is $341.5 million, or 5.5%, above the revised 2006-07 level. Total Proposition 98 support for CCC in 2007-08 is $2.0 billion. In addition, the budget provides CCC with another $21.1 million in one-time funds that, for Proposition 98 purposes, will count toward prior fiscal years.

Significant features of the 2007-08 Budget for community colleges include:

• $248.4 million to increase the Proposition 98 K-14 annual cost of living adjustment ("COLA") for general-purpose apportionments.

• $107.5 million increase for enrolhnent growth for the Proposition 98 apportionments. This funding will enable CCC to enroll an additional 23,000 full-time-equivalent ("FTE") students.

• $203 .1 million reduction in Proposition 98 apportionments reflecting an estimated growth in local property taxes of an identical amount.

• $80 million Proposition 98 base reduction for unused growth from current and prior years.

• $5.2 million increase for additional attrition reduction related investments to increase the graduation rate in Associate Degree Nursing programs.

• $21.2 million increase for the Proposition 98 Categorical Program enrollment growth and COLA for Basic Skills, Matriculation, Disabled Students, Campus Childcare Tax Bailout, and Extended Opportunity Programs and Services.

• $46.9 million Proposition 98 General Fund set aside for pending legislation expected to appropriate these funds for various Proposition 98 purposes.

• $31. 5 million increase to offset the remaining fee revenue reduction incurred by colleges in the budget year due to the reduction in student fees from $26 per unit to $20 per unit in the spring of 2007 and other workload adjustments.

24 • $8.1 million in one-time funding for equipment and other one-time expenses associated with nursing and allied health programs that will stimulate increased enrollment capacity for these high demand occupations.

• $8.1 million in one-time funding for deferred maintenance and instruction materials.

• $4 million in one-time funding for startup costs related to four new nursing programs.

• $1 million in one-time funding for the Cal-Pass program to facilitate institutional research for multiple education segments.

Additional information regarding the 2007-08 Budget is available from the California Department of Finance website at www.dof.ca.gov.

Future Budgets. The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State's ability to fund schools during 2007-08 as budgeted. Continued State budget shortfalls in future fiscal years could have an adverse financial impact on the District.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

The principal and Maturity Value of and interest on the Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof (See "THE BONDS - Security and Sources of Payment") Articles XIIIA, XIIIB, XIIIC and XIIID of the Constitution, Propositions 98 and I I I, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes, and 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 Bonds. The tax levied by the County for payment of the Bonds was approved by the District's voters in compliance withArticleXIIIA, ArticleXIIIC, and all applicable laws.

Article XIIIA of the California Constitution

Article XIIIA of the State Constitution ("Article XIIIA") limits the amount of ad valorem taxes on real property to 1% of "full cash value" as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the county assessor's valuation of real property as shown on the 1975-76 bill under 'full cash value,' or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment,'' subject to exemptions in certain circumstances of property transfer or reconstruction. The "full cash value" is subject to annual adjustment to reflect inflation at a rate not to exceed 2% for any year, or decreases in the consumer price index or to reflect reductions in property value caused by damage, destruction or other factors, including a general economic downturn.

Article XIIIA requires a vote of two-thirds of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (i) on any indebtedness approved by the 25 voters prior to July I, 1978, or (ii) as the result of an amendment approved by State voters on July 3, 1986, on any bonded indebtedness approved by two-thirds of the votes cast by the voters for the acquisition or improvement of real property on or after July I, 1978, or (iii) bonded indebtedness 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, approved by 55% or more of the votes cast of the proposition, but only if certain accountability measurers are included in the proposition. In addition, Article XIIIA requires the approval of two-thirds of all members of the state legislature to change any state taxes for the purpose of increasing tax revenues.

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 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. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

That portion of annual property tax revenues generated by increases in assessed valuations within each tax rate area within a county, subject to redevelopment agency, if any, claims on tax increment and subject to changes in organizations, if any, of affected jurisdictions, is allocated to each jurisdiction within the tax rate area in the same proportion that the total property tax revenue from the tax rate area for the prior year was allocated to such jurisdictions.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% 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.

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

Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA.

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 formulae 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, nonutility companies may affect how those assets are assessed, and which

26 local agencies are to receive the property taxes. The District is unable to predict the impact of these changes on its utility property tax revenues, or whether legislation may be proposed or adopted in response to industry restructuring, 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. See "FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA - Major Revenues'' herein.

Article XIIIB of the California Constitution

Article XIIIB of the State Constitution ("Article XIIIB"), as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular govermnental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. As amended, Article XIIIB defines

(a) "change in the cost of living" with respect to school districts to mean the percentage change in California per capita income from the preceding year, and

(b) "change in population" with respect to a school district to mean the percentage change in the average daily attendance of the school district from the preceding fiscal year.

For fiscal years beginning on or after July I, 1990, the appropriations limit of each entity of govermnent shall be the appropriations limit for the 1986-87 fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended.

The appropriations of an entity of local govermnent subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.

Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service, ( c) appropriations required to comply with certain mandates of the courts or the federal govermnent, ( d) appropriations of certain special districts, ( e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years.

Article XIIIB also includes a requirement that fifty percent of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund pursuant to Section 8. 5 of Article XVI of the State Constitution. See "Propositions 98 and 111" below.

27 Article XIIIC and Article XIIID of the California Constitntion

On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the "Right to Vote on Taxes Act." Proposition 218 added to the California Constitution Articles XIIIC and XIIID, which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges.

According to the "Title and Summary" of Proposition 218 prepared by the California Attorney General, Proposition 218 limits "the authority of local governments to impose taxes and property-related 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 school districts 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; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further 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 XIIID deals with assessments and property related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

The District does not impose any taxes, assessments, or property-related fees or charges which are subject to the provisions of Proposition 218. It does, however, receive a portion of the basic one percent ad valorem property tax levied and collected by the County pursuant to Article XIIIA of the California Constitution. The provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District.

Propositions 98 and 111

On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the "Classroom Instructional Improvement and Accountability Act" (the "Accountability Act"). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. 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 (hereinafter referred to collectively as "K-14 school 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, and (b) the amount actually appropriated to such districts from the General Fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period.

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 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit 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 school districts for 28 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 K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.

Since the Accountability Act is unclear in some details, there can be no assurances 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 school districts, or to apply the relevant percentage to the State's budgets in a different way than is proposed in the Governor's Budget.

On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. I) called the "Traffic Congestion Relief and Spending Limit Act of 1990" ("Proposition 111") which further modified Article XIIIB and Sections 8 and 8. 5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation.

The most significant provisions of Proposition 111 are summarized as follows:

a. Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the "change in the cost of living" is now measured by the change in California per capita personal income. The definition of "change in population" specifies that a portion of the State's spending limit is to be adjusted to reflect changes in school attendance.

b. Treatment of Excess Tax Revenues. "Excess" tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools' minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts' base expenditures for calculating their entitlement for State aid in the next year, and the State's appropriations limit is not to be increased by this amount.

c. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropnabons which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for "qualified capital outlay projects" as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January I, 1990. These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

d. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Proposition 111 had been in effect.

e. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (I) 40.9% of State general fund 29 revenues (the "first test") or (2) 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 enrolhnent (the "second test"). Under Proposition 111, schools will receive the greater of (I) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capital personal income. Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrolhnent and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a "credit" to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.

Proposition 39

On November 7, 2000, California voters approved an amendment ( commonly known as Proposition 39) to the California Constitution. This amendment (I) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current I percent limit in order to repay such bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The local school jurisdictions affected by this proposition are K-12 school districts, community college districts, and county offices of education. As noted above, the California Constitution previously limited property taxes to I percent of the taxable value of property. Property taxes may only exceed this limit to pay for (I) any local government debts approved by the voters prior to July I, 1978 or (2) bonds to buy or improve real property that receive two-thirds voter approval after July I, 1978.

The 55 percent vote requirement would apply only if the local bond measure presented to the voters includes, among other items: (I) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for a school district), or $25 (for a community college district), per $100,000 of taxable property value. These requirements are not part of this proposition and can be changed with a majority vote of both houses of the Legislature and approval by the Governor.

Proposition lA

On November 2, 2004, California voters approved Proposition lA, which amends the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition lA, the State may not (i) reduce any local sales tax rates, limit existing local government authority to levy a sales tax rate or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from 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 30 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 lA does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition lA also amends the State Constitution to require the State to suspend, beginning July 1, 2005, certain State laws creating mandates in any year that the State does not fully reimburse local govermnents for their costs to comply with such mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Kindergarten-University Public Education Facilities Bond Act of2006

The Kindergarten-University Public Education Facilities Bond Act of 2006 ("Proposition lD") appeared on the November 7, 2006 ballot as Proposition lD and was approved by California voters. This measure authorizes the sale and issuance of $10.4 billion in general obligation bonds for construction and renovation of K-12 school facilities ($7.3 billion) and higher education facilities ($3.1 billion).

K-12 School Facilities. Proposition lD makes available $3.3 billion for reconstruction or modernization of existing K-12 school facilities. K 12 school districts will be required to pay for 40% of these costs with local revenues, unless qualified for hardship funding. Proposition lD also includes $1.9 billion for acquisition of land and new construction ofK-12 school facilities. K-12 school districts will be required to pay for 50% of such costs with local revenues, unless qualified for hardship funding. Proposition lD directs a total of $1.0 billion to K-12 school districts which are considered severely overcrowded, specifically to schools that have large number of pupils relative to the size of the school site. $29 million will be available to fund joint-use projects.

Higher Education Facilities. Proposition lD includes approximately $3.1 billion to construct new buildings and related infrastructure, alter existing buildings and purchase equipment for use in the State's public higher education systems. The Governor and the Legislature will select the specific projects to be funded by the bond proceeds.

31 The table below shows the planned use of bond funds for the $10.4 billion bond issuance:

PROPOSITION lD Use of Bond Funds (In Millions)

Modernization projects $3,300(l) New construction projects 1,900(1 )(l) Severely overcrowded schools 1,000 Charter schools facilities 500 Career technical facilities 500 Environment-friendly projects 100 Joint-use projects 29 Subtotal, K-12 $7,329

Higher Education

Community Colleges $1,507 University of California 8900) California State University 690 Subtotal, Higher Education $3,087

Total $10,416

Cl) A total ofup to $200 million is available from these two amollllts combined as incentive funding to promote the creation of small high schools. 2 C) Up to $200 million is available for earthquake-related retrofitting. 3 C) $200 million is available for medical education programs. Source: California Legislative Analyst's Office.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 39, 98 and 111 were each adopted as measures that qualified for the ballot pursuant to tlie State's initiative process. From time to time other initiative measures could be adopted, further affecting District revenues or tlie District's ability to expend revenues. The nature and impact of tliese measures cannot be anticipated by tlie District.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

The information in this section concerning the operations of the District and the District's finances are provided as supplementary information only, and it should not be inferred from the inclusion ofthis information in this Official Statement that the princzpal ofor interest on the Bonds is payable from the General Fund of the District. The Bonds are payable only from the proceeds of an ad valorem tax levied by the County for the payment thereof See "THE BONDS - Security and Sources of Payment" herein.

General

The Antelope Valley Community College District (the "District") was established in 1929 and provides higher education in Kem County and a portion of Los Angeles County. The Antelope Valley

32 College, is situated on a 135-acre campus located in the City of Lancaster, California. The total assessed valuation of the District for fiscal year 2006-07 was $27, 771,243,982.

Administration

The District is governed by a five-member Board of Trustees (the "Board of Trustees"), each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between two and three available positions. Current members of the Board, together with their offices and the dates their terms expire, are listed below:

Name Office Term ExJJires Earl J Wilson President 2007 Betty Wienke Vice President 2009 Steve Fox Clerk 2009 Jack Seefus Member 2007 Steve Buffalo Member 2009

The District's administrative and fmancial staff includes a Superintendent/President and Vice President, Business Services. Jackie Fisher is the District's current Superintendent/President.

Brief biographies of key administrators follow:

Dr. Jackie Fisher. Dr. Jackie Fisher, Sr. was appointed as the District's Superintendent/President on March 25, 2004. Dr. Fisher has many years of experience in education as both a teacher and administrator. Prior to coming to the District, Dr. Fisher worked as a Dean of Instruction at Bakersfield College, moving to the position after teaching and serving as Director of the college's Fire Technology Program for 11 years. Dr. Fisher received a doctorate in education management from the University of La Verne, a master's degree in counseling from California State University, Bakersfield, a bachelor's degree in physical education from California State University, Fresno, and an associate in arts degree from Bakersfield College.

Deborah Wallace. Deborah Wallace was appointed as the Vice President, Business Services on July I, 2006. Prior to being appointed as the Vice President, Ms. Wallace served as the District's Director of Business Services for 2.5 years. Prior to coming to the District, Ms. Wallace worked as the Fiscal Officer for the Pahndale School District Head Start Program for ahnost 5 years. Ms. Wallace's earned a bachelor's of science degree in business administration with a concentration in economics and fmance from Elizabeth City State University, North Carolina, and a master's of business administration from the University of Phoenix, Arizona

33 Enrollment

The following table shows the District's full-time equivalent students ("FTES") for fiscal years 1999-00 through 2006-07:

Year FTES 1999-00 7,776.85 2000-01 8,181.58 2001-02 8,666.61 2002-03 9,617.15 2003-04 9,695.56 2004-05 9,986.07 2005-06 9,922.45 2006-07(!) 10,420.56

Cl) Estimated. Source: The District.

Employee Relations

Under State law, public school employees are divided into appropriate bargaining units which are to be represented by an exclusive bargaining agent. The following is a listing of the bargaining units, recognized employee organizations and the expiration dates or current agreements for the District's full time employees' principal bargaining units and labor organizations as of June 30, 2005:

Employees Bargaining Unit Expiration Date 721 Antelope Valley College Federation of June 30, 2007 Teachers 200 Antelope Valley College Federation of June 30, 2007 Classified Employees

Source: The District.

Retirement Programs

The District participates in the State of California Teachers Retirement System ("STRS"). This plan covers all full-time and most part-time certificated employees. The District's contribution to STRS was $1,418,045 in fiscal year 2004-05, $1,625,516 in fiscal year 2005-06, and is projected to be $1,866,878 in fiscal year 2006-07. In order to receive STRS benefits, an employee must be at least 55 years old and have provided five years of service to California public schools.

The District also participates in the State of California Public Employees Retirement System ("PERS"). This plan covers all classified personnel who are employed more than four hours per day. The District's contribution to PERS was $758,949 in fiscal year 2004-05, $763,597 in fiscal year 2005-06, and is projected to be $841,224 in fiscal year 2006-07. In order to receive PERS benefits, an employee must be at least 50 years old and have provided five years of service to California public schools.

Contribution rates to these two retirement systems vary annually depending on changes in actuarial assumptions and other factors, such as changes in benefits. The contribution rates are based on statewide rates set by the STRS and PERS retirement boards. STRS has substantial statewide unfunded

34 liability. Since this liability has not been broken down by each school district, it is impossible to determine the District's share.

Other Post Employment Benefits

The District provides post-retirement health care benefits to qualifying retired certificated and classified employees under certain circumstances. See "APPENDIX B - Excerpts from the District's 2005-06 Audited Financial Statements." The District has, in the past accounted for these benefits on a "pay as you go" basis, recording the expenses for such benefits when paid. For fiscal year 2005-06, a total of approximately $214,857 was expended to provide these benefits to 24 qualified retirees.

The Govermnental Accounting Standards Board recently published Statement No. 45, requiring govermnental agencies such as the District (beginning for the District with the fiscal year ending June 30, 2008), to account for and report the outstanding obligations and commitments related to such post employment benefits in essentially the same manner as for pensions. The District commissioned a study by a consultant dated September 12, 2006 with respect to its liability in connection with such benefits (the "Actuarial Report"). The Actuarial Report concluded the total actuarial present value of such liability as of May I, 2006 to be $14,405,010. The Actuarial Report projects the District's annual required contribution necessary to fund such benefits for the year May I, 2007 to May I, 2008 will be $1,119,675.

Insurance

The District participates in three joint ventures under joint powers agreements ("JPAs")): Self Insurance Risk Management Authority for Workers' Compensation, Self Insurance Risk Management Authority for Liability and Property Protection, and Self Insurance Risk Management Authority for Employee Benefits. The relationship between the District and the JP As is such that the JP As are not considered a component unit of the District for financial reporting purposes.

DISTRICT FINANCIAL MATTERS

District Financial Statements

Excerpts from the audited fmancial statements of the District for Fiscal Year 2005-06 are attached hereto as APPENDIX B. The fmancial statements should be read in their entirety. The information set forth herein does not purport to be a summary of the District's financial statements.

Accounting Practices

The accounting policies of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California Community College Budget and Accounting Manual. This manual, according to Section 84030 of the California Education Code, is to be followed by all California community college districts. The Govermnental Accounting Standards Board ("GASB") has released (i) Statement No. 34, which makes changes in the annual fmancial statements for all govermnental agencies in the United States, especially in recording of fixed assets and their depreciation, and in the way the report itself is formatted, and (ii) Statement No. 35, which makes changes in the required content and format of annual financial statements for public colleges and universities. These requirements became effective on June 15, 2002 for the District, as well as for any other govermnental agency with annual revenues of between $10 million and $100 million. Revenues are recognized in the period in which they become both measurable and available to finance expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is incurred.

35 Comparative Financial Statements

The following table reflects the District's audited revenues, expenditures and fund balances from fiscal year 2001-02 through 2005-06, as well as estimated actual results for fiscal year 2006-07.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Summary of General Fund Revenues, Expenditures and Changes in Fund Balances for Fiscal Years 2001-02 through 2006-07

Estimated Audited Audited Audited Audited Audited Actuals 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 REVENUES: Federal Revenues $2,095,251 $1,505,046 $1,320,905 $1,758,216 $1,326,293 $1,740,785 Other State Revenues 26,029,319 24,938,876 24,563,937 33,904,379 38,261,459 48,013,880 Other Local Revenues 14597819 14 658 768 16 556 563 11 466 329 11170863 9 023 142 TOT AL REVENUES 42,722,389 41,102,690 42,441,405 47,128,924 50,758,615 58,777,807

EXPENDITURES: Certificated Salaries 19,930,794 18,845,564 19,484,076 21,742,388 24,321,690 26,549,763 Classified Salaries 9,130,868 7,757,709 7,718,264 8,419,615 9,283,331 10,892,024 Employee Benefits 5,726,524 6,153,098 7,608,809 8,799,533 9,390,790 10,448,893 Books and Supplies 1,663,781 1,559,722 2,218,638 2,542,741 2,156,603 3,094,720 Services and Operating Expenses 4,913,531 4,183,718 5,785,692 4,490,024 4,965,829 5,071,014 Other Outgo Capital Outlay 1,350,553 635,913 199,787 813,677 1,499,775 1,367,208 Debt Service 26 715 29 672 216417 209 081 209 081 209 081 TOT AL EXPENDITURES 42,742,765 39,165,396 43,231,683 46,727,059 51,827,099 57,632,703

Excess of Revenues Over/ (Under) Expenditures (Uses): (20,376) 1,937,294 (790,278) 401,865 (1,068,484) 1,145,104

Other Financing Sources (Uses): Operating Transfers In 81,606 654,449 213,907 200,000 Operating Transfers Out (153,463) (531,846) (421,928) (988,701) (143,450) (145,000) Other Sources 1,541,532 Other Uses (118,668) 202,057 270,934 (51,488) ( 42,297) ( 43,000)

Prior Year Adjustments --- Total Other Financing Sources (Uses) (190,525) 324,660 1,390,538 (1,040, 189) 28,160 12,000

Excess of Revenues and Other Financing Sources Over/(Under) Expenses and Other Uses (210,901) 2,261,954 600,260 (638,324) (1,040,324) 1,157,104

FUND BALANCE, BEGINNING OF YEAR 2,288,296 1,954,548 4,332,465 4,932,725 4,294,400 3,254,076 2 Prior Period Adjustment (122,740)° 115 963( ) FUND BALANCE, END OF YEAR $1 954 655 $4 332 465 $4 932 725 $4294401 $3 254 076 $4411180

0>Restated due to adjustments to prior year accollllts receivable/payable. 2 C) Restated due to adjustments to prior year accounts receivable/payable. Source: The District.

Ad Valorem Property Taxation

District property taxes are assessed and collected by the Counties at the same time and on the same tax rolls as are county, city and special district taxes. Assessed valuations are the same for both District and the Counties taxing purposes. 36 The valuation of secured property is established as of January I and is subsequently equalized in August. Property taxes are payable in two instalhnents due November I and February I, respectively, and become delinquent on December 10 and April 10 for each respective installment. Taxes on unsecured property (personal property and leasehold) are due on August 31 of each year based on the preceding fiscal year's secured tax rate and become delinquent on October 31.

State law exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of the exemptions.

All property is assessed using full cash value as defined by Article XIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions.

Future assessed valuation growth allowed under Article XIII A (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of "base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's allocation in the following year. The availability of revenue from growth in tax bases to such entities may be affected by the establishment of redevelopment agencies which, under certain circumstances, may be entitled to revenues resulting from the increase in certain property values.

For assessment and collection purposes, property is classified as either "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured roll" is the part of the assessment roll containing State-assessed property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Unsecured property comprises all property not attached to land such as personal property or business property. Boats and airplanes are examples of unsecured property. Unsecured property is assessed on the "unsecured roll."

The following table represents the seven-year history of assessed valuations in the District:

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Assessed Valuations Fiscal Year 2000-01 through 2006-07

Total Before Local Secured Utility Unsecured Rdv. Increment 2000-01 $13,824,945,785 $13,670,413 $405,604,669 $14,244,220,867 2001-02 14,645,282,129 13,018,350 456,404,798 15,114,705,277 2002-03 15,600,974,697 12,832,299 488,877,265 16,102,684,261 2003-04 16,983, 738, 749 12,811,059 511,865,714 17,508,415,522 2004-05 18,924,959,356 13,652,544 527,019,036 19,465,630,936 2005-06 22, 154,098,562 13,129,138 601,337,298 22,768,564,998 2006-07 27,075,289,830 12,351,176 683,602,976 27,771,243,982

Source: California Municipal Statistics, Inc.

37 The following is an analysis of the District's assessed valuation ( excluding utility and unsecured property) by land use.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Secured Assessed Valuation and Parcels by Land Use

2006-07 %of No. of %of 1 Assessed Valuation( ) Total Parcels Total Non-Residential: Agricultural $118,028,540 0.44% 1,937 104% Commercial 2, 113,570,081 7.81 2,315 1.24 Vacant Commercial 220,413,088 0.81 987 0.53 Industrial 804,284,098 2.97 681 0.37 Vacant Industrial 30,388,237 0.11 2,254 1.21 Recreational 84,275,986 0.31 162 0.09 Government/Social/Institutional 223,915,006 0.83 705 0.38 J\.1iscellaneous 91 678 428 0.34 2 984 160 Subtotal Non-Residential $3,686,553,464 13.62% 12,025 6.46%

Residential: Single Family Residence $17,833, 198,963 65.87% 87,542 4703% Condominium/Townhouse 307,263,076 113 3,114 167 Mobile Home 67,000,391 0.25 1,879 101 Mobile Home Park 106,214,423 0.39 108 0.06 2-4 Residential Units 258,285,000 0.95 1,679 0.90 5+ Residential Units/Apartments 1,033,136,728 3.82 1,684 0.90 Vacant Residential 1 028 036 677 3.80 26103 14 02 Subtotal Residential $20,633, 135,258 76.21% 122,109 65.60%

Other Vacant $2,755,601,108 10.18% 51,994 27.93%

Total $27,075,289,830 10000% 186,128 100 00%

Cl) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

38 Principal Taxpayers

The following table lists the major taxpayers in the District in terms of their 2006-07 secured assessed valuations. The District provides educational services to and its boundaries include portions of the Counties. ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Largest 2006-07 Local Secured Taxpayers 2006-07 %of Property Owner Primary Land Use Assessed Valuation TotalC1l I. Lockheed Corp. Industrial $291,522,415 1.08% 2. Antelope Valley Mall Developers Ltd. Shopping Center 88,846,611 0.33 3. Palmdale Hills Property Residential Development 71,960,082 0.27 4. KB Home Greater Los Angeles Inc. Residential Development 70,057,120 0.26 5. Joshua Ranch Development Inc. Undeveloped 45,475,000 0 17 6. SPC Del Sur Ranch LLC Undeveloped 45,218,600 0 17 7. BPP Valley Central Shopping Center 39,877,585 0.15 8. Basrock Woodcreek Gardens California LLC Apartments 39,675,138 0.15 9. Avenue K Lancaster UCM/Cadence LLC Shopping Center 37,294,000 0.14 10. Thrifty Payless Inc. Industrial 36,071,220 0 13 11. Amargosa Palin dale Investments LLC Shopping Center 34,214,062 0 13 12. Heritage Asset Management Inc. Hotel 31,977,000 0.12 13 Wal Mart Realty Company Commercial 31,489,431 0.12 14. Pulte Home Corp. Residential Development 29,453,351 0.11 15. Basrock Antelope Pines California LLC Apartments 28,735,690 0.11 16. Lexington Lancaster II LLC Industrial 27,268,215 0.10 17 Countrywide Home Loans Inc. Office Building 27,254,589 0.10 18. Anaverde LLC Undeveloped 26,581,131 0.10 19. Basrock Villa Mirage California LLC Apartments 25,778,600 0.10 20. Trim ark Pacific Lancaster LLC Residential Development 20 915 380 0.08 $1,049,665,220 3.88%

Cl) 2006-07 Local Secured Assessed Valuation: $27,075,289,830. Sowce: California Municipal Statistics, Inc.

Tax Levies, Collections and Delinquencies

Taxes are levied for each fiscal year on taxable real and personal property which is situated in the District as of the preceding January 1. A supplemental tax is levied when property changes hands or new construction is completed.

A ten percent penalty attaches to any delinquent payment for secured roll taxes. In addition, property on the secured roll with respect to which taxes are delinquent becomes tax-defaulted. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty (i.e., interest) to the time ofredemption. If taxes are unpaid for a period of five years or more, the property is subject to auction sale by the applicable County Tax Collector.

In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1. 5% per month begins to accrue beginning December 1 of the fiscal year, and a lien is recorded against the assessee. The taxing authority has four ways of collecting unsecured personal property taxes: ( 1) a civil action against the taxpayer; (2) filing a certificate in the office of the applicable County Clerk specifying certain facts in order to obtain a judgment lien on specific property of the taxpayer; (3) filing a certificate of delinquency for record in the applicable County

39 Recorder's office in order to obtain a lien on specified property of the taxpayer; and ( 4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

The Counties levy and collect all property taxes for property falling within their respective taxing boundaries.

The annual secured tax levies and delinquencies for fiscal years 2000-01 through 2005-06 are shown below.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Secured Tax Charges and Delinquencies 2000-01 through 2005-06

Secured Amt. Del. %Del. Tax Charge(') ---June 30 ---June 30 2000-01 Not Available 2001-02 $3,725,818.31 $94,490.55 2.54% 2002-03 4,025,251.68 105,869.68 2.63 2003-04 4,367.345.70 95,279.20 2.18 2004-05 4,914,575.09 114,814.02 2.33 2005-06 5,787,270.20 148,571.94 2.57

Cll 1% General Fund apportionment. Excludes redevelopment agency impounds. Source: Californi.a Muni.cipal Statistics, Inc.

Teeter Plan

Certain counties in the State of California operate under a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County of Los Angeles has not adopted the Teeter Plan, and consequently the Teeter Plan is not available to local taxing entities within the County, such as the District. The District's receipt of property taxes within the County is therefore subject to delinquencies.

The Board of Supervisors of Kem County has approved the implementation of the Teeter Plan, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency levying property taxes, including community college districts, receives from its county the amount of uncollected taxes credited to its fund, in the same manner as if the amount credited had been collected. In return, the county receives and retains delinquent payments, penalties and interest as collected, that would have been due the local agency. The Teeter Plan, once adopted by a county, remains in effect unless the county board of supervisors orders its discontinuance or unless, prior to the commencement of any fiscal year, the board of supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the county. A board of supervisors may, after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan with respect to any tax levying agency in the county when delinquencies for taxes levied by that agency exceed 3 %.

The Teeter Plan applies to the 1% general purpose property tax levy. Whether or not the Teeter Plan also is applied to other tax levies for local agencies, such as the tax levy for general obligation bonds of local agencies, varies by county.

40 The property tax to be levied to pay the interest on and principal of the Bonds will be subject to the Teeter Plan of Kem County, beginning in the first year of such levy. The District will receive 100% of the ad valorern property tax levied to pay the Bonds irrespective of actual delinquencies in the collection of the tax by Kem County.

District Debt Structure

The following table presents the long-term debt of the District as of June 30, 2006:

Balance Restated Balance ,My__l,_ Per Study Additi Deduct June 30 2005 ons ions 2006 General Obligation Bonds $30,000,0 $30,000,0 California Energy Commission 1,223,:001 $173,66 1,049,()'(!3 Sub-I otal Debt Obligations 31,223,39 l 73,ffi58 31,049,72 Retiree Health Benefits 5,195,962 $2,628,03 $365,5 214,857 7,974,6~8 Compensated Absences 878,125 .(\(!) 43,43.'II 921,539 Early Retirement 587,680 146,920 440,760 Sub-I otal of Employment Obligations 2 628 036 361 777 9 336 977 Totals ~ 35li$ 82l51 $2,628 036 $@08l9 $535 44 $40 386 7 58 :11 ~ 00 (1) Represents increase due to actuarial valuation of other posternployrnent benefits. Source: The District.

41 General Obligation Bonds. On May 17, 2005, the District issued its General Obligation Bonds, Election of 2004 Series A in the aggregate principal amount of $30,000,000 (the "Series A Bonds"). On August 31, 2006, the District issued its 2006 General Obligation Refunding Bonds in the aggregate principal amount of $24,336, 792.20 (the "2006 GO Refunding Bonds''), the proceeds of which were used to advance refund a portion of the outstanding Series A Bonds. The following table shows the annual debt service requirements of all the District's general obligation bonded debt, assuming no optional redemptions are made.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT General Obligation Bonds - Consolidated Debt Service Schedule Year Ending Series A 2006 GO Series B Series C Total Annual (August 1) Bonds Refunding Bonds Bonds Bonds Debt Service 2008 $124,581.25 $1,966,750.00 $1,869, 144.38 $2,413,483.54 $6,373,959.17 2009 183,231.25 2,001,750.00 2,116,012.50 2,214,162.50 6,515,156.25 2010 240,081.25 2,041,750.00 2,116,012.50 2,308,162.50 6,706,006.25 2011 300, 131.25 2,086,750.00 2,116,012.50 2,393,162.50 6,896,056.25 2012 362,081.25 2,131,750.00 2,116,012.50 2,488,931.26 7,098,775 01 2013 426,581.25 2,176,750.00 2,116,012.50 2,580,162.50 7,299,506.25 2014 497,987.50 2,226,750.00 2,116,012.50 2,671,150.00 7,511,900.00 2015 571,312.50 2,271,750.00 2,116,012.50 2,772,250.00 7,731,325.00 2016 2,971,750.00 2,116,012.50 2,862,825.00 7,950,587.50 2017 3,106,750.00 2,116,012.50 2,961,075.00 8, 183,837.50 2018 3,245,250.00 2,116,012.50 3,057,075.00 8,418,337.50 2019 3,391,250.00 2,116,012.50 3,152,500.00 8,659,762.50 2020 3,543,750.00 2,116,012.50 3,254,525.00 8,914,287.50 2021 3,701,750.00 2,116,012.50 3,352,362.50 9,170,125.00 2022 3,869,250.00 2,116,012.50 3,450,750.00 9,436,012.50 2023 2,116,012.50 7,594,000.00 9,710,012.50 2024 2,116,012.50 7,870,250.00 9,986,262.50 2025 2,116,012.50 8,162,250.00 10,278,262.50 2026 2,116,012.50 8,457,750.00 10,573, 762.50 2027 2,116,012.50 8,765,000.00 10,881,012.50 2028 2,116,012.50 9,075,000.00 11,191,012.50 2029 2,116,012.50 9,400,000.00 11,516,012.50 2030 2,116,012.50 9,735,000.00 11,851,012.50 2031 2,116,012.50 10,075,000.00 12,191,012.50 2032 11,541,012.50 1,000,000.00 12,541,012.50 2033 12,906,012.50 12,906,012.50 2034 13,281,012.50 13,281,012.50 2035 13,661,012.50 13,661,012.50 2036 14,056,012.50 14,056,012.50 2037 14,461,012.50 14,461,012.50 2038 14,882,900.00 14,882,900.00 2039 15 308 612.50 15 308 612.50 $2 705 987.50 $40 733 750.00 $160 635 019.38 $122 066 827.30 $326141 584.18

Statement of Direct and Overlapping Debt

Set forth below is a direct and overlapping debt report (the "Debt Report'') prepared by California Municipal Statistics, Inc. and effective as of August 1, 2007 for debt issued as of July 25, 2007. 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.

42 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.

The first colunm in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. Colunm 2 shows the percentage of each overlapping agency's assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in column 3, which is the apportionment of each overlapping agency's outstanding debt to taxable property in the District.

43 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT Statement of Direct and Overlapping Bonded Debt

2006-07 Assessed Valuation: $27 ,771,243,982 Redevelopment Incremental Valuation: 9 815 776 630 Adjusted Assessed Valuation: $17 ,955,467 ,352

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 8/1/07 Los Angeles County F1ood Control District 0.461 % $523,512 Antelope Valley Joint Community College District 100.000 25,757,980 (1) Southern Kem Unified School District 100.000 11,668,737 Antelope Valley Union High School District 100.000 96,984,873 Lancaster School District 100.000 25,429,931 Palmdale School District 100.000 22,979,827 Westside Union School District 100.000 17,617,860 Other School Districts Various 12,920,253 Los Angeles County Regional Park and Open Space Assessment District 2.090 5,685,427 Community Facilities Districts 100.000 173,216,041 1915 Act Bonds 100.000 58 121 883 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $450,906,324

OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 2.090% $22,673,406 Los Angeles County Pension Obligations 2.090 11,429,147 Los Angeles County Superintendent of Schools Certificates of Participation 2.090 390,643 Kem County General Fund Obligations 1.497 811,599 Kem County Pension Obligations 1.497 7,209,718 Kem County Board of Education Certificates of Participation 1.497 854,937 Eastside Union School District Certificates of Participation 100.000 7,000,000 Lancaster School District Certificates of Participation 100.000 16,832,425 Palmdale School District Certificates of Participation 100.000 27,065,000 Other School District General Fund Obligations Various 9,725,034 City of Lancaster General Fund Obligations 100.000 13,395,000 City of Palmdale Certificates of Participation 100.000 86,155,000 Los Angeles County Sanitation District Nos. 14, 20 & 32 Authorities 0.001-100.000 9 970 639 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $213,512,548 Less: Eastside Union School District self-supporting obligations 3 500 000 TOTAL NET OVERLAPPING GENERAL FUND DEBT $210,012,548

GROSS COMBINED TOTAL DEBT $664,418,872 (2) NET COMBINED TOTAL DEBT $660,918,872

(1) Excludes the Bonds. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

Ratios to 2006-07 Assessed Valuation: Direct Debt ($25, 757,980) ...... 0.09°/o Total Overlapping Tax and Assessment Debt ...... 1.62%

Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt ...... 3.70% Net Combined Total Debt ...... 3.68%

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/07: $0

Source: California Municipal Statistics, Inc.

44 TAX MATTERS

In the opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, San Francisco, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations.

The difference amount by which the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) is less than the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner's basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

Bond Counsel's opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements.

The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity ( or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premmm.

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

It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that 45 affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or inteipretations will not occur. On May 21, 2007, the U.S. Supreme Court agreed to review a Kentucky state court decision, in the matter of Kentucky v. Davis, on the issue of whether the U.S. Constitution commerce clause precludes states from giving more favorable tax treatment to state and local government bonds issued within that state than the tax treatment given bonds issued outside that state. The outcome of this or any similar case cannot be predicted, but the ultimate result could be a change in the treatment for state tax putposes of interest on the Bonds. If the Kentucky v. Davis decision is affirmed by the United States Supreme Court, states such as California may be required to eliminate the disparity between the income tax treatment of out-of-state tax-exempt obligations and the income tax treatment of in-state tax-exempt obligations, such as the Bonds. The impact of such a United States Supreme Court decision may also affect the market price for, or the marketability of the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding this matter.

Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolution and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax putposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Y occa Carlson & Rauth.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax putposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.

A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX A.

LEGAL MATTERS

Legality for Investment in California

Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and, under provisions of the Goverrnuent Code of the State, are eligible security for deposits of public moneys in the State.

Continuing Disclosure of Material Events

The District has covenanted for the benefit of holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District (the "Annual Report") by not later than nine months following the end of the District's fiscal year, commencing with the report for the 2006-07 fiscal year, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the District with each Nationally Recognized Municipal Securities Information Repository and with the appropriate State information depository, if any. The notices of

46 material events will be filed by the District with each Nationally Recognized Municipal Securities Information Repository or with the Municipal Securities Rulemaking Board, and with the appropriate State information depository, if any. The specific nature of the information to be made available and to be contained in the notices of material events is summarized under the caption "APPENDIX C - 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 in the past failed to file certain of its required annual reports in a timely manner as required by the Rule. The District has since filed all such reports and is current on all filings required under its continuing disclosure obligations.

No Litigation

No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to purchasers at the time of the original delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District's ability to receive ad valorem taxes or to collect other revenues or contesting the District's ability to issue and retire the Bonds.

New Information Reporting Requirements

On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA"). Under Section 6049 of the Internal Revenue Code of 1986, as amended by TIPRA, interest paid on tax-exempt obligations will be subject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any bondholder who fails to file an accurate Form W-9 or who meets certain other criteria. The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes

Legal Opinion

The legal opinion of Bond Counsel, approving the validity of the Bonds, will be supplied to the original purchasers of the Bonds without cost. A copy of the proposed form of such legal opinion is attached to this Official Statement as APPENDIX A.

MISCELLANEOUS

Ratings

The Bonds have been assigned ratings of "AAA" and "Aaa" by Standard & Poor's, A Division of The McGraw-Hill Companies ("S&P"), and Moody's Investors Service ('Moody's"), respectively, based on the issuance by the Insurer of a municipal bond insurance policy with respect to the Bonds. The Bonds have been assigned underlying ratings of "AA-" and "Aa3" by S&P and Moody's, respectively. The ratings reflect only the view of the rating agencies, and any explanation of the significance of such ratings should be obtained from the rating agencies at the following address: Standard & Poor's, a Division of The McGraw-Hill Companies, 55 Water Street, 45th Floor, New York, NY 10041, and Moody's Investors Service, 99 Church Street, New York, NY 10007-2796. There is no assurance that the ratings will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by the rating agencies if, in the judgment of the rating agencies, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such 47 downward revision or withdrawal of the ratings obtained may have an adverse effect on the market price of the Bonds.

Underwriting

UBS Securities LLC (the "Underwriter") has agreed, pursuant to a contract of purchase between the District and the Underwriter, to purchase all of the Series B Bonds for a purchase price of $52,840,873.20 (principal amount of the Series B Bonds of $52,536,256.40, plus net original issue premium of $1,092,265.50, less Underwriter's discount of $457,718.44 and less an amount of $329,930.26 for costs of issuance including a bond insurance premium associated with the Series B Bonds to be paid from premium retained by the Underwriter for such purpose).

The purchase contract related to the Series B Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by Bond Counsel and certain other conditions.

The Underwriter has agreed, pursuant to a contract of purchase between the District, the County, and the Underwriter, to purchase all of the Series C Bonds for a purchase price of $56,887,482.46 (principal amount of the Series C Bonds of $56,460,276.45, plus net original issue premium of $1,203,983.05, less Underwriter's discount of $494,233.43 and less an amount of $282,543.61 for costs of issuance including a bond insurance premium associated with the Series C Bonds to be paid from premium retained by the Underwriter for such purpose).

The purchase contract related to the Series C Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by Bond Counsel and certain other conditions.

The initial offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than such initial offering prices.

Additional Information

This Official Statement supplies information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Resolution providing for issuance of the Bonds, and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions.

All data contained herein about the District has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the District.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended only as such and not as representations of fact. This Official Statement is not to be

48 construed as a contract or agreement between the District and the purchasers or Owners, beneficial or otherwise, of any of the Bonds.

This Official Statement and the delivery thereof have been duly approved and authorized by the District.

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

By:~~~~~~/=s/_J~a~c=ki=·e~F=i=sh=e=r~~~~~~~~ Superintendent/President

49 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX A

FORM OF OPINION OF BOND COUNSEL

September 13, 2007

Board of Trustees Antelope Valley Community College District

Members of the Board of Trustees:

We have examined a certified copy of the record of the proceedings relative to the issuance and sale of $52,536,256.40 Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series B (the "Series B Bonds") and $56,460,276.45 Antelope Valley Community College District General Obligation Bonds, Election of 2004, Series C (the "Series C Bonds", and together with the Series B Bonds, the "Bonds"). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation.

Based on our examination as bond counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that:

I. Such proceedings and proofs show lawful authority for the issuance and sale of the Series B Bonds pursuant to the provisions of Article 4. 5 of Chapter 3 of Part I of Division 2 of Title 5 of the California Government Code, a fifty-five percent vote of the qualified electors of the Antelope Valley Community College District (the "District") voting at an election held on November 2, 2004, and a resolution of the Board of Trustees of the District adopted on July 9, 2007 (the "Series B Resolution"), and the Series C Bonds pursuant to Title 1.5, Division I, Part 10, Chapter I of the California Education Code, a resolution of the Board of Trustees of the District (the "District Resolution") and a resolution of the Board of Supervisors of Los Angeles County, California (together with the District Resolution, the "Series C Resolution.") The Series B Resolution and the Series C Resolution are referred to herein as the "Resolutions."

2. The Bonds constitute valid and binding general obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount.

3. Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations.

A-1 4. Interest on the Bonds is exempt from State of California personal income tax.

5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. For purposes of the previous sentence, the stated redemption price at maturity includes the aggregate sum of all debt service payments on Capital Appreciation Bonds. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will increase the Bondowner's basis in the applicable Bond. Original issue discount that accrues to the Bondowner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

6. The amount by which a Bondowner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity ( or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bondowner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bondowner realizing a taxable gain when a Bond is sold by the Bondowner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Bondowner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premmm.

The opinions expressed herein may be affected by actions taken ( or not taken) or events occurring ( or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than ourselves. Other than expressly stated herein, we express no opinion regarding tax consequences with respect to the Bonds.

The opinions expressed herein as to the exclusion from gross income of interest ( and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the District and others and are subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements.

It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. On May 21, 2007, the U.S. Supreme Court agreed to review a Kentucky state court A-2 decision, in the matter of Kentucky v. Davis, on the issue of whether the U.S. Constitution commerce clause precludes states from giving more favorable tax treatment to state and local government bonds issued within that state than the tax treatment given bonds issued outside that state. The outcome of this or any similar case cannot be predicted, but the ultimate result could be a change in the treatment for state tax pmposes of interest on the Bonds. If the Kentucky v. Davis decision is affirmed by the United States Supreme Court, states such as California may be required to eliminate the disparity between the income tax treatment of out-of-state tax-exempt obligations and the income tax treatment of in-state tax-exempt obligations, such as the Bonds. The impact of such a United States Supreme Court decision may also affect the market price for, or the marketability of the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding this matter.

The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Respectfully submitted,

Stradling Y occa Carlson & Rauth

A-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX B

EXCERPTS FROM THE DISTRICT'S 2005-06 AUDITED FINANCIAL STATEMENTS

B-1 (THIS PAGE INTENTIONALLY LEFT BLANK) ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

COUNTY OF LOS ANGELES LANCASTER, CALIFORNIA

AUDIT REPORT JUNE 30, 2006

BURKEY, COX, EVANS & BRADFORD Accountancy Corporation 44811 N. Date Avenue, Suite A Lancaster, CA 93534 INTRODUCTORY SECTION ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT TABLE OF CONTENTS JUNE 30, 2006

INTRODUCTORY SECTION

Table of Contents i-ii

Objectives of the Audit - Introduction 1

FINANCIAL SECTION

Independent Auditor's Report 2-3

Management Discussion and Analysis - Required Supplementary Information 4-9 Basic Financial Statements

Statement of Net Assets 10

Statement of Revenues, Expenses and Changes in Net Assets 11

Statement of Cash Flows 12

Notes to the Basic Financial Statements 13-36

SUPPLEMENTARY INFORMATION SECTION

Independent Auditor's Report on Supplemental Information 37

Organization 38

Schedule of Expenditures of Federal Awards, Required by OMB Circular A-133 39

Schedule of Expenditures of State Awards 40

Schedule of Workload Measures for State General Apportionment 41

Schedule of Annual Apprenticeship Hours of Instruction 42

Reconciliation of Annual Financial and Budget Report (CCFS-311) with Audited Financial Statements 43-46

Statement of Revenues, Expenses and Changes in Net Assets - Budget to Actual 47

Fund Balance Sheets and Statement of Revenues, Expenditures and Changes in Fund Balance for the District's Various Funds 48 ---64 Notes to Supplementary Information 65

( i ) ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT TABLE OF CONTENTS JUNE 30, 2006

OTHER INDEPENDENT AUDITOR'S REPORTS

Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Pertormed in Accordance with Government Auditing Standards 66

Auditor's Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 67-68

Auditor's Report on State Compliance 69-70

FINDINGS AND QUESTIONED COSTS

Schedule of Audit Findings and Questioned Costs 71 - 79

Summary Schedule of Prior Audit Findings 80-83

( ii ) ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT OBJECTIVES OF THE AUDIT JUNE 30, 2006

INTRODUCTION

The single audit of the Antelope Valley Community College District had the following objectives:

To determine the fairness of presentation of the District's basic financial statements in accordance with accounting principles generally accepted in the United States of America.

To evaluate the adequacy of the systems and provisions affecting compliance with applicable Federal and State laws and regulations with which noncompliance would have a material effect on the District's financial statements and allowability of program expenditures for Federal and California financial assistance programs.

To evaluate the adequacy of the internal control structure sufficient to meet the requirements of auditing standards generally accepted in the United States of America for the purpose of formulating an opinion on the basic financial statements taken as a whole and sufficient to ensure compliance with federal and state regulations.

To determine whether financial and financially related reports to state and federal agencies are presented fairly.

To recommend appropriate actions to correct any noted areas where internal control compliance with applicable federal and state regulations could be improved.

- 1 - FINANCIAL SECTION BURKEY, Cox, EVANS & BRADFORD ACCOUNTANCY CORPORATION

GARY W. Cox. CPA Scan EVANS, CPA. CFP, CVA CERTIFIED PUBLIC ACCOUNTANTS LAURA A BRADFORD. CPA, CVA 44811 DA1E AVENUE. Su1TE A LANCASTER. CALIFORNIA 93534-3136 JENNIFER ALDEN, CPA MEMBERS TEL: (661) 948-0808 FAX: (661) 949-3508 TERRY L. SNEDIGAR. EA AMERICAN INSITTUTE OF CERTIFIED PUBLIC ACCOUNTANTS CALIFORNIA Soc1E1Y OF CERTIFIED Pusuc AccouNTANTS CHRISTINE M. HORNE BRAD RoBERlS TERESA YATES

INDEPENDENT AUDITOR'S REPORT

Board of Trustees Antelope Valley Community College District Lancaster, California

We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of the Antelope Valley Community College District ("District') as of and for the year ended June 30, 2006, which comprise the District's basic financial statements as listed in the table of contents_ These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these 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 Slates. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements_ An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation_ We believe that our audit provides a reasonable basis for our opiriion.

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the net assets of the Antelope Valley Community College District as of June 30, 2006, and the changes in its net assets and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards we have also issued our report dated November 17, 2006, on our consideration of the Antelope Valley Community College District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing standards and should be read in conjunction with this report in considering the results of our audit.

The Management's Discussion and Analysis identified as Required Supplementary Information on pages 4 through 9 is not a required part of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board_ We have applied certain limited procedures, consisting principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

- 2 - BURKEY, COX, EVANS & BRADFORD ACCOUNTANCY CORPORATION Antelope Valley Community College District Page two

Our audit was conducted for the purpose of forming an opinion on the District's basic financial statements. The accompanying supplementary information listed in the table of contents, including the Schedule of Expenditures of Federal Awards, which is required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the basic financial statements of Antelope Valley Community College District. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Lancaster, California November 17, 2006

-3- Management Discussion and Analysis Antelope Valley College Management's Discussion and Analysis Fiscal Year Ending June 30, 2006

This section of Antelope Valley College District's annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year ended June 30, 2006. Please read it in conjunction with the District's financial statements, which follow this section.

The California Community College Chancellor's Office has recommended that all State community college districts follow the new standards under the Business Type Activity (BTA) model. The District has adopted the BTA reporting model for these financial statements to comply with the recommendation of the Chancellor's Office and to report in a manner consistent and corn parable with other community college districts.

The following discussion and analysis provides an overview of the District's financial activities with emphasis on current year data. As required by the newly adopted accounting principles, the annual report consists of three basic financial statements that provide information on the District as a whole: the Statement of Net Asset; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows.

Some of the changes in the financial statements that have resulted under the BTA model from the implementation of these new standards are:

• Revenues and expenses are now categorized as either operating or non-operating; this operating information was not previously presented. • Pledges from donors (excluding permanent endowments) are recorded, as receivable and non-operating revenues at the date of the pledge. Previously, pledges were not recorded as revenue until the related gift was received. • Capital assets are now included in the statement presentations.

Statement of Net Assets

The statement of Net Assets (see page 10, Basic Financial Statements section) presents the assets, liabilities, and net assets of the district as of the end of the fiscal year using the accrual basis of accounting, which is comparable to the accounting basis used by most private-sector institutions. Net assets-the difference between assets and liabilities-are one way to measure the financial health of the district. The data allows readers to determine the assets available to continue the operations of the district. The net assets of the district consist of three major categories.

• Invested in capital assets - The district's equity in property, plant, and equipment. • Restricted net assets (divided into either expendable or nonexpendable.) - Restricted net assets are restricted by use constraints placed on them by outside parties such as through agreements, laws, or regulations of creditors or other governments or imposed by law through constitutional provisions or enabling legislation. • Unrestricted net assets - The district can use them for any lawful purpose. Although unrestricted, the district's governing board may place internal restrictions on these net assets, but it retains the power to change, remove, or modify those restrictions.

The District's financial position, as a whole, remained steady in comparison to fiscal year 2005. During the fiscal year ending June 30, 2006, its total net asset increased $7,739 or about .03 percent from the previous year due primarily to the increase in invested capital assets net of depreciation. The District, however, continues to be impacted by the suppressed economic

- 4 - climate in the state of California and increasingly significant reductions in state support resulting from the growing state budget deficit. This downturn has certainly impacted the District. Accounts receivable have increased approximately $2,585,065, or approximately 49 percent due to outstanding collections of delayed payments of liabilities owed to the District from State and Local sources.

The following chart reflects the breakdown of the District's total net assets.

Total Net Assets 8%

ll'l Invested in Capital Assets II Restricted

D Unrestricted

89%

Statement of Revenues, Expenses and Changes in Net Assets

The Statement of Revenues, Expenses and Changes in Net Assets (see page 11, Basic Financial Statements section) presents the operating results of the district. The purpose of the statement is to present the revenues received by the district, both operating and non-operating, and the expenses paid by the district, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the district. State general apportionment funds, while budgeted for operations, are considered non-operating revenues according to generally accepted accounting principles.

Changes in total net assets on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the district. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the district.

The statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year, despite a significant increase in employee benefits of approximately $668,333, or about 7.26 percent. Salaries and benefits also increased significantly by approximately $3,538,000 over fiscal year 2005 due to additional hires of faculty and classified positions. Nets assets increased at the end of the year by approximately $7,739. Although the statement shows an operating loss of $42.8 million, that balance does not reflect the $43.4 million non-operating revenue and the approximately $2.6 million of local property taxes and capital apportionments received by the District. The District reports an increase in its net assets of $7,739 for this fiscal year, and a decrease in total operating revenues of $1.9 million over fiscal year 2005. The total operating revenues loss is due to the decrease in State grants from 2005 to 2006.

- 5 - The following charts reflect the breakdown of the District's total operating revenues and expenses.

-~~~~--~~~~-~~~~~ Total Operating Revenues 1% 10% 16%

IEl Tuition and Fees

II Grants

o Auxiliary Enterprise

D Other Operating Revenues

73%

Total Operating Expenses

0.9% Ifill Salaries

29o/o II Benefits (49% o Books and Supplies D Services and Other Operating

II Depreciation

8% I!!! Other Outgo

-6- Statement of Cash Flows

The statement of cash flows (see page 12, Basic Financial Statements section) provides additional information about the district's financial results by reporting its major sources and uses of cash. This information assists readers in assessing the district's ability to generate revenue, meet its obligations as they come due, and evaluate its need for external financing. The statement is divided into several parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities and shows the sources and uses of those funds. The third sections deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section deals with cash flows from investing activities. This section reflects the cash received and spent for short-term investments and any interest paid or received on those investments. The net cash used by the District for operating activities for period ending June 30, 2006 was $37.9 million.

District's Fiduciary Responsibility

The District is the trustee, or fiduciary, for certain amounts held on behalf of students, clubs and donors for student loans and scholarships. The District's fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets. These activities are excluded from the District's other financial statements because we cannot use these assets to finance operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

Economic Factors That Will Affect the Future

The District's economic strength is directly affected by the economic well being of California. Fiscal year 2006 realized some positive economic changes in the Governor's budget for community colleges, however, state resources to the District have been reduced and the District has faced increasing demands as students seek additional training. We anticipate additional significant reductions in state funding, namely, Partnership for Excellence funding. However, with the recent passage of Senate Bill 361 by the Legislature, an additional $3, 125,000 in final equalization revenue will be realized. SB 361 also included language to replace the old "program based funding" model. With the increased revenue, the District plans to hire additional faculty and support staff to accommodate the student growth population.

In the last ten years, the state budget has often _miscalculated property tax and student fee revenues by projecting above actual collections, thereby providing less than adequate state general funds for the general apportionment. Because the revenue shortfall is not discovered until the fiscal year has virtually closed, the shortfall can threaten year-end operations and summer session offerings.

Although we continue to face an increasing number of students seeking training and job development to better compete in the contracting state economy, continuing budget cuts have resulted in a reduced capability for the District to meet the demands of its continuing student population. The District has been approved for a growth rate of almost 3.67% for fiscal year 2006- 2007, versus the almost 8% rate for prior year. The actual growth funding is dependent upon actual increase in enrollment. Due to a calendar change and no intersession for 2005-2006, the District growth was non-existent. Consequently, the District opted to revive the intersession calendar for the fiscal year 2006-2007. Early indication is that the District will recover and meet its expected allowable growth cap for 2006-2007.

- 7 - Effective Spring 2007 the Legislature approved the Governor's proposed enrollment fee decrease from $26 per credit unit to $20 for community college students, but disapproved the proposed "differential" fee of $50 for community college students with bachelor's degrees. The budget act assumes that this latest fee decrease will promote some growth for the system.

The District also anticipates one-time state funds of $1,928,000 for fiscal year 2006-2007. These funds will allow the District to evaluate and prioritize annual budget requests. Recommendations will be presented to the Board of Trustees for implementation.

- 8 - Contacting Antelope Valley College's Financial Management

This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contract the District's Office of Business Services.

- 9 - Basic Financial Statements ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT STATEMENT OF NET ASSETS JUNE 30, 2006

Component Unit District (Foundation) ASSETS:

Current Assets: Cash in County Treasury $30,077,974 Cash on Hand and in Banks 2,575,253 $40,663 Cash in Revolving Fund 30,000 Investments 1,228, 116 Accounts Receivable 7,903,223 Stores Inventories 481,756 Other Current Assets 146,920 5,600

Total Current Assets 41,215,126 1,274,379

Non-Current Assets: Capital Assets (Net) 31,989,272

Total Assets $73,204,398 $1,274,379

LIABILITIES:

Current Liabilities: Accounts Payable $7,932,492 $1,000 Due to Student Groups 94,251 Deferred Revenues 398,530 Current Portion of Long-Term Debt 2,929,061

Total Current Liabilities 11,354,334 $1,000

Non-Current Liabilities: Long-Term Debt 37,457,639

Total Liabilities 48,811,973 1,000

NET ASSETS: Invested in Capital Assets, Net of Related Debt 21,686,449 Restricted for: Non-Expendable 976,753 Expendable 801,216 228,389 Unrestricted 1,904,760 68,237

Total Net Assets 24,392,425 1,273,379

Total Liabilities and Net Assets $73,204,398 $1,274,379

The accompanying notes are an integral part of this statement.

10 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2006 Component Unit District (Foundation) OPERATING REVENUES: Tuition and Fees $3,057,899 Grants and Contracts, Non-Capital Federal 13,553,895 State 7,946,886 Local 906,638 $330,842 Auxiliary Enterprise Sales and Charges Parking Fees 282,334 Library Fines 10,412 Bookstore Sales and Commissions 4, 144, 154 Cafeteria Sales and Commissions 468,660 Child Care Parent Pay 144,028 Other Operating Revenue 250,377 Total Operating Revenues 30,765,283 330,842

OPERATING EXPENSES: Academic Salaries 24,613,578 Classified Salaries 10,699,776 31,943 Employee Benefits 9,873,648 Books and Supplies 6,118,139 Services and Other Operating Expenses 21,602,187 42,883 Program Support 262,988 Depreciation 669,709 other Outgo 77,710 Total Operating Expenses 73,654,747 337,814

OPERATING INCOME (LOSS) (42,889,464) (6,972)

NON-OPERATING REVENUES (EXPENSES) State Apportionments, Non Capital 32,461,442 Property Taxes 10,572,491 Investment Income - Non Capital 1,325,835 32, 160 Unrealized Appreciation 10, 198 Investment Income - Capital 24,833 Interest Expense - Capital (940,964) Total Non-Operating Revenues (Expenses) 43,443,637 42,358

INCOME BEFORE OTHER REVENUES (EXPENSES), GAINS OR LOSSES 554,173 35,386

OTHER REVENUES (EXPENSES) State Apportionments - Capital 34,370 Local Property Taxes and Revenues Capital 2,047,232

INCREASE (DECREASE) IN NET ASSETS 2,635,775 35,386

NET ASSETS - JUNE 30, 2005 24,384,686 1,237,993

Restatement of Post Employment Benefits Actuarial Study (2,628,036)

NET ASSETS - JUNE 30, 2006 $24,392,425 $1,273,379

The accompanying notes are an integral part of this statement.

11 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2006 Component Unit District (Foundation) CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Tuition and Fees $2,991,186 Cash Received from Grants 23,309,739 Cash Receipts (Payments) for Auxiliary Enterprises 5,008,267 Cash Receipts for Other Operating 250,377 $330,842 Cash Payments to Employees and Employee Benefits (45,053,977) (31,943) Cash Payments to Other Suppliers for Goods and Services (24,369,278) (42,883) Cash Payments for Other Operating Expenses (77, 710) (261,988) Net Cash Provided (Used) by Operating Activities (37,941,396) (5,972) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES: State Apportionment, Non Capital 32, 781,676 Property Taxes 8,645,092 Net Cash Provided (Used) by Non-Capital Financing Activities 41,426,768 0 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Issuance of Long-Term Debt 408,951 Principal and Long-Term Benefits Paid (535,445) Interest Paid - Capital (940,964) Acquisition or Construction of Capital Assets (5,805,281) Investment Income - Capital Investments 141,069 State Apportionment Capital 88,462 Local Tax and Revenues Capital 680,424 Net Cash Provided (Used) by Capital and Related Financing Activities (5,962,784) 0 CASH FLOWS FROM INVESTING ACTIVITIES: Net Loss on Sale of Land and Investments (4,912) Unrealized Changes in Market Value 10, 198 Interest and Dividends on Investments 887,863 42,072 Net Cash Provided (Used) by Investing Activities 887,863 47,358 Net Increase (Decrease) in Cash and Cash Equivalents (1,589,549) 41,386 Cash and Cash Equivalents - Beginning of Year 34,272,776 1,227,393 Cash and Cash Equivalents - End of Year $32,683,227 $1,268,779 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) ($42,889,464) ($6,972) Depreciation 669,709 Changes in Assets and Liabilities: Decrease (Increase) in Receivables 656,551 Decrease (Increase) in Inventories (31,570) Increase (Decrease) in Accounts Payable 3,515,643 1,000 Increase (Decrease) in Due to Student Groups (63,830) Increase (Decrease) in Deferred Revenue 201,565 4,948,068 1,000 Net Cash Provided (Used) by Operating Activities ($37,941,396) ($5,972) The accompanying notes are an integral part of this statement.

12 Notes to the Basic Financial Statements ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 1 -ORGANIZATION AND NATURE OF ACTIVITIES

Reporting Entity

The Antelope Valley Community College District (the "District") is the level of government primarily accountable for activities related to higher public education in the County of Los Angeles, state of California. The District consists of one community college located in Lancaster, California. The governing authority consists of five elected officials who, together, constitute the Board of Trustees.

The District is a political subdivision of the State of California and provides educational services to the local residents of the surrounding area. The District consists of one community college located in Lancaster, California. While the District is apolitical subdivision of the State, it is not a component unit of the State in accordance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 14. The District is classified as a state instrumentality under Internal Revenue Code Section 115, and is also classified as a charitable organization under Internal Revenue Code Section 501(c)(3) and is therefore exempt from federal taxes. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in generally accepted accounting principles (GAAP) and GASS Statement No. 14 as amended by GASB 39. The three criteria for requiring a legally separate, tax-exempt organization to be discretely presented as a component unit are: the "direct benefit" criterion, the "entitlement/ability to access" criterion, and the "significance" criterion. The District identified the Antelope Valley Community College Foundation (Foundation) as its only potential component unit.

The District will report the Foundation as a component unit of the District. The Foundation was established as a legally separate not-for-profit corporation to support the District and its students. It contributes to various scholarship funds for the benefit of District students and contributes directly to the District. The funds contributed directly by the Foundation are significant to the District's financial statements. Therefore, the District has classified the Foundation as a component unit that will be discretely presented in the District's annual financial statements. The Foundation also issues a stand-alone audited, financial report, which can be obtained from the District or the Foundation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation

GASB released Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments in June 1999, which established a new reporting format for annual financial statements. In November 1999 GASB released Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities, which applies the new reporting standards of GASB Statement No. 34 to public colleges and universities. GASB then amended those statements in June 2001 with the issuance of GASS Statements No. 37 and No. 38. Antelope Valley Community College District (the "District") adopted and applied these new standards beginning in 2001-02 as required. In May 2002, GASB released Statement No. 39, Determining Whether Certain Organizations are Component Units, which amends GASB Statement 14, paragraphs 41 and 42, to provide guidance for determining and reporting whether certain organizations are component units. The District adopted and applied this standard for the 2003-04 fiscal year as required. In March 2003, GASB released Statement No. 40, Deposit and Investment Risk Disclosures, which rescinds GASB 3 disclosures and it is effective for periods beginning after June 15, 2005. The District adopted and applied this standard for the 2005/2006 fiscal year as required.

The District now follows the financial statement presentation required by GASB Statements No. 34, 35, 37, 38, 39 and 40. This presentation provides a comprehensive, entity-wide perspective of the District's assets, cash flows, and replaces the fund-group perspective previously required.

- 13 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Basis of Accounting

For financial reporting purposes, the District is considered a special-purpose government engaged only in business-type activities (BTA). Accordingly, the District's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. All significant intra agency transactions have been eliminated.

The District has elected to apply all Financial Accounting Standards Board (FASB) pronouncements issued before November 30, 1989, unless FASB conflicts with GASB. The District has not elected to apply FASB pronouncements issued after that date. The budgetary and financial accounts of the District are recorded and maintained in accordance with the Chancellor's Office California Community College's Budget and Accounting Manual.

C. Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the District considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Funds invested in the county treasurer's investment pool are considered cash equivalents.

D. Accounts Receivable

Accounts receivable consist of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of California. Accounts receivable also include amounts due from the federal, state and local governments or private sources, in connection with reimbursement of allowable expenditures made pursuant to the District's grants and contracts. The District does not record an allowance for uncollectible accounts. When receivables are determined to be uncollectible, a direct write-off is recorded.

E. Inventories

Inventories, primarily bookstore merchandise, are carried at the lower of cost of market using the first-in, first-out ("FIFO") method.

F. Capital Assets

Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. Capitalized equipment includes all items with a unit cost of $5,000 or more, and estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 50 years for buildings, 15 years for portable buildings, 10 years for land improvements, 8 years for most equipment and vehicles, and 3 years for technology equipment such as computers.

G. Net Assets

The District's net assets are classified as follows:

* Invested in capital assets, net of related debt - This represents the District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component invested in capital assets, net of related debt.

- 14 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

* Restricted net assets - expendable - Restricted expendable net assets include resources that the District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

* Restricted net assets - nonexpendab/e - Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal.

* Unrestricted net assets - Unrestricted net assets represent resources derived from student tuition and fees, state apportionments, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the District, and may be used at the discretion of the governing board to meet current expenses for any purpose. Although the governing board may designate these funds for special purposes, the funds remain unrestricted.

When an expense is incurred that can be paid using either restricted or unrestricted funds, the District's policy is to utilize available restricted resources, and then utilize unrestricted resources.

H. State Apportionments

Certain current year apportionments from the State are based on various financial and statistical information of the previous year. Any prior year corrections due to the recalculation in February 2006 will be recorded in the year computed by the State.

I. On-Behalf Payments

GASB Statement 24 requires that direct on-behalf payments for fringe benefits and salaries made by one entity to a third party recipient for the employees of another, legally separate entity be recognized as revenue and expenditures by the employer government. The State of California makes direct on-behalf payments for retirement benefits to the State Teachers and Public Employees Retirement Systems on behalf of all community- colleges in California. However, a fiscal advisory issued by the California Department of Education instructed districts not to record revenue and expenditures for these on-behalf payments.

J. Deferred Revenues

Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.

K. Operating Revenues

Operating revenues include all revenues from programmatic sources. Non-operating revenues include state apportionments, state and local tax revenues, investment income, and gifts.

- 15 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

L. Classification of Revenues

The District has classified its revenues as either operating or non-operating. Certain significant revenue streams relied upon for operations are recorded as non-operating revenues, as defined by GASS Statement No. 35, including state appropriations, local property taxes, and investment income. Nearly all the District's expenses are from exchange transactions. Revenues and expenses are classified according to the following criteria:

* Operating revenues - Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, (3) most federal, state and local grants and contracts and federal appropriations, and (4) interest on institutional student loans.

* Non-operating revenues - Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources described in GASB Statement No. 35, such as state appropriations and investment income.

M. Investments

In accordance with GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, investments are reported at fair value. However, cash in the county treasury and some investments are recorded at cost, which approximates fair value. The District has also reported investments in accordance with GASB Statement 40, Deposit and Investment Risk Disclosures.

N. Restricted Cash and Cash Equivalents

Cash that is externally restricted for contractual obligations such as debt service payments, sinking or reserve funds, or to purchase or construct capital or other non-current assets, is classified as a non-current asset in the statement of net assets.

0. Compensated Absences

Compensated absence costs are accrued when earned by employees. Accumulated unpaid employee vacation benefits are recognized at year-end as liabilities of the District. The District also participates in and accrues "load banking" with eligible academic employees whereby the employee may teach extra courses in one period in exchange for time off in another period.

Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits for eligible employees when they retire.

P. Scholarship Discounts and Allowances

Student tuition and fee revenue are reported net of scholarship discounts and allowances in the statement of revenues, expenses and changes in net assets. Scholarship discounts and allowances represent the difference between stated charges for goods and services provided by the District and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell Grants, and other federal, state or nongovernmental programs, are recorded as operating revenues in the District's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the District has recorded a scholarship discount and allowance.

- 16 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS

Cash in County Treasury !included in Investment)

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Los Angeles County Treasury as part of the common investment pool, which totaled $31,903,648 as of June 30, 2006. The fair market value of this pool as of that date as provided by the pool sponsor, was $31,591,567. The District is considered to be an involuntary participant in the external investment pool. Interest is deposited into participating funds, except for the payroll-clearing fund, which is credited to the General Fund. The County is restricted by Government Code Section 53635 pursuant to Sections 53601 and 53602 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 has adopted Governmental Accounting Standards Board Statement 31 (GASB 31), which requires investments of governmental agencies to be reported at fair value. However, investment pools, such as a state or county treasury, may report the value of short-term investments with remaining maturities of less than 90 days at amortized costs. The majority of the County Treasury investments have a remaining maturity of less than 90 days. In addition, GASB 31 does not apply to immaterial cost/value differences. The District has chosen to continue to reflect investments in the County Treasury at cost.

Summary of Total Cash on Hand and in Banks ·

Cash on hand and in banks at June 30, 2006 is insured up to $100,000 by the Federal Depository Insurance Corporation (FDIC). All cash held by the financial institution is fully insured or collateralized.

Cash on hand and in banks at June 30, 2006 consisted of the following: District Foundation Deposits: Cash on Hand and In Banks $2 575 253 $ 40 663 Cash in Revolving Fund $ 30 000 $ o

The District's combined cash with one institution had exceeded the FDIC insurance maximum of $100,000 on cash deposits. However, the District obtained separate collateralization agreements for these accounts.

All cash and time deposits are entirely insured or collateralized. The California Government Code requires state banks to secure District deposits by pledging government securities as collateral. The fair value of pledged securities must equal at least 110% of the District's deposits. The District may waive collateral requirements for deposits that are fully insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC).

The surplus funds of the District may be invested in any of the approved investments contained in the California Government Code Sections 53600 et seq., limited further by the investment policy adopted by the District.

Investments

The District's investments are shown by type, carrying amount, fair value and level of risk assumed in the holding of the various securities. The level of risk assumed in the various investments are categorized as follows: ·

Category 1 - Insured or registered, or for which the securities are held by the District or its agent in the District's name. Category 2 - Uninsured and unregistered for which the securities are held by the bank's or dealer's trust department or agent in the District's name. Category 3 - Uninsured and unregistered investments for which the securities are held by the bank or dealer, or by its trust department or agent but not in the District's name.

- 17 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Category Cost Fair Value Carrying District 1 2 3 Basis Adjustment Value Los Angeles County ___ Treasury Unab.le to Assign (1) $30,077,974 ($90,234) $29,987,740

Foundation Investments $0 $1,228, 116 $0 ==$=1=,2=2=8=,1=16======$=0= ==$=1=,2=2=8,=11=6=

(1) Unable to Assign Investment in the Los Angeles County Treasurer's Investment Pool cannot be assigned a credit risk category because the District does not own specific Securities. However, the fund's investment policies and practices with regard to the credit and market risks have been determined acceptable to the District's investment policies.

DISTRICT CASH AND INVESTMENT DISCLOSURES

Investments Authorized by the District's Investment Policy

The District's investment policy authorizes investment in the local government investment pool administered by Los Angeles County. The District's investment policy does not contain any specific provisions intended to limit the District's exposure to interest rate risk, credit risk, and concentration of credit risk.

Additionally, the District may invest idle or surplus funds in accordance with California Government Code Section 53601. The following represents permissible investments per this code section

• Local agency bonds, notes or warrants within the state • United States Treasury instruments • Registered state warrants or treasury notes • Securities of the U.S. Government, or its agencies • Bankers acceptances • Commercial paper • Certificates of deposit (or lime deposits) placed with commercial banks and/or savings and loan companies • Repurchase or reverse repurchase agreements • Medium term corporate notes • Shares of beneficial interest issued by diversified management companies • Certificate of Participation • Obligations with first priority security , Collateralized mortgage obligations

The Foundation (Component Unit) has established an independent investment policy which permits the following investments:

Cash Equivalents • Treasury Bills • Money Market Funds • Commercial Paper • Banker's Acceptances , Repurchase Agreements • Certificates of Deposit

- 18 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Fixed Income Securities • U.S. Government and Agency Securities • Corporate Notes and Bonds • Mortgage Backed Bonds • Preferred Stock • Fixed Income Securities of Foreign Government and Corporations • Planned Amortization Class Collateralized Mortgage Obligations (PAC CMOs) or other "early tranche" CMOs Equity Securities • Common Stocks • Convertible Notes and Bonds • Convertible Preferred Stocks • American Depository Receipts (ADRs) of Non-U.S. Companies (Exception: emerging growth) • Stocks of Non-U.S. Companies (Ordinary Shares) Mutual Funds • Mutual Funds that invest in securities as allowed in this statement Other Assets • GIC's - Guaranteed Insurance Contracts

Investments Authorized by Debt Agreements

Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the District's investment policy. The District had no debt proceeds investments as of June 30, 2006.

Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As of fiscal year-end, the weighted average maturity of the investments contained in the Los Angeles County Investment Pool is approximately eleven (11) months.

Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuations is provided by the following table that shows the maturity date of each investment:

Maturity Cost Fair Value Fair Carrying Date Basis Difference Value Value District Los Angeles County Investment Pool - 11 month Unrestricted average $30,077,974 ($90,234) $29,987,740 $30,077,974

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations

The District's investments do not include the investments that are highly sensitive to interest rate fluctuations to a greater degree than already indicated in the information provided above.

- 19 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the District's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. The Los Angeles County Investment Pool does not have a rating provided by a nationally recognized statistical rating organization.

Minimum Exempt Legal from Not Investment Ty:Qe Rating Disclosure AAA AA+ AA- A1 A Rated Los Angeles County Investment Pool NIA $30,077,974 $0 $0 $0 $0 $0 $0 Totals $30,077,974 $0 $0 $0 $0 $0 $0

Concentration of Credit Risk

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 total investments by reporting unit are as follows:

As of June 30, 2006, $30,077,974 of the cash and investments are held in the form of a nonnegotiable unrated investment in the Los Angeles County Investment Pool.

Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure District deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2006, $1,874,931 of the District's deposits with Bank of America exceeded the FDIC (federal insurance) limits, but were fully collateralized pursuant to a District collateralization agreement.

As of June 30, 2006, $17,446 of the District's deposits with Downey Savings exceeded the FDIC (federal insurance) limits and were not collateralized.

The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools such as the Los Angeles County Investment Pool.

- 20 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Investment in Los Angeles County Investment Pool

The District is a voluntary participant in the Los Angeles County Investment Pool that is regulated by the California Government Code under the oversight of the Treasurer of the County of Los Angeles. The fair value of the District's investment in this pool is reported in the accompanying financial statements at amounts based upon the District's pro-rata share of the fair value provided by Los Angeles County for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by Los Angeles County, which are recorded on an amortized cost basis.

Derivative Investments

The District did not directly enter into any derivative investments.

COMPONENT UNIT I FOUNDATION CASH AND INVESTMENT DISCLOSURES

General

The Foundation has adopted Governmental Accounting Standards Board Statements 31 and 40 (GASS 31 and 40), which requires investments of governmental agencies to be reported at fair values. Cash and investments as of June 30, 2006, are classified in the accompanying financial statements as follows:

Summary of Net Assets Cash and Investments: Cash and Investments $62,637 Restricted Cash and Investments 1,206,142 Total Cash and Investments $1,268,779

Cash and investments as of June 30, 2006, consist of the following:

Unrestricted Restricted Totals

Deposit with Financial Institutions $40,663 $0 $40,663 Investments 21,974 1,206,142 1,228,116 Total Cash and Investments $62,637 $1,206,142 $1,268,779

Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Foundation manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by liming cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over lime as necessary to provide the cash flow and liquidity needed for operations.

-21 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

As of June 30, 2006, the Foundation had the following investments:

Maturity Amount Date Mutual Funds: Janus Fund $23,739 N/A Janus Twenty Fund 27,862 N/A Pimco Total Return • D 90,342 N/A Van Kampen Equity & Income • A 28,362 N/A Wells Government Securities 112,836 N/A Fidelity Advisor New Insights 17,042 N/A RVS Diversified EQ .Inc.· A 11,855 N/A American Century Equity Income Adv. 21,749 N/A American Century Cent Vista 23,693 N/A Davis New York Venture 31,949 N/A Fidelity High Income Adv. 44,891 N/A Fidelity Advisor Strat Income 23,598 N/A Oppenheimer Capital Apprec. 24,881 N/A Pimco Total Return 60,327 N/A Van Kampen Growth & Income 55,535 N/A American Centruy lnfl. Adj. Bond 14,681 N/A Fidelity New Insights 56,658 N/A Oppenheimer Small & M/Cap Val • A 16,807 N/A Van Kampen Equity & Income 15,941 N/A Sub-Total Mutual Funds 702,748 Securities: Simulations Plus 19,700 N/A Money Market Funds: Amerprise Financial 55,918 N/A Amerprise Financial 200,543 N/A Sub-Total Money Market Funds 256,461 Certificates of Deposit: Amerprise Financial 60,203 08/2006 Amerprise Financial 88,652 10/2006 Amerprise Financial 100,352 11/2006 Sub-Total Certificates of Deposit · 249,207

Total Investments $1,228,116

• 22 • ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations

None of the Foundation's investments were held in investments that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above):

Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Foundation's investment policy, or debt agreements, and the actual rating as of year-end for each investment type.

Minimum Exempt Legal from Not Investment TyQe Rating Disclosure AA+ A+ A Rated Certificates of Deposits N/A $249,207 Money Market N/A 256,461 Securities $19,700 Mutual Funds N/A 702,748 Totals $505,668 $0 $0 $0 $722,448

Concentration of Credit Risk

The investment policy of the Foundation contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. The Foundation did not maintain any investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total Foundation investments.

Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Foundation's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure Foundation deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

-23 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 3 - CASH AND INVESTMENTS (Continued)

Component Unit Investment Earnings

Investment earnings are summarized as follows for the year ended June 30, 2006:

Investment Earnings

Interest and Dividends on Investments $42,072 Realized Gains/(Losses) on Investment Sold: Gross Proceeds $32,600 Cost 42,512 {9,912)

Total Investment Earnings {Loss) 32,160

Unrealized Gains I (Losses}

Unrealized Gain /(Loss) on Investments Sold Recorded in Previous Years 8,143 Unrealized Gains {Losses) on Investments Recorded in Current Year 2,055

Total Unrealized Gains I (Losses) 10,198

Net Investment Earnings $42,358

NOTE 4-ACCOUNTS RECEIVABLE

Receivables at June 30, 2006 consist of the following:

Federal Government:

Federal Financial Assistance Programs $324,204 Total Federal $324,204 State Government:

State Financial Assistance Programs 5,062,925 Total State 5,062,925 Local Receivables:

Local Sources 2,053,786 Interest Receivable 462,308 Total Local 2,516,094 Total Accounts Receivable $7,903,223

- 24 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 5 - CAPITAL ASSETS

The changes in general fixed assets for the year ended June 30, 2006, are shown below:

Balance Balance Julx 1, 2005 Additions Deductions June 30, 2006 Land $2,430,691 $2,430,691 Sites, Buildings and improvements 36,127,381 $4,131,823 40,259,204 Machinery and Equipment 5,272,733 1,673,458 6,946,191 Totals 43,830,805 5,805,281 ___$"-'O'-- 49,636,086 Less: Accumulated Depreciation Sites, Buildings and Improvements 13,637,050 585,624 14,222,674 Machinery and Equipment 3,340,055 84,085 3,424,140 Totals 16,977,105 669,709 -----'o'- 17,646,814 Capital Assets - Net $26,853,700 $5,135,572 ===$~0~ $31,989,272

Depreciation Expense was charged as follows: Instruction $632,002 Transportation 37,707 Total Depreciation Expense $669,709

NOTE 6 - LEASES

A. Capital Lease Obligations

The District has not entered into any leases for buildings or equipment which provide for title to pass upon expiration of the lease period.

B. Operating Leases

The District has entered into an operating lease for buildings and facilities with lease terms in excess of one year. Future minimum lease payments are as follows:

Year Ending L.ease June 30, Payment 2007 $113,140 2008 11,368 2009 2,116 2010 2,116 2011 1,940 Total $130,680

- 25 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 7 - GENERAL OBLIGATION BONDS AND OTHER LONG TERM DEBT OBLIGATIONS

General Obligation Bonds

On May 17, 2005, the District sold $30,000,000 of 2004 General Obligation Bonds, Series 2004A. These bonds represent the first series issued pursuant to authorization received from an election held November 2, 2004, to issue $139,000,000 of general obligation bonds. The Series 2004A bonds in the amount of $30,000,000 mature in August 2029, carrying an interest rate which ranges from 3.00% to 5.00%. The remaining $109,000,000 authorized bonds will remain available for future issuance. At June 30, 2006, the principal balance outstanding was $30,000,000.

The outstanding general obligation bonded debt of Antelope Valley Community College District at June 30, 2006:

Date of Interest Maturity Amount of Outstanding Issued in Redeemed in Outstanding Issue Rate Date Original Issue July 1, 2005 Current Year Current Year June 30, 2006 3.00% to 05/17105 5.00% 08101/29 $30,000,000 $30,000,000 $0 $0 $30,000,000

$30,000,000 $30,000,000 $0 $0 $30,000,000

The annual requirements to amortize general obligation bonds payable outstanding as of June 30, 2006, are as follows:

Year Ending June 30, Principal Interest Total 2007 $2,250,000 $1,299,900 $3,549,900 2008 2,875,000 1,223,025 4,098,025 2009 45,000 1,179,225 1,224,225 2010 105,000 1,176,975 1,281,975 2011 165,000 1, 172,925 1,337,925 2012 - 2016 1,915,000 5,709,622 7,624,622 2017 - 2021 4,345,000 5, 109,734 9,454,734 2022 - 2026 8,040,000 3,660,500 11,700,500 2027 - 2031 10,260,000 1,088,500 11,348,500 Totals $30,000,000 $21,620,406 $51,620,406

- 26 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 7 - GENERAL OBLIGATION BONDS AND OTHER LONG TERM DEBT OBLIGATIONS (Continued)

Loan Payable - California Energy Commission

The District entered into three loan agreements during 2002 and 2003 for the installation of energy conservation measures on the District campus. The original amount of the loans was $1,696,227 payable semi-annually with interest at 3.00 percent. At June 30, 2006, the principal balance outstanding was $1,049, 723.

The loans mature through September 2012 as follows:

Year Ending June 30, Principal Interest Total 2007 $178,918 $23, 164 $202,082 2008 184,261 24,820 209,081 2009 184,862 19, 187 204,049 2010 185,342 13,675 199,017 2011 190,944 8,073 199,017 2012 - 2016 125,396 4,748 130,144 Totals $1,049,723 $93,667 $1, 143,390

COMBINED FUTURE DEBT OBLIGATIONS

General Obligation Bonds and Energy Conservation Loans maturities through August 1, 2029 are as follows:

Year Ending June 30, Principal Interest Total 2007 $2,428,918 $1,323,064 $3,751,982 2008 3,059,261 1,247,845 4,307, 106 2009 229,862 1, 198,412 1,428,274 2010 290,342 1, 190,650 1,480,992 2011 355,944 1,180,998 1,536,942 2012 - 2016 2,040,396 5,714,370 7,754,766 2017 - 2021 4,345,000 5, 109,734 9,454,734 2022 -2026 8,040,000 3,660,500 11, 700,500 2027 - 2031 10,260,000 1,088,500 11,348,500 Totals $31,049,723 $21,714,073 $52, 763, 796

- 27 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 8 - LONG-TERM DEBT SCHEDULE OF CHANGES

A schedule of changes in long-term debt for the year ended June 30, 2006, is shown below:

Restated Balance Per Study Balance Due within Jult 1, 2005 (See Note 11) Additions Deductions June 30, 2006 one year

General Obligation Bonds $30,000,000 $30,000,000 $2,250,000 California Energy Commission 1,223,391 $173,668 1,049,723 178,918

Sub-Total Debt Obligations 31,223,391 $0 $0 173,668 31,049,723 2,428,918

Retiree Health Benefits 5, 195,962 2,628,036 365,537 214,857 7,974,678 353,223 Compensated Absences 878, 125 43,414 921,539 0 Early Retirement Incentives 587,680 146,920 440,760 146,920 Sub-Total Employment Obligations 6,661,767 2,628,036 408,951 361,777 9,336,977 500, 143 Totals $37,885, 158 $2,628,036 $408,951 $535,445 $40,386, 700 $2,929,061

- 28 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 9 - EMPLOYEE RETIREMENT SYSTEMS

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 Antelope Valley Community College 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, disability, and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. 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 8.00% of their salary and the Antelope Valley Community College 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 required employer contribution rate for fiscal year 2005/2006 was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The Antelope Valley Community College District's contributions to STRS for the fiscal years ended June 30, 2006, 2005, and 2004 were $1,625,516, $1,418,045, and $1,304, 152, respectively, and equal 100% of the required contributions for each year.

California Public Employees' Retirement System (Cal PERS) Plan Description The Antelope Valley Community College District contributes to the School Employer Pool under the California Public Employees' Retirement System (C~IPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits; annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. 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 7.00% of their salary (7% of monthly salary over $133.33 if the member participates in Social Security), and the Antelope Valley Community College 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. The required employer contribution rate for fiscal year 2005/2006 was 9.116% of annual payroll. The contribution requirements of the plan members are established by state statute. The Antelope Valley Community College District's contributions to CalPERS for the fiscal years ended June 30, 2006, 2005, and 2004 were $763,597, $758,979, and $713,943, respectively, and equal 100% of the required contributions for each year.

- 29 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 10 - JOINT VENTURES {JOINT POWERS AGREEMENT)

The Antelope Valley Community College District participates in three joint ventures under joint powers agreements (JPAs): Protected Insurance Programs for Schools for Workers' Compensation, Self Insurance Risk Management Authority for Liability and Property Protection, and Self Insurance Risk Management Authority for Employee Benefits. The relationship between the Antelope Valley Community College District and the JPAs is such, that the JPAs are not considered a component unit of the Antelope Valley Community College District for financial reporting purposes.

A. Protected Insurance Programs for Schools IPIPS) - The PIPS provides Workers' Compensation coverage to its fifteen (15) members:

ABC Unified School District Anaheim Union School District Antelope Valley Community College District Calexico Unified School District Coast Community College District El Camino Community College District Grossmont-Cuyamaca Community College District Mt. San Antonio Community College District Ontario Montclair School District Redlands Unified School District Rialto Unified School District Santa Barbara Community College District Saugus Union School District South Orange County Community College District Ventura Community College District

All members are public school districts. All of the members of the PIPS - Workers' Compensation are located in Southern California.

The PIPS is governed by a board consisting of a representative from each member district. The board controls the operations of the PIPS, 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 of coverage requested and shares surpluses and deficits proportionately to their participation in the PIPS.

B. Self Insurance Risk Management Authority (SIRMA) Liability and Property Protection - The SIRMA arranges for and provides liability and property insurance for its fifteen (15) members.

Acton-Agua Dulce Unified School District Antelope Valley Community College District Antelope Valley Schools Transportation Agency Castaic Union School District Eastside Union School District Gorman School District Guidance Charter School Hughes-Elizabeth Lakes Union School District Keppel Union School District Lancaster School District Newhall School District Palmdale School District Santa Clarita Valley School Food Services Agency Saugus Union School District Sulphur Springs Union School District

- 30 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 10-JOINT VENTURES (JOINT POWERS AGREEMENT) {Continued}

All members except two are public school districts. The two non public school district members are Joint Powers Authorities consisting of several public school districts. All of the members of the Self Insurance Risk Management Authority - Liability and Property Protection are located in the northern part of Los Angeles County.

The SIRMA is governed by a board consisting of a representative from each member district. The board controls the operations of the SIRMA, 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 of coverage requested and _shares surpluses and deficits proportionately to their participation in the SIRMA.

C. Self Insurance Risk Management Authority (SIRMA) Employee Benefits - The SIRMA provides services for the operations and maintenance of a self-insured system for dental, vision and life insurance for eligible employees and their eligible dependents of the public educational agencies that are members thereof. SIRMA- Employee Benefits has nine (9) members:

Antelope Valley Community College District Antelope Valley Schools Transportation Agency Antelope Valley Union High School District Las Virgenes Unified School District Santa Clarita Community College District Santa Paula Union High School District Saugus Union School District Sulphur Springs Union School District William S. Hart Union High School District

All members except one are public school districts. The one non public school district member is a Joint Powers Authority consisting of several public school districts. All of the members of the Self Insurance Risk Management Authority - Employee Benefits are located in the northern part of Los Angeles County.

The SIRMA is governed by a board consisting of a representative from each member district. The board controls the operations of the SIRMA, 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 of coverage requested and shares surpluses and deficits proportionately to their participation in the SIRMA.

Unaudited condensed financial information of PIPS {Workers' Compensation}, SIRMA {Liability and Property Protection}, SIRMA {Employee Benefits}, and Santa Clarita Valley School Food Services Agency for the year ended June 30, 2006 is as follows: Protected SIRMA Insurance Liability SIRMA Programs and Property Employee for Schools Protection Benefits Total Assets Not $2,504,937 $2,416,283 Total Liabilities Available 1,963,715 1,692,418 Fund Equity I Retained Earnings $541,222 $723,865 Total Revenues Not $2,832,467 $5,495,203 Total Expenditures Available 2,981,597 5,879,356 Net Increase {Decrease} in Fund Equity I Retained Earnings ($149,130) ($384,153)

The District's share of year end assets, liabilities or fund equity in these JPAs has not been calculated. • 31 • ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 11 - POST EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

In addition to the pension benefits described in Note 10, the District provides post retirement health care benefits as follows:

A. Certificated Personnel

This plan is a retirement incentive program for academic employees who retire prior to age 65. An employee may choose one plan or the other, but may not combine the benefits of the two plans. Recipients of the benefit shall receive all health and accident, dental, vision, and life insurance coverage for the employee and dependents that, insofar as possible, are the same plans and contain the same benefits as the health and accident insurance coverage that remain in force for regular and active certificated employees of the District during the period covered by this benefit. The following specific regulations will apply to retirees under this plan:

1. For employees retiring before the year in which they reach their 55

2. During the entire period of this benefit, the retired employee must be actively drawing service retirement benefits from either the State Teachers' Retirement System (STRS) or the Public Employees' Retirement System (PERS).

3. To be eligible for health and accident insurance coverage under this plan, an employee must have been eligible for health insurance while an active employee and immediately prior to receiving this benefit.

4. This benefit is to terminate on the 65'" birthday of the retired employee.

5. The applicant must be at least 55 years. of age prior to July 1 of the year of early retirement.

6. The effective date of this benefit shall be July 1, following the receipt of a qualified application.

7. Applications to participate in this program must be directed to the President by February 1 of the academic year preceding the effective date of early retirement.

8. Classified Personnel

The plan is an incentive benefit for classified employees who retire between the ages of 60 and 65. Recipients of the benefit shall receive all health and accident, dental, vision and life insurance coverages for the employee and dependents, that insofar as possible, are the same plans and contain the same benefits as the health and accident insurance that remains in force for regular active classified employees of the District during the period covered by this benefit.

- 32 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCiAL STATEMENTS JUNE 30, 2006

NOTE 11 - POST EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS (Continued)

The following specific regulations shall apply to classified retirees under this plan:

1. The minimum age shall be 55.

2. The employee must have been employed full-time by the District for a period of:

Classified

Twenty (20) years prior to retirement at ages 57 to 59. Ten (10) years prior to retirement at age 60. Nine (9) years prior to retirement at age 61. Eight (8) years prior to retirement at age 62.

Faculty and Management

Ten (10) years prior to retirement at age 55.

3. During the entire period of this benefit, the retired employee must be actively drawing service retirement from the Public Employees' Retirement System (PERS).

4. The employee must have been eligible for health insurance while an active employee and immediately prior to receiving this benefit.

1 5. The benefit is to terminate on the 65 " birthday of the retired employee.

C. Funding Status

During the year the District provided a total of $214,857 of post retirement benefits to 24 certificated and classified retiree participants.

In September of 2006 the District had an actuarial valuation of their post retirement health benefit obligation. This valuation calculated the present value of future benefit obligations for the current group of certificated and management employees and the value, less payments made, is estimated to be $7,974,678. This obligation has been reflected in the District's government-wide financial statement. Additional disclosures as required under GASS 12 are as follows:

Actuarial cost method: Entry age normal

Interest rate assumption: 501o

Projected salary increase assumption: 3%

Health inflation assumption:

Actuarially required contributions year beginning May 1, 2006 Normal cost: $ 766,452 Unfunded past service liability amortization: $ 353,223 Actuarial accrued liability as of May 1, 2006 $7,974,678

- 33 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 12 - EARLY RETIREMENT INCENTIVE

In prior fiscal years the District entered into agreements to provide both its academic and classified personnel with early retirement incentives.

DISTRICT SPONSORED

A. Certificated Program

Eligibility: Be at least 50 years of age on date of retirement and a full time employee for at least 8 years.

Benefits: A retiring employee may choose either the Cash Incentive or the Service Credit option described below:

Cash Option - Unit member retiring under this option shall receive a $26,000 cash incentive payable in four equal installments of $6,500 over the next four years.

Service Credit - Under this option a qualifying retiree shall receive two additional years of STRS service credit, paid for by the District, pursuant to the provisions of Education Code Section 22726 and 87488.

Health Insurance Benefits - In addition to the Cash Option .!!!: the Service Credit each qualified retiree shall receive District paid health insurance premiums up to $6,000 per year until the age of 65 or 5 years, whichever is longer, with the following exceptions:

Qualified retirees under the age of 55 would be limited to a maximum of 1O years District paid health insurance.

Retirees eligible for health benefits may choose to waive the benefits option of the retirement incentive and instead receive a $3,000 cash payment each year they would have been eligible to receive those benefits.

Retirees with 35 Years of Service - Retirees with 35 or more years of service with the District could choose to receive 1O years of District paid health insurance premiums up to $6,000 per year but would not be eligible to receive either the Cash Option or the Service Credit.

B. Classified Program

Eligibility: Be at least 55 years of age on date of retirement and a full time employee for at least 10 years.

Benefits: A retiring employee will receive $15,000 paid over a 3-year period. The retiree may choose to receive the $5,000 per year in cash or use it towards purchasing the District's health insurance.

GOLDEN HANDSHAKE

The District did not adopt any early retirement incentive program, pursuant to Education Code Sections 22714 and 44929, whereby the service credit to eligible employees is increased by two years.

- 34 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 13 -COMMITMENTS AND CONTINGENCIES

State and Federal Allowances. Awards and Grants - The District has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursements will not be material.

Litigation - The District was involved in several matters of litigation as of June 30, 2006. The matters of litigation centered around construction stop notice enforcements and employee discrimination charges. The District and its counsel believe there will be favorable settlement on all construction matters with no monetary impact on the District. The District and its counsel are unable to speculate on the outcome of the employee discrimination · charges and reservations for costs (if any) cannot be estimated as of the date of this audit report.

NOTE 14 - FUNCTIONAL EXPENSES

Services Academic Classified Employee Books and and Other Other Salaries Salaries Benefits Supplies Operating Depreciation Outgo Totals

Instruction $20,644,217 $5,434,598 $1,119,046 $54,265 $27,252.126 Instruction- Related 1,540,738 $6, 189,629 2,790,132 1,215,923 1,287,714 13,024,136 Pupil Services 2,912,993 6,660,860 $77,710 9,651,563 Ancillary Services 168,770 174,551 19,210 3,911 366,442 Community Services 163 3,924 468 4,555 General Adm in 2,428,460 2,845,056 1,412,169 490,034 1, 163,480 8,339, 199 Plant Service 1,492,397 61,730 360,933 12,431,957 14,347,017 Depreciation $669,709 669,709

Totals $24,613,578 $10,699,776 $9,873,648 $6,118,139 $21,602,187 $669,709 $77,710 $73,654,747

NOTE 15 - EXCESS OF EXPENDITURES OVER APPROPRIATIONS

As of June 30, 2006, expenditures exceeded final appropriations as follows:

Excess Appropriations Category Expenditures

Primary Government: Academic Salaries $ 296,329 Books and Supplies $ 2,870,675 Services and Other Operating Expenses $ 524,134

- 35 - ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006

NOTE 16 - COMPLIANCE AND ACCOUNTABILITY

A. Finance-Related Legal and Contractual Provisions.

In accordance with GASB Statement No. 38, "Certain Financial Statement Note Disclosures," violations of finance-related legal and contractual provisions, if any, are reported below, along with actions taken to address such violations:

Violation Action Taken None reported Not applicable

B. Deficit Fund Balance or Fund Net Assets of Individual Funds

Following are funds having deficit fund balances or fund net assets at year-end, if any, along with remarks which address such deficits:

Fund Name Deficit Amount Remarks Corporate and Community Education $466,466 Note 17 Child Development $ 45,184 Note 17

NOTE 17 - DEFICIT FUND BALA_NCE

As disclosed in the financial statements, the Corporate and Community Education Fund ended the June 30, 2006 fiscal year with a deficit fund balance of $466,466. The Child Development Fund ended the June 30, 2006 fiscal year with a deficit fund balance of $45, 184. The fund deficits are expected to return to positive balances during the 2006/07 fiscal year as funding sources and interfund transfers received are expected to exceed the 2006/07 budgeted costs and the 2005/06 deficit amounts.

- 36 - APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the Antelope Valley Community College District (the "District") in connection with the issuance of $52,536,256.40 General Obligation Bonds, Election of 2004, Series B (the "Series B Bonds") and $56,460,276.45 General Obligation Bonds, Election of 2004, Series C (the "Series C Bonds", and together with the Series B Bonds, the "Bonds"). The Series B Bonds are being issued pursuant to a resolution of the District adopted on July 9, 2007 (the "Series B Resolution"). The Series C Bonds are being issued pursuant to a resolution of the District adopted on July 9, 2007 (the "Series C District Resolution") and a Resolution of the County of Los Angeles dated August 21, 2007 (the "County Resolution"). The Series C District Resolution together with the County Resolution are referred to as the "Series C Resolution." The "Series B Resolution together with the "Series C Resolution" are referred to as the "'Resolutions."

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b )(5).

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

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

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

"Dissemination Agent" shall mean initially the District, or any successor Dissemination Agent designated in writing by the District (which may be the District) and which has filed with the District a written acceptance of such designation.

"Holders" shall mean registered owners of the Bonds.

"Listed Events" shall mean any of the events listed in Section 5( a) of this Disclosure Certificate.

"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission can be found at www.sec.gov/info/municipal/nrmsir.htrn or www.sec.gov.

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

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

C-1 "Rule" shall mean Rule 15c2-12(b )(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"State" shall mean the State of California.

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

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District's fiscal year (presently ending June 30), commencing with the report for the 2006-07 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited fmancial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are 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 ).

(b) Not later than 30 days (nor more than 60 days) prior to said date the Dissemination Agent shall give notice to the District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than 15 Business Days prior to said date, the District shall provide the Annual Report in a format suitable for reporting to the Repositories to the Dissemination Agent (if other than the District), with a copy to the Participating Underwriter. If the District is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the District shall send a notice to each Repository in substantially the form attached as Exhibit A with a copy to the Dissemination Agent. The Dissemination Agent shall not be required to file a Notice to Repositories of Failure to File an Annual Report.

( c) The Dissemination Agent shall file a report with the District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided and listing all the Repositories to which it was provided.

SECTION 4. Content of Annual Reports. The District's Annual Report shall contain or include by reference the following:

I. The audited fmancial statements of the District for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited fmancial statements in a format similar to the financial statements contained in the final Official Statement, and the audited fmancial statements shall be filed in the same manner as the Annual Report when they become available.

2. Material fmancial information and operating data with respect to the District of the type included in the Official Statement in the following categories (to the extent not included in the District's audited fmancial statements):

C-2 (a) State funding received by the District for the last completed fiscal year;

(b) enrollment of the District for the last completed fiscal year;

( d) summary fmancial information on revenues, expenditures and fund balances for the District's general fund reflecting adopted budget for the current fiscal year.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

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

I. principal and interest payment delinquencies,

2. non-payment related defaults,

3. modifications to rights of Bondholders,

4. optional, contingent or unscheduled bond calls,

5. defeasances,

6. rating changes,

7. adverse tax opinions or events affecting the tax-exempt status of the Bonds,

8. unscheduled draws on the debt service reserves reflecting fmancial difficulties,

9. unscheduled draws on the credit enhancements reflecting financial difficulties,

10. substitution of the credit or liquidity providers or their failure to perform,

11. release, substitution or sale of property securing repayment of the Bonds.

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

(c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the District shall promptly file a notice of such occurrence with the Repositories or provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)( 4) and (5) need not be given under C-3 this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolutions. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the District's determination of materiality pursuant to Section 5(b ).

SECTION 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(a).

SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent ( or substitute Dissemination Agent) to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign upon 15 days written notice to the District. Upon such resignation, the District shall act as its own Dissemination Agent until it appoints a successor. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate and shall not be responsible to verify the accuracy, completeness or materiality of any continuing disclosure information provided by the District. The District shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed by the parties. Any entity succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 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 the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances;

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds; and

( d) No duties of the Dissemination Agent hereunder shall be amended without its written consent thereto.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report. and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type ( or in the case of a change of accounting principles, on the presentation) of fmancial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the

C-4 financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

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

SECTION 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate 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 Resolutions, 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. The Dissemination Agent acts hereunder solely for the benefit of the District; this Disclosure Certificate shall confer no duties on the Dissemination Agent to the Participating Underwriter, the Holders and the Beneficial Owners. 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 gross 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. The Dissemination Agent shall have no liability for the failure to report any event or any fmancial information as to which the District has not provided an information report in format suitable for filing with the Repositories. The Dissemination Agent shall not be required to monitor or enforce the District's duty to comply with its continuing disclosure requirements hereunder.

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

To the District: Antelope Valley Community College District 3041 West Avenue K Lancaster, California 93536

To the Dissemination Agent: Antelope Valley Community College District 3041 West Avenue K Lancaster, California 93536

C-5 SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Signature. This Disclosure Certificate has been executed by the undersigned on the date hereof, and such signature binds the District to the undertaking herein provided. Date: September 13, 2007 ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

Superintendent/President

C-6 EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of District: ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

Name of Bond Issue: General Obligation Bonds, Election of 2004, Series B General Obligation Bonds, Election of 2004, Series C

Date oflssuance: September 13, 2007

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The District anticipates that the Annual Report will be filed by ______

ANTELOPE VALLEY COMMUNITY COLLEGE DISTRICT

By [form only; no signature required]

C-7 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIXD

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy or completeness thereof The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownershzp interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner ofthe Bonds, or that they will so do on a timely basis or that DTC, DTC Particzpants or DTC Indirect Particzpants will act in the manner described in this Official Statement. 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.

General

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

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New 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 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 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, in tum, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries ofDTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") 1s m turn to be recorded on the Direct and Indirect

D-1 Participants' records. Beneficial Owners will not receive written confinnation 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 certificates 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 DTC 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.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative ofDTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the 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 the 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 the 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.

A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Paying Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on D-2 DTC's records and followed by a book-entry credit of tendered Bonds to the Paying Agent's DTC account.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or Paying Agent. Under such circumstances, in the event that a successor 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 transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

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

Discontinuation of Book-Entry Only System; Payment to Beneficial Owners

In the event that the book-entry system described above is no longer used with respect to the Bonds, the following provisions will govern the payment, transfer and exchange of the Bonds.

The principal of the Bonds and any premium and interest upon the redemption thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the office of the Paying Agent. Interest on the Bonds will be paid by the Paying Agent by check or draft mailed to the person whose name appears on the registration books of the Paying Agent as the registered owner, and to that person's address appearing on the registration books as of the close of business on the Record Date. At the written request of any registered owner of at least $1,000,000 in aggregate principal amount, payments shall be wired to a bank and account number on file with the Paying Agent as of the Record Date.

Any Bond may be exchanged for Bonds of any authorized denomination upon presentation and surrender at the office of the Paying Agent together with a request for exchange signed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred only on the Bond registration books upon presentation and surrender of the Bond at such office of the Paying Agent together with an assignment executed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of any authorized denomination or denominations requested by the owner equal in the aggregate to the umnatured principal amount of the Bond surrendered and bearing interest at the same rate and maturing on the same date.

Neither the District, the County nor the Paying Agent will be required (a) to issue or transfer any Bonds during a period beginning with the opening of business on the 15th business day next preceding any Bond Payment Date, the stated maturity of any of the Bonds or any date of selection of Bonds to be redeemed and ending with the close of business on the applicable Bond Payment Date, the close of business on the applicable stated maturity date or any day on which the applicable notice ofredemption is given or (b) to transfer any Bonds which have been selected or called for redemption in whole or in part.

D-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E

FORM OF MUNICIPAL BOND INSURANCE POLICY

E-1 (THIS PAGE INTENTIONALLY LEFT BLANK) FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer"), in consideratim of the payment of the premium and subject to the terms of this policy, hereby uncmditionally and irrevocably guarantees to any owner, as hereinafter defmed, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to [PA YING AGENI/TRUSTEE] or its successor (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleratim resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects in its sole discretion, to pay in whole or in part any principal due by reasm of such acceleration); and (ii) the reimbursement of a such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment cmstitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean:

[PAR] [LEGAL NAME OF ISSUE]

Upm receipt of telephonic or telegraphic notice, such notice subsequently confmned in writing by registered or certified mail or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligatim the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer m the due date of such payment or within me business day after receipt of notice of such nmpayment, whichever is later, will make a deposit of funds, in an account with US. Bank Trust National Association, in New York, New Yark, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assigrnnent to evidence the assigrnnent of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts m the Obligations, such instruments being in a form satisfactory to US. Bank Trust National Association, US. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due m such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer cmstitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Annorik, New Yark 10504 and such service of process shall be valid and binding. This policy is nm-cancellable for any reason The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. In the event the Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1CX53) of Chapter 1 of Part 2 of Divisim 1 of the California Insurance Code. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile m its behalf by its duly authorized officers, this [DAY] day of [MONTH, YEAR].

Attest: Assistant Secretary STD-R-CA-7 01/05 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX F

ACCRETED VALUE TABLES

F-1 (THIS PAGE INTENTIONALLY LEFT BLANK) BOND ACCRETED VALUE TABLE

Antelope Valley Corrmunity College District General Obligation Bonds, Election of 2004, Series B

Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds 08Plf.W32 08P1ieo33 08P1ieo34 08P1iem5 08P1ieo35 Date 5.63% 5.64% 5.65% 5.66!6 5.67%

09113ieoo1 1,255.90 1,185.05 1,118.05 1,054.55 994.55 02p1ieoos 1,282.90 1,210.60 1, 142.15 1,077.40 1,016.05 08P1ieoos 1,319.00 1,244.75 1, 174.45 1,107.85 1,044.90 02p1ie009 1,356.15 1,279.85 1,207.60 1, 139.20 1,074.50 08Plie009 1,394.35 1,315.95 1,241.70 1,171.45 1,104.95 02p1 ie010 1,433.60 1,353.05 1,276.80 1,204.60 1, 136.30 08P1ie010 1,473.95 1,391.20 1,312.85 1,238.70 1, 168.50 02p1 ieo11 1,515.40 1,430.45 1,349.95 1,273.75 1,201.65 08Pl ieo11 1,558.10 1,470.80 1,388.10 1,309.80 1,235.70 02p1 ie012 1,601.95 1,512.25 1,427.30 1,346.90 1,270.75 08Pl ie012 1,647.05 1,554.90 1,467.65 1,385.00 1,306.75 02p1ieo13 1,693.40 1,598.75 1,509.10 1,424.20 1,343.80 08P1ieo13 1,741.10 1,643.85 1,551.75 1,464.50 1,381.90 02p1ie014 1,790.10 1,690.20 1,595.55 1,505.95 1,421.10 08P1ie014 1,840.50 1,737.85 1,640.65 1,548.55 1,461.35 02p1 ie015 1,892.30 1,786.85 1,687.00 1,592.40 1,502.80 08Pl ie015 1,945.55 1,837.25 1,734.65 1,637.45 1,545.40 02p1 ie016 2,000.35 1,889.05 1,783.65 1,683.80 1,589.20 08P1ie016 2,056.65 1,942.35 1,834.05 1,731.45 1,634.30 02p1 ie011 2, 114.55 1,997.10 1,885.85 1,780.45 1,680.60 08P1ie011 2, 174.05 2,053.45 1,939.15 1,830.85 1,728.25 02p1 ie018 2,235.25 2,111.35 1,993.90 1,882.65 1,777.25 08P1ie018 2,298.20 2, 170.90 2,050.25 1,935.95 1,827.65 02p1 ie019 2,362.85 2,232.10 2, 108.15 1,990.70 1,879.45 08P1ie019 2,429.40 2,295.05 2,167.70 2,047.05 1,932.75 02p1ieo20 2,497.80 2,359.75 2,228.95 2, 105.00 1,987.55 08P1ieo20 2,568.10 2,426.30 2,291.95 2, 164.55 2,043.85 02p1 ieo21 2,640.40 2,494.75 2,356.70 2,225.80 2, 101.80 08Pl ieo21 2,714.70 2,565.10 2,423.25 2,288.80 2, 161.40 02p1ieo22 2,791.15 2,637.45 2,491.70 2,353.60 2,222.70 08P1ieo22 2,869.70 2,711.80 2,562.10 2,420.20 2,285.70 02p1ieo23 2,950.50 2,788.30 2,634.50 2,488.70 2,350.50 08P1ieo23 3,033.55 2,866.90 2,708.90 2,559.10 2,417.15 02p1ieo24 3,118.95 2,947.75 2,785.45 2,631.55 2,485.65 08P1ieo24 3,206.75 3,030.90 2,864.10 2,706.00 2,556.15 02p1ieo25 3,297.00 3,116.35 2,945.05 2,782.60 2,628.60 08P1ieo25 3,389.80 3,204.25 3,028.25 2,861.35 2,703.10 02p1ieo26 3,485.25 3,294.60 3, 113.80 2,942.30 2,779.75 08P1ieo26 3,583.35 3,387.50 3,201.75 3,025.60 2,858.55 02p1ieo21 3,684.20 3,483.05 3,292.20 3, 111.20 2,939.60 08P1ieo21 3,787.95 3,581.25 3,385.20 3, 199.25 3,022.95 02p1ieo28 3,894.55 3,682.25 3,480.85 3,289.80 3, 108.65 08P1ieo28 4,004.20 3,786.10 3,579.15 3,382.90 3, 196.75 02p1ieo29 4,116.90 3,892.85 3,680.30 3,478.65 3,287.40 08P1ieo29 4,232.80 4,002.65 3,784.25 3,577.10 3,380.60 02p1iemo 4,351.95 4, 115.50 3,891.15 3,678.30 3,476.45 BOND ACCRETED VALUE TABLE

Antelope Valley Corrmunity College District General Obligation Bonds, Election of 2004, Series B

Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds 08Plf.W32 osp1ieo33 osp1ieo34 osp1iem5 osp1ieo35 Date 5.63% 5.64% 5.65% 5.66!6 5.67% osp1iemo 4,474.45 4,231.55 4,001.10 3,782.40 3,575.00 02p1 iem1 4,600.45 4,350.90 4,114.10 3,889.45 3,676.35 osp1 iem1 4,729.95 4,473.60 4,230.35 3,999.55 3,780.55 02p1ieo32 4,863.10 4,599.75 4,349.85 4,112.70 3,887.75 osp1ieo32 5,000.00 4,729.45 4,472.75 4,229.10 3,997.95 02p1ieo33 4,862.85 4,599.10 4,348.80 4,111.30 osp1ieo33 5,000.00 4,729.00 4,471.85 4,227.85 02p1ieo34 4,862.60 4,598.40 4,347.75 osp1ieo34 5,000.00 4,728.55 4,471.00 02p1iem5 4,862.35 4,597.75 osp1iem5 5,000.00 4,728.10 02p1ieo35 4,862.15 osp1ieo35 5,000.00 BOND ACCRETED VALUE TABLE

Antelope Valley Corrmunity College District General Obligation Bonds, Election of 2004, Series C

Capital Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds Bonds 08Plf.W27 OSPl/2028 OSPl/2029 OSPl/2030 osp1 /2031 OSPl/2032 Date 5.51% 5.54% 5.58)6 5.6!6 5.62% 5.63%

09/13/2007 1,696.70 1,597.15 1,499.40 1,412.80 1,330.70 1,255.90 02Pl/2008 1,732.40 1,630.95 1,531.35 1,443.00 1,359.25 1,282.90 OSPl/2008 1,780.15 1,676.15 1,574.10 1,483.45 1,397.45 1,319.00 02Pl/2009 1,829.15 1,722.55 1,618.00 1,524.95 1,436.70 1,356.15 OSPl/2009 1,879.55 1,770.30 1,663.15 1,567.65 1,477.10 1,394.35 02p1 /2010 1,931.35 1,819.30 1,709.55 1,611.55 1,518.60 1,433.60 OSPl/2010 1,984.55 1,869.70 1,757.25 1,656.70 1,561.25 1,473.95 02p1 /2011 2,039.25 1,921.50 1,806.25 1,703.05 1,605.15 1,515.40 osp1 /2011 2,095.40 1,974.75 1,856.65 1,750.75 1,650.25 1,558.10 02p1 /2012 2, 153.15 2,029.45 1,900.45 1,799.80 1,696.60 1,601.95 osp1 /2012 2,212.45 2,085.65 1,961.70 1,850.15 1,744.30 1,647.05 02Pl/2013 2,273.40 2, 143.40 2,016.45 1,902.00 1,793.30 1,693.40 OSPl/2013 2,336.05 2,202.80 2,072.70 1,955.25 1,843.70 1,741.10 02Pl/2014 2,400.40 2,263.80 2, 130.55 2,010.00 1,895.50 1,790.10 OSPl/2014 2,466.55 2,326.50 2,189.95 2,066.25 1,948.80 1,840.50 02p1 /2015 2,534.50 2,390.95 2,251.10 2, 124.10 2,003.55 1,892.30 osp1 /2015 2,604.30 2,457.20 2,313.90 2, 183.60 2,059.85 1,945.55 02p1 /2016 2,676.05 2,525.25 2,378.45 2,244.75 2,117.70 2,000.35 OSPl/2016 2,749.80 2,595.20 2,444.80 2,307.60 2, 177.25 2,056.65 02p1 /2017 2,825.55 2,667.10 2,513.00 2,372.20 2,238.40 2, 114.55 OSPl/2017 2,903.40 2,741.00 2,583.10 2,43&60 2,301.30 2, 174.05 02p1 /2018 2,983.40 2,816.90 2,655.20 2,506.90 2,366.00 2,235.25 OSPl/2018 3,065.60 2,894.95 2,729.25 2,577.10 2,432.45 2,298.20 02p1 /2019 3, 150.05 2,975.15 2,805.40 2,649.25 2,500.80 2,362.85 OSPl/2019 3,236.85 3,057.55 2,883.70 2,723.45 2,571.10 2,429.40 02p112020 3,326.00 3, 142.25 2,964.15 2,799.70 2,643.35 2,497.80 OSPl/2020 3,417.65 3,229.25 3,046.85 2,87& 10 2,717.60 2,568.10 02p1 /2021 3,511.80 3,318.75 3, 131.85 2,95&65 2,794.00 2,640.40 osp1 /2021 3,608.55 3,410.65 3,219.25 3,041.50 2,872.50 2,714.70 02p112022 3,707.95 3,505.15 3,309.05 3, 126.70 2,953.20 2,791.15 OSPl/2022 3,810.10 3,602.20 3,401.40 3,214.25 3,036.20 2,869.70 02Pl/2023 3,915.10 3,702.00 3,496.30 3,304.25 3, 121.50 2,950.50 OSPl/2023 4,022.95 3,804.55 3,593.80 3,396.75 3,209.25 3,033.55 02Pl/2024 4,133.75 3,909.95 3,694.10 3,491.85 3,299.40 3,118.95 OSPl/2024 4,247.65 4,018.25 3,797.15 3,589.65 3,392.10 3,206.75 02Pl/2025 4,364.70 4, 129.55 3,903.10 3,690.15 3,487.45 3,297.00 OSPl/2025 4,484.95 4,243.95 4,012.00 3,793.45 3,585.45 3,389.80 02Pl/2026 4,608.50 4,361.50 4, 123.95 3,899.70 3,686.20 3,485.25 OSPl/2026 4,735.45 4,482.30 4,239.00 4,00885 3,789.80 3,583.35 02Pl/2027 4,865.90 4,606.45 4,357.25 4,121.10 3,896.25 3,684.20 OSPl/2027 5,000.00 4,734.05 4,478.85 4,236.50 4,005.75 3,787.95 02Pl/2028 4,865.20 4,603.80 4,355.15 4,11&30 3,894.55 OSPl/2028 5,000.00 4,732.25 4,477.10 4,234.05 4,004.20 02Pl/2029 4,864.25 4,602.45 4,353.00 4,116.90 OSPl/2029 5,000.00 4,731.30 4,475.35 4,232.80 02Pl/2030 4,863.80 4,601.10 4,351.95 BOND ACCRETED VALUE TABLE

Antelope Valley Comnunity College District General Obligation Bonds, Election of 2004, Series C

OSPl/2030 5,000.00 4,730.40 4,474.45 02p1 /2031 4,863.30 4,600.45 osp1 /2031 5,000.00 4,729.95 02Pl/2032 4,863.10 OSPl/2032 5,000.00

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