NEW ISSUE NOT RATED In the opinion of Stradiing Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, 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 (and original issue discount) 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 (and original issue discount) on the Bonds is exempt from State of California personal income tax. See ~LEGAL MATTERS - Tax Exemption." $25,820,000 COMMUNITY FACILITIES DISTRICT NO. 04-2 (LAKE HILLS CREST) OF THE COUNTY OF RIVERSIDE SPECIAL TAX BONDS, SERIES 2005 Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The bonds captioned above {the "Bonds") are being issued under the Mello-Roos Community Facilities Act of 1982 (the "Acr) and a Bond Indenture, dated as of July 1, 2005 (the "Indenture"), by and between the Community Facilities District No. 04-2 (Lake Hills Crest) of the County of Riverside (the "Community Facilities District~) and The Bank of New York Trust Company, N.A., as trustee (the "Trustee"). The Board of Supervisors (the "Board") of the County of Riverside (the ~countyn), acting as leglslatlve body of the Community Facilities District, and the eligible landowner voters in the Community Facilities District, have authorized the issuance of bonds in an aggregate principal amount not to exceed $32,500,000. The Bonds are the only series of bonds to be issued under this authorization, other than refunding bonds. See "THE BONDS - Authority for Issuance. H Security and Sources of Payment. The Bonds are payable from proceeds of Net Taxes (as defined herein) levied on property within the Community Facilities District according to the rate and method of apportionment of special tax approved by the Board and the eligible landowner voters in the Community Facilities District. The Bonds are secured by a pledge of the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expense Account). See "SECURITY FOR THE BONDS." Use of Proceeds. The Bonds are being issued to (i) finance the acquisition and construction of certain road and appurtenant drainage facilities and related grading required as a condition for the development of the property in the Community Facilities District, which will be owned by the County, (ii) finance the acquisition and construction of certain water and sewer facilities and related grading required as a condition of development of the property in the Community Facilities District, which will be owned by Western Municipal Water District of Riverside County, and (iii) finance the acquisition and construction of certain flood control and storm water drainage facilities and related grading required as a condition for the development of the property in the Community Facilities District, which will be owned by Riverside County Flood Control and Water Conservation District rRiverside County Flood Control"), (iv) fund a reserve fund for the Bonds, {v) fund capitalized interest on the Bonds through September 1, 2005, (vi) pay certain administrative expenses of the Community Facilities District, and (vii) pay the costs of issuing the Bonds. See ~FINANCING PLAN." Bond Terms. Interest on the Bonds is payable on March 1, 2006, and semiannually thereafter on each March 1 and September 1. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTCH), New York, New York. OTC will act as securities depository for the Bonds. See "THE BONDS- General Bond Terms~ and "APPENDIX F OTC and the Book-Entry Only System.~ Redemption. The Bonds are subject to optional redemption, mandatory sinking fund redemption, and extraordinary redemption from Special Tax prepayments before maturity. In addition, the Term Bond maturing on September 1, 2035, is subject to extraordinary redemption from any surplus remaining in the Project Account following completion of the Public Facilities. See "THE BONDS~ Redemption.~ THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE COUNTY, THE COMMUNITY FACILITIES DISTRICT, THE STATE OF CALIFORNIA (THE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION, AND NEITHER THE COUNTY, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COUNTY, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE SPECIAL TAXES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXES AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. MATURITY SCHEDULE (see Inside cover) This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the Bonds involves risks which may not be appropriate for some investors. See "BONDOWNERS' RISKS" for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Jones Hall, A Professional Law Corporation, San Francisco, California will pass upon certain legal matters for the Underwriter as its counsel. Certain legal matters will be passed upon for the County and the Community Facilities District by the Office of County Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery on or about August 18, 2005. E. J. De La Rosa & Co., Inc. The date of this Official Statement is: August 2, 2005 MATURITY SCHEDULE $8, 720,000 Serial Bonds (Base CUSIPt: 76911F) Maturity Principal Interest {Segtember 1) Amount Rate Yield CUSIPt 2006 $450,000 2.950% 2.950% NH3 2007 460,000 3.000 3.200 NJ9 2008 475,000 3.200 3.500 NK6 2009 490,000 3.600 3.900 NL4 2010 505,000 3.800 4.100 NM2 2011 525,000 4.000 4.200 NNO 2012 545,000 4.125 4.300 NP5 2013 565,000 4.200 4.400 NQ3 2014 590,000 4.375 4.550 NR1 2015 615,000 4.400 4.650 NS9 2016 640,000 4.500 4.750 NT? 2017 670,000 4.625 4.850 NU4 2018 695,000 4.700 4.900 NV2 2019 730,000 4.750 4.950 NWO 2020 765,000 4.800 5.000 NX8 $4,400,000 5.000% Term Bond due September 1, 2025, Yield: 5.05% CUSIPt No. 76911 FN Y6 $5,590,000 5.000% Term Bond due September 1, 2030, Yield: 5.10% CUSIPt No. 76911FN Z3 $7,110,000 5.100% Term Bond due September 1, 2035, Yield: 5.15% CUSIPt No. 76911FP A6 t Copyright 2005, American Bankers Association. CUSiP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the Community Facilities District, the County nor the Underwriter assumes any responsibility for the accuracy of these CUSiP data. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as ha•ling been authorized. No Unlawful Off.,rs or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy n any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitatior is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Effective Date. ''his Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor an I sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the County, the Community Facilities District, any other parties described in this Official Statement, or in :he condition of property within the Community Facilities District since the date of this Official Statement. Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Bonds. Preparation of tUs Official Statement. The information contained in this Official Statement has been obtained from sources that 3re believed to be reliable, but this information is not guaranteed as to accuracy or completeness.