$49,995, Oceanside Unified School District

Transcription

1 New ISSUE BOOK-ENTRY ONLY RATINGS: Insured: Aa2 / AAA Underlying: A1 / A+ (See BOND INSURANCE and MISCELLANEOUS Ratings herein). In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See LEGAL MATTERS Tax Matters herein. $49,995, Oceanside Unified School District (San Diego County, California) General Obligation Bonds Election of 2008, Series A comprised of $25,095, Capital Appreciation Bonds $24,900,000 Current Interest Bonds Dated: Delivery Date Due: August 1, as shown on inside cover. The Oceanside Unified School District (San Diego County, California) General Obligation Bonds, Election of 2008, Series A Capital Appreciation Bonds (the Capital Appreciation Bonds ) and the Series A Current Interest Bonds (the Current Interest Bonds and together with the Capital Appreciation Bonds, the Bonds ) are issued on behalf of the Oceanside Unified School District (the District ) pursuant to a resolution adopted by the Board of Supervisors of San Diego County to finance capital projects as described herein. The Bonds are issued on a parity with all other general obligation bonds of the District. See THE BONDS Security and Sources of Payment. The Board of Supervisors of San Diego County is empowered and is obligated to annually levy ad valorem taxes, without limitation as to rate or amount, upon all property subject to taxation within the District (except certain personal property which is taxable at limited rates), for the payment of interest on, and principal of, the Bonds, all as more fully described herein under THE BONDS and AD VALOREM PROPERTY TAXATION. The Capital Appreciation Bonds will not bear current interest, but will accrete interest, at their stated Accretion Rates, as defined herein, commencing on their date of delivery, from their respective Denominational Amounts, as defined herein, to their respective Maturity Values, as defined herein, on their respective maturity dates. Interest on the Current Interest Bonds is payable semiannually on each February 1 and August 1, commencing August 1, The Bonds, when delivered, will be registered initially in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds as described herein. See THE BONDS Book-Entry System. The Capital Appreciation Bonds are not subject to optional redemption. The Current Interest Bonds are subject to optional redemption as described herein. See THE BONDS Redemption. The scheduled payment of principal or Maturity Value of and interest on the Bonds when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY CORP ( Assured Guaranty ). The following firm, serving as financial advisor to the District, has structured this financing: MATURITIES, PRINCIPAL AMOUNTS. INTEREST RATES AND PRICES OR YIELDS SEE INSIDE COVER PAGE The Bonds will be offered when, as and if issued by the District and received by Morgan Stanley & Co. Incorporated and E. J. De La Rosa and Co., the Underwriters, subject to the approval of legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain matters will be passed upon for the Underwriters by their counsel, Fulbright & Jaworski L.L.P., Los Angeles, California. It is anticipated that the Bonds, in book-entry form, will be available for delivery through The Depository Trust Company in New York, New York, on or about March 4, 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. Official Statement Date: February 19, 2009.

2 MATURITY SCHEDULES (Base CUSIP (1) : ) $25,095, SERIES A CAPITAL APPRECIATION BONDS Denominational Accretion Reoffering Maturity (August 1) Amount Rate Yield Value CUSIP (1) 2014 $ 232, % 3.830% $ 285,000 HU , ,000 HV , ,000 HW , ,000 HX , ,180,000 HY , ,410,000 HZ , ,300,000 JA , ,555,000 JB , ,815,000 JC ,505, ,670,000 JD ,551, ,260,000 JE ,598, ,865,000 JF ,575, ,355,000 JG ,508, ,760,000 JH ,415, ,095,000 JJ ,702, ,440,000 JK ,639, ,790,000 JL ,415, ,210,000 JM 6 $24,900,000 SERIES A CURRENT INTEREST BONDS $24,900, % Term Bonds Due August , Priced to Yield 5.320% [CUSIP (1) HK 2] (1) Copyright 2009, American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw- Hill Companies, Inc. This Data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers.

3 No dealer, broker, salesperson or other person has been authorized by the Oceanside Unified School District to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation 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 any 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 a representation of facts. The summaries and descriptions of 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 document, statute and constitutional provision. The information set forth herein, other than that provided by the District, has been obtained from sources which the District believes to be reliable, but is not guaranteed as to accuracy or completeness, and its inclusion herein is not to be taken as a representation of such by the District. The information and expressions of opinion 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 Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. THE PRICES OF THE OFFERING AND SALE OF THE BONDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS AFTER SUCH BONDS ARE RELEASED FOR SALE AND SUCH BONDS MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICES, INCLUDING SALES TO DEALERS WHO MAY SELL SUCH BONDS INTO INVESTMENT ACCOUNTS. IN CONNECTION WITH THE OFFERING OF BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES FOR SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 3(a)(2) OF SUCH ACT. Assured Guaranty makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and 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 Assured Guaranty supplied by Assured Guaranty and presented under the heading BOND INSURANCE and APPENDIX F - SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY.

4 SAN DIEGO COUNTY County Board of Supervisors Dianne Jacob Chairwoman, District 2 Pam Slater-Price Ron Roberts Vice-Chairwoman, District 3 District 4 Greg Cox Bill Horn District 1 District 5 OCEANSIDE UNIFIED SCHOOL DISTRICT Board of Education Adrianne Hakes, Ed.D. President Emily Ortiz Wichmann Vice President Lillian V. Adams Clerk District Administration Larry Perondi Superintendent Janet Bledsoe Lacy Member Mike Blessing Member Robyn Phillips Associate Superintendent, Business Services PROFESSIONAL SERVICES Financial Advisor KNN Public Finance A Division of Zions First National Bank Oakland, California Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Paying Agent San Diego Treasurer Tax Collector San Diego, California

5 TABLE OF CONTENTS INTRODUCTION... 1 The District... 1 Sources of Payment for the Bonds... 1 Bond Insurance... 1 Purpose of the Bonds... 2 Definitions Regarding the Bonds... 2 Authority for Issuance of the Bonds... 3 Description of the Bonds... 3 Tax Matters... 3 Professionals Involved in the Offering... 4 Offering and Delivery of the Bonds... 4 Other Information... 4 THE BONDS... 5 Authority for Issuance... 5 Purpose of the Issue... 5 Sources and Deposit of Funds... 5 Investment of Bond Proceeds... 5 Security and Sources of Payment... 6 Description of the Bonds... 6 Book-Entry System... 7 Payment to Holders... 9 Debt Service Redemption BOND INSURANCE The Insurance Policy The Insurer AD VALOREM PROPERTY TAXATION County Services Assessed Valuation State-Assessed Utility Property Tax Levies, Collections and Delinquencies Teeter Plan DISTRICT TAX BASE INFORMATION Assessed Valuation Secured Tax Charges and Delinquencies Tax Rates Largest Taxpayers Statement of Direct and Overlapping Debt CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUE AND APPROPRIATIONS Article XIIIA Article XIIIB Propositions 98 and Proposition 1A Propositions 57 and Articles XIIIC and XIIID Future Initiatives GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION... 28

6 State Funding of School Districts Basic Aid Districts State Budget State Funding of Schools Without A State Budget State Funding of School Construction State Retirement Programs County Office of Education School District Budget Process Accounting Practices County Investment Pool DISTRICT INFORMATION General Information Average Daily Attendance and Revenue Limit Labor Relations Retirement Programs Comparative Financial Statements Audit District Debt Other Post Employment Benefits Availability of Documents ECONOMIC PROFILE Introduction Population Employment Major Employers Construction Activity Commercial Activity Median Household Income LEGAL MATTERS Tax Matters Legality for Investment in California No Litigation Legal Opinion MISCELLANEOUS Ratings Underwriting Closing Documents Continuing Disclosure Financial Advisor Additional Information APPENDIX A BASIC FINANCIAL STATEMENTS FOR YEAR ENDED JUNE 30, 2008, WITH INDEPENDENT AUDITOR S LETTER AND MANAGEMENT S DISCUSSION AND ANALYSIS... A-1 APPENDIX B PROPOSED FORM OF LEGAL OPINION... B-1 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE... C-1 APPENDIX D EXCERPTS FROM THE SAN DIEGO COUNTY INVESTMENT PORTFOLIO REPORT... D-1 APPENDIX E ACCRETED VALUE TABLES... E-1 APPENDIX F SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY... F-1

7 OFFICIAL STATEMENT $49,995, Oceanside Unified School District (San Diego County, California) General Obligation Bonds Election of 2008, Series A comprised of $25,095, Capital Appreciation Bonds $24,900,000 Current Interest Bonds INTRODUCTION This Introduction is not a summary of this official statement (the 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 of the entire Official Statement. This Official Statement, which includes the cover page and appendices hereto, is provided to furnish information in connection with the sale of Oceanside Unified School District (San Diego County, California), General Obligation Bonds, Election of 2008, Series A, $25,095, Capital Appreciation Bonds (the Capital Appreciation Bonds ), and $24,900,000 Current Interest Bonds (the Current Interest Bonds and together with the Capital Appreciation Bonds the Bonds ) as described more fully herein. The District Oceanside Unified School District (the District ) provides kindergarten through 12 th grade educational services to the residents of the City of Oceanside (the City ), and certain unincorporated areas in the County of San Diego (the County ), in the State of California (the State ). More detailed information regarding the area served by the District and the student population of the District may be found under DISTRICT INFORMATION, DISTRICT TAX BASE INFORMATION, and ECONOMIC PROFILE herein. Sources of Payment for the Bonds The Bonds are issued by the District, and the Board of Supervisors of the County is empowered and is obligated to annually levy ad valorem taxes, without limitation as to rate or amount, upon all property subject to taxation within the District (except certain personal property which is taxable at limited rates), as necessary for payment of interest on and principal of the Bonds. See THE BONDS Security and Sources of Payment, AD VALOREM PROPERTY TAXATION and DISTRICT TAX BASE INFORMATION herein. Bond Insurance The scheduled payment of principal or Maturity Value of and interest on the Bonds will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Corp. See BOND INSURANCE herein. 1

8 Purpose of the Bonds The proceeds of the Bonds are authorized to be used to replace deteriorated plumbing/sewer/roofing systems; renovate student restrooms; improve school/playground safety/security; upgrade or replace outdated electrical, heating/ventilation systems, and aging portable classrooms. See THE BONDS Purpose of the Issue. Definitions Regarding the Bonds The terms set forth below have the following meanings: Accreted Interest means the difference, as of the date of calculation, between the Denominational Amount and its Accreted Value, as these terms are defined below. Accreted Value means the calculated value of a Bond upon discounting its Maturity Value semiannually at its Accretion Rate to the date of calculation, assuming the Accreted Value increases between semiannual compounding dates on the basis of a 360-day year of twelve 30-day months commencing on the date of delivery. The semiannual compounding dates for calculation of Accreted Value are February 1 and August 1, beginning August 1, The Accreted Values are shown (per $5,000 maturity) in the Accreted Value Table in APPENDIX E on the semiannual compounding dates and can be interpolated for any date between the dates given by straight line method on a 360-day basis. Accretion Rate means the yield which discounts the Maturity Value of any Capital Appreciation Bond to its Denominational Amount, as those terms are defined herein (or, stated another way, the yield at which a Capital Appreciation Bond accretes in value from its Denominational Amount to its Maturity Value). Accretion Rate is calculated on the basis of a 360-day year of twelve 30-day months and on the basis of semiannual compounding on each February 1 and August 1, beginning on the date of delivery. Accretion Rates for the Bonds appear as part of the Accreted Value Table(s) in APPENDIX E herein. The Accretion Rate is not necessarily the same as the Reoffering Yield, as defined herein. Capital Appreciation Bond means a bond, the interest component of which is compounded semiannually and paid at maturity. A Capital Appreciation Bond has a zero stated interest rate, but accretes in value on the basis of its Accretion Rate, compounding semiannually, as described herein under AAccreted Value. Current Interest Bonds means the Bonds the interest component of which is payable semiannually on February 1 and August 1, commencing August 1, Denominational Amount means the initial purchase price of any Capital Appreciation Bond at which it is purchased by the Underwriters. Maturity Value means the redemption price or Accreted Value of any Capital Appreciation Bond on its maturity date. Reoffering Price means the price at which a Bond is initially reoffered to the public by the Underwriters. Reoffering Yield, for any Capital Appreciation Bond, means the yield which discounts the Maturity Value to its Reoffering Price. Reoffering Yield is calculated on the basis of a 360-day year of twelve 30-day months discounted semiannually on February 1 and August 1. The Reoffering Yield is not 2

9 necessarily the same as the Accretion Rate, as defined herein. Reoffering Yields on the Capital Appreciation Bonds appear on the inside cover page hereof and in APPENDIX E herein. Authority for Issuance of the Bonds The Bonds are issued pursuant to certain provisions of the Education Code (the Education Code ) and resolutions adopted by the Board of Education of the District and the Board of Supervisors of the County. See THE BONDS Authority for Issuance herein. Description of the Bonds Form, Denomination and Registration. The Bonds will be issued in fully registered form only, without coupons, and will be in denominations of $5,000 each for the Current Interest Bonds, and in Denominational Amounts corresponding to $5,000 Maturity Value each for the Capital Appreciation Bonds, or in any integral multiples thereof, except that one Capital Appreciation Bond may be issued in an odd Maturity Value, dated as of the Delivery Date, as herein defined, and will be registered initially in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. So long as DTC, or Cede & Co., as its nominee, is the registered owner of all the Bonds, payments on the Bonds will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined herein) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined herein) will be the responsibility of the DTC Participants, as more fully described hereinafter. See THE BONDS C Description of the Bonds, Book-Entry System and C Discontinuation of Book-Entry System; Payment to Beneficial Owners herein. Interest Compounding and Interest Payments. The Capital Appreciation Bonds will not bear current interest, but will accrete interest, at their respective Accretion Rates, commencing on their date of delivery, from their respective Denominational Amounts to their respective Maturity Values on their respective maturity dates. Interest on the Current Interest Bonds is payable semiannually on each February 1 and August 1, commencing August 1, 2009, from the Delivery Date, calculated on the basis of a 360-day year consisting of twelve 30-day months. See THE BONDS herein. Maturity Value and Payment of Principal. Maturity Value of the Capital Appreciation Bonds and Principal of the Current Interest Bonds, comprising both interest and principal, is payable on August 1 in each year due, as set forth on the inside cover page hereof. See THE BONDS herein. Optional Redemption. The Capital Appreciation Bonds are not subject to redemption. The Current Interest Bonds may be redeemed prior to maturity at the option of the District beginning on August 1, See THE BONDS C Redemption herein. Tax Matters In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See LEGAL MATTERS Tax Matters herein. 3

10 Professionals Involved in the Offering With respect to the Bonds, KNN Public Finance, A Division of Zions First National Bank, Oakland, California, is the District's financial advisor (the Financial Advisor ) (see MISCELLANEOUS Financial Advisor herein) and Jones Hall, A Professional Law Corporation, San Francisco, California, is the District s bond counsel (the Bond Counsel ). San Diego County Treasurer, San Diego, California, will act on behalf of the County as paying agent, registrar and transfer agent (the Paying Agent ) with respect to the Bonds. The Financial Advisor, Bond Counsel, and Paying Agent will receive compensation from the District contingent upon the sale and delivery of the Bonds. Offering and Delivery of the Bonds The Bonds will be offered when, as and if issued by the District and received by the Underwriters, 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 March 4, 2009, (the Delivery Date ). Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. The District has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide notices of the occurrence of certain enumerated events, if material. See MISCELLANEOUS Continuing Disclosure herein. Copies of documents referred to herein and information concerning the Bonds are available from the Business Office, Oceanside Unified School District, 2111 Mission Avenue, Oceanside, CA (760) The District may impose a charge for copying, mailing and handling. END OF INTRODUCTION 4

11 THE BONDS Authority for Issuance The Bonds will be issued pursuant to Sections et seq. of the California Education Code, and pursuant to a resolution adopted by the Governing Board of the District on September 23, 2008, and a resolution of the Board of Supervisors of the County adopted on October 14, The Governing Board of the District approved this Official Statement and authorized its distribution on January 27, The District received authorization to issue $195 million of bonds at an election held on June 3, 2008, by an affirmative vote of 71.3% of the votes cast (the Authorization ). A 55% vote in favor of the Authorization was required. See DISTRICT INFORMATION District Debt. Purpose of the Issue The proceeds of the Bonds are authorized to be used to replace deteriorated plumbing/sewer/roofing systems; renovate student restrooms; improve school/playground safety/security; upgrade or replace outdated electrical, heating/ventilation systems, and aging portable classrooms. Sources and Deposit of Funds At closing, the issue price of the Bonds is to be deposited and/or applied as shown in the following table: OCEANSIDE UNIFIED SCHOOL DISTRICT Sources and Deposit of Funds Sources of Funds Principal Amount of Bonds $49,995, Original Issue Premium 1,536, Total Sources $51,531, Deposit of Funds Deposit to Building Fund $49,995, Deposit to Debt Service Fund 264, Deposit to Cost of Issuance Fund (a) 745, Underwriters Compensation 525, Total Uses $51,531, (a) Includes estimated fees for Bond Insurance Premium, Financial Advisor, Bond Counsel, rating agency, printing and distribution of official statement, Paying Agent, and miscellaneous costs of issuance. Investment of Bond Proceeds The proceeds from the sale of the Bonds, to the extent of the principal and denominational amount thereof, shall be deposited in the treasury of the County to the credit of the building fund of the District (the Building Fund ) and shall be accounted for separately from all other District and County funds, but may be commingled with the proceeds of sale of other bonds of the District deposited in the 5

12 Building Fund and authorized to be used for the same purpose. The proceeds shall be used only for the purposes for which the Bonds are authorized. The accrued interest and any premium received from the sale of the Bonds shall be deposited in the Election of 2008 Account in the bond interest and sinking fund of the District (the 2008 Debt Service Fund ) and used only for payments of principal of and interest on the Bonds. Interest earned on the investment of monies held in the 2008 Bond Debt Service Fund shall be retained in the 2008 Bond Debt Service Fund. Interest earned on the investment of monies held in the Building Fund shall be retained in the Building Fund. Monies in the Building Fund and the 2008 Debt Service Fund shall be invested in any one or more investments generally permitted to school districts under the laws of the State, consistent with County investment policy and the Resolutions. The Resolutions authorize investment at the County Treasurer's discretion pursuant to law and the investment policy of the County. The District has delegated to the County Treasurer, pursuant to Section of the Government Code, its authority under Section of the Education Code and Section of the Government Code to invest proceeds of the Bonds held in the Treasury of the County. See GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION County Investment Pool herein and APPENDIX D SAN DIEGO COUNTY INVESTMENT PORTFOLIO REPORT. Security and Sources of Payment The Board of Supervisors of the County is empowered and is obligated to annually levy ad valorem taxes, without limitation as to rate or amount, as necessary for payment of interest on and principal of the Bonds, upon all property within the District (except certain personal property which is taxable at limited rates). Such taxes, when collected, will be placed by the County in the Debt Service Fund. The rate of the ad valorem tax will be set annually by the County based on the assessed value of taxable property in the District and the debt service requirement on the outstanding bonds in each year. Variation in the annual debt service requirement and changes in assessed valuation within the District may cause the annual tax rate to change from year to year. For further information regarding ad valorem property taxation in general, see AD VALOREM PROPERTY TAXATION and within the District in particular, see DISTRICT TAX BASE INFORMATION herein. The District has issued several series of general obligation bonds, including refunding bonds being issued concurrently with the Bonds. All general obligation bonds of the District are issued on a parity with the Bonds and with each other. See DISTRICT INFORMATION District Debt. Description of the Bonds The Capital Appreciation Bonds will be dated the Delivery Date, and will be issued in the aggregate Denominational Amount of $25,095, The Capital Appreciation Bonds will not bear current interest, but will accrete interest, at their respective Accretion Rates, commencing on their date of delivery from their respective Denominational Amounts to their respective Maturity Values on their respective maturity dates as shown on the inside cover hereof. Interest will be calculated on the basis of a 360-day year of twelve 30-day months, and will accrete in equal daily amounts during each annual period. The Capital Appreciation Bonds will mature in each of the years and at the Maturity Values set forth on the cover page hereof. The Capital Appreciation Bonds will be issued as fully-registered bonds, without coupons, and will be in Denominational Amounts corresponding to $5,000 Maturity Value each for the Capital Appreciation Bonds or in any integral multiple thereof; provided that one Capital Appreciation 6

13 Bond for each maturity may be issued in an odd Maturity Value and provided that no Capital Appreciation Bond shall mature on more than one maturity date. The Current Interest Bonds in the aggregate principal amount of $24,900,000 will be dated the Delivery Date, and will bear interest payable semiannually each February 1 and August 1 (each an Interest Payment Date ), commencing August 1, 2009, at the interest rates shown on the inside cover hereof. The Current Interest Bonds will mature on August 1 in each of the years and in the principal amounts shown on the cover page hereof. Interest on the Current Interest Bonds will be computed on the basis of a 360-day year of twelve 30-day months. Each Current Interest Bond authenticated on or before Authentication Date, shall bear interest from the Delivery Date. Each Current Interest Bond authenticated during the period between the 15th day of the month preceding any Interest Payment Date (the Record Date ) and that Interest Payment Date shall bear interest from that Interest Payment Date. Any other Current Interest Bond shall bear interest from the Interest Payment Date immediately preceding the date of its authentication. If a Payment Date does not fall on a business day, the interest, principal or redemption payment due on such Payment Date will be paid on the next business day. The Bonds will be issued in the denomination of $5,000 principal amount each or any integral multiple thereof. The Bonds when issued will be registered in the name of Cede & Co., as registered owner and nominee of DTC. So long as DTC, or Cede & Co., as its nominee, is the registered owner of all the Bonds, principal and interest payments on the Bonds will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined below) will be the responsibility of the DTC Participants, as more fully described below under Book-Entry System. Only if the Bonds should cease to be paid through a book-entry system would the Paying Agent make payments on the Bonds directly to Beneficial Owners, as registered owners of the Bonds, as more fully described below under Payment to Holders. Book-Entry System The information in this section concerning DTC and DTC s book-entry system has been furnished by DTC for use in disclosure documents, and the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC will distribute to Direct Participants, or that Direct Participants or Indirect Participants will distribute to the Beneficial Owners, payments of principal of, interest, and premium, if any, on the Bonds paid or any redemption or other notices or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the District nor the County nor the Paying Agent are responsible or liable for the failure of DTC or any Direct or Indirect Participant to make any payments or give any notice to a Beneficial Owner or any error or delay relating thereto. Accordingly, no representations can be made concerning these matters and neither the Direct nor Indirect Participants nor the Beneficial Owners should rely on the following information with respect to such matters but should instead confirm the same with DTC or the DTC Participants, as the case may be. DTC 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 7

14 member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 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 turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the 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 and Purchases of the 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 ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with 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. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may 8

15 wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to 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 Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts 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 of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the issuer 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), the Paying Agent, the District or the County, 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 County or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the County or the 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 County 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. Payment to Holders The following provisions governing the payment, transfer and exchange of the Bonds apply to holders of the Bonds. As long as the DTC book-entry system described above is in effect, Cede & Co., or such other nominee of DTC, but not the Beneficial Owners, is the holder of the Bonds. Only in the event that Bonds are certificated and delivered to the Beneficial Owners do these provisions then apply directly to Beneficial Owners as holders of the Bonds. Principal and Maturity Value of the Bonds and any premium upon the redemption thereof prior to the maturity will be payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Paying Agent, or such other location as the Paying Agent may specify. Interest shall be paid by check to the owner of any Bond at the address of such owner shown on the registration books of the Paying Agent, or at such other address the owner of the Bond has filed with the Paying Agent for such purpose on or before the Record Date. Owners of not less than $1,000,000 in principal amount of Bonds may, by written request received by the Paying Agent not later than the Record Date immediately 9

16 preceding any Interest Payment Date, have interest payments made on the date due by wire transfer to an account maintained in the United States of America in immediately available funds. Any Bond may be exchanged for Bonds of any authorized denominations of the same tenor, maturity and interest rate upon presentation and surrender at the principal corporate trust 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 the principal corporate trust 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 designated District official shall execute, and the Paying Agent shall authenticate and deliver a new Bond or Bonds of the same tenor and of any authorized denomination or denominations requested by the registered owner or by a person legally empowered to do so, equal in the aggregate to the unmatured principal amount of the Bond surrendered and bearing interest at the same rate and maturing on the same date. The Paying Agent will not be required to exchange or transfer any Bond during the period from the close of business on the applicable Record Date next preceding any Interest Payment Date or redemption date, to and including such Interest Payment Date or redemption date. Debt Service Semiannual debt service obligations for the Bonds and all general obligation bonds of the District, assuming that no optional redemptions are made, are as follows: 10

17 OCEANSIDE UNIFIED SCHOOL DISTRICT Semiannual Debt Service Current Interest Bonds Capital Appreciation Bonds Payment Outstanding Debt Denominational Accreted Maturity Total Debt Date Bonds (a) Principal Interest Service Amount Interest Value Service 8/1/2009 $ 5,207, $ 533, $ 533, $ 5,741, /1/2010 2,647, , , ,300, /1/2010 4,222, , , ,875, /1/2011 2,605, , , ,259, /1/2011 4,265, , , ,919, /1/2012 2,558, , , ,212, /1/2012 4,293, , , ,947, /1/2013 2,523, , , ,176, /1/2013 4,348, , , ,001, /1/2014 2,487, , , ,140, /1/2014 4,907, , , $ 232, $ 52, $ 285, ,845, /1/2015 2,433, , , ,087, /1/2015 5,888, , , , , , ,712, /1/2016 2,362, , , ,016, /1/2016 6,372, , , , , , ,591, /1/2017 2,285, , , ,938, /1/2017 6,455, , , , , , ,673, /1/2018 2,202, , , ,855, /1/2018 7,187, , , , , ,180, ,020, /1/2019 2,091, , , ,745, /1/2019 7,541, , , , , ,410, ,605, /1/2020 1,971, , , ,624, /1/2020 8,266, , , , , ,300, ,219, /1/2021 1,831, , , ,485, /1/2021 8,666, , , , , ,555, ,875, /1/2022 1,681, , , ,334, /1/2022 9,091, , , , , ,815, ,559, /1/2023 1,513, , , ,167, /1/2023 5,958, , , ,505, ,164, ,670, ,282, /1/2024 1,408, , , ,061, /1/2025 6,053, , , ,551, ,708, ,260, ,966, /1/2025 1,295, , , ,949, /1/2025 6,160, , , ,598, ,266, ,865, ,679, /1/2026 1,178, , , ,832, /1/2026 6,268, , , ,575, ,779, ,355, ,277, /1/2027 1,055, , , ,709, /1/2027 6,385, , , ,508, ,251, ,760, ,799, /1/ , , , ,580, /1/2028 6,506, , , ,415, ,679, ,095, ,255, /1/ , , , ,444, /1/2029 6,626, , , ,702, ,737, ,440, ,719, /1/ , , , ,302, /1/2030 6,763, , , ,639, ,150, ,790, ,207, /1/ , , , ,150, /1/2031 6,896, $ 945, , ,598, ,415, ,794, ,210, ,705, /1/ , , , , /1/2032 5,712, ,870, , ,498, ,211, /1/ , , , , /1/2033 4,532, ,085, , ,428, ,960, /1/ , , /1/2034 3,070, ,070, /1/ , , /1/2035 1,582, ,582, Total $198,914, $24,900,000 $31,237, $56,137, $25,095, $51,194, $76,290, $331,342, (a) Outstanding Bonds take into account the 2009 General Obligation Refunding Bonds issued on March 4, See DISTRICT INFORMATION District Debt for a description of other outstanding bonds of the District. 11

18 Redemption Optional Redemption The Capital Appreciation Bonds are not subject to optional redemption. The Current Interest Bonds are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part, on any date on or after August 1, 2018, at the redemption prices equal to the principal amount thereof together with accrued interest thereon to the date fixed for redemption, without premium. If less than all of the Bonds are called for redemption, such Bonds shall be redeemed in inverse order of maturities or as otherwise directed by the District, and if less than all of the Bonds of any given maturity are called for redemption, the portions of such Bonds of a given maturity to be redeemed shall be determined by lot. Mandatory Sinking Fund Redemption The Current Interest Bonds are term bonds maturing on August 1, 2033, subject to redemption prior to their stated maturity, in part by lot, from mandatory sinking fund payments in the following amounts and on the following dates, at the principal amount thereof on the date fixed for redemption, without premium together with interest accrued thereon to the date fixed for redemption: Redemption Date Principal Amount August 1, 2031 $ 945,000 August 1, ,870,000 August 1, 2033* 13,085,000 Total $24,900,000 *Maturity The principal amount of each mandatory sinking fund payment shall be reduced proportionately by the amount of any Bonds optionally redeemed prior to the mandatory sinking fund payment date. Notice of Redemption Notice of redemption will be given by the Paying Agent at the expense of the District. Such notice will specify: (a) that the Bonds or a designated portion thereof are to be redeemed, (b) the numbers and CUSIP numbers of the Bonds to be redeemed, (c) the date of notice and the date of redemption, (d) the place or places where the redemption will be made, and (e) descriptive information regarding the Bonds including the dated date, interest rate and maturity date. Such notice of redemption will also state that the Bonds, along with the interest accrued to such date and the redemption premium, if any, will become due and payable on the specified date, and that from and after such date interest with respect to the Bonds will cease to accrue. Notice of redemption will be made by registered or otherwise secured mail, postage prepaid, to (a) the registered owners of the Bonds being redeemed (or, if such owner is a syndicate, to the managing member of such syndicate), (b) a municipal registered securities depository, and (c) a national information service that disseminates securities redemption notices. Notice of redemption will be at least thirty days, but not more than sixty days, prior to the redemption date. Neither failure to receive such notice nor any 12

19 defect in the content of such notice will affect the sufficiency of the proceeding for the redemption of the Bonds. BOND INSURANCE The following information is not complete and reference is made to Appendix F for a specimen of the financial guaranty insurance policy (the Policy ) of Assured Guaranty Corp. ( Assured Guaranty or the Insurer ). The Insurance Policy Assured Guaranty has made a commitment to issue the Policy relating to the Bonds, effective as of the date of issuance of such Bonds. Under the terms of the Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of principal of and interest on the Bonds that becomes Due for Payment but shall be unpaid by reason of Nonpayment (the Insured Payments ). Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. The Policy is non-cancelable for any reason, including without limitation the non-payment of premium. Due for Payment means, when referring to the principal of the Bonds, the stated maturity date thereof, or the date on which such Bonds shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and, when referring to interest on such Bonds, means the stated dates for payment of interest. Nonpayment means the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on the Bonds. It is further understood that the term Nonpayment in respect of a Bond also includes any amount previously distributed to the Holder (as such term is defined in the Policy) of such Bond in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Nonpayment does not include nonpayment of principal or interest caused by the failure of the Trustee or the Paying Agent to pay such amount when due and payable. Assured Guaranty will pay each portion of an Insured Payment that is Due for Payment and unpaid by reason of Nonpayment, on the later to occur of (i) the date such principal or interest becomes Due for Payment, or (ii) the business day next following the day on which Assured Guaranty shall have received a completed notice of Nonpayment therefor in accordance with the terms of the Policy. Assured Guaranty shall be fully subrogated to the rights of the Holders of the Bonds to receive payments in respect of the Insured Payments to the extent of any payment by Assured Guaranty under the Policy. 13

20 The Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance law. The Insurer Assured Guaranty Corp. ( Assured Guaranty ) is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in Assured Guaranty is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty. Assured Guaranty is subject to insurance laws and regulations in Maryland and in New York (and in other jurisdictions in which it is licensed) that, among other things, (i) limit Assured Guaranty s business to financial guaranty insurance and related lines, (ii) prescribe minimum solvency requirements, including capital and surplus requirements, (iii) limit classes and concentrations of investments, (iv) regulate the amount of both the aggregate and individual risks that may be insured, (v) limit the payment of dividends by Assured Guaranty, (vi) require the maintenance of contingency reserves, and (vii) govern changes in control and transactions among affiliates. Certain state laws to which Assured Guaranty is subject also require the approval of policy rates and forms. Assured Guaranty s financial strength is rated AAA (stable) by Standard & Poor s, a division of The McGraw-Hill Companies, Inc. ( S&P ), AAA (stable) by Fitch, Inc. ( Fitch ) and Aa2 (stable) by Moody s Investors Service, Inc. ( Moody s ). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are 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 any security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn. Recent Developments On November 14, 2008, AGL announced that it had entered into a definitive agreement to purchase Financial Security Assurance Holdings Ltd. ( FSA ), the parent of financial guaranty insurance company Financial Security Assurance, Inc. For more information regarding the proposed acquisition by AGL of FSA, see the Annual Report on Form 10-K filed by AGL with the Securities and Exchange Commission (the SEC ) on February 26, Capitalization of Assured Guaranty Corp. As of December 31, 2008, Assured Guaranty had total admitted assets of $1,803,146,295 (unaudited), total liabilities of $1,425,012,944 (unaudited), total surplus of $378,133,351 (unaudited) and total statutory capital (surplus plus contingency reserves) of $1,090,288,113 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 2007, Assured Guaranty had total admitted assets of $1,361,538,502 14

21 (audited), total liabilities of $961,967,238 (audited), total surplus of $399,571,264 (audited) and total statutory capital (surplus plus contingency reserves) of $982,045,695 (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. The Maryland Insurance Administration recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the Maryland Insurance Code, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the Maryland Insurance Administration to financial statements prepared in accordance with accounting principles generally accepted in the United States in making such determinations. Incorporation of Certain Documents by Reference The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof: The Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2008 (which was filed by AGL with the SEC on February 26, 2009); and The Current Reports on Form 8-K filed by AGL with the SEC, as they relate to Assured Guaranty. All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of the Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading BOND INSURANCE The Insurer shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document which is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available upon request by contacting Assured Guaranty at 1325 Avenue of the Americas, New York, New York or by calling Assured Guaranty at (212) In addition, the information regarding Assured Guaranty that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC s web site at and at AGL s web site at from the SEC s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C , and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York Assured Guaranty makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and 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 Assured Guaranty supplied by Assured Guaranty and presented under the heading BOND INSURANCE. 15

22 AD VALOREM PROPERTY TAXATION The information in this section describes how ad valorem property taxes in general are assessed and levied. For specific information on the property tax base, tax levies and collections in the District, see DISTRICT TAX BASE INFORMATION herein. County Services School districts and other public agencies with property tax levies in the State all use the services of their county for the assessment of property values (certain utility and other classes of property are assessed by the State Board of Equalization; see -- State-Assessed Utility Property herein) and collection of property taxes and property assessments. All property taxes and assessments on property due all taxing agencies in each county generally are included on the same unified tax bill from the county to property owners twice each year, based on the same county administered tax rolls, whether general purpose property tax or specific ad valorem property tax for payment of general obligation bonds. In addition, for school district general obligation bonds, the county, not the school district, determines and levies each year s tax in an amount necessary to provide for payment of the school district s general obligation bond debt service. Property taxes collected are apportioned by each county according to purpose and taxing agency as prescribed by State law to that county and all school districts, special districts, cities and other agencies within that county with property tax levies. The amounts apportioned specifically for payment of school district general obligation bonds are retained by the county, and used to make the debt service payments on those bonds on behalf of the school district. Assessed Valuation All non-exempt property is assessed using full cash value as defined by Article XIIIA of the California Constitution (the Constitution ). State law exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling, provided that the owner files and qualifies for such exemption. The State is required to reimburse local agencies for the value of taxes on the exempt $7,000. State law also provides exemptions from ad valorem property taxation for certain classes of property based on ownership or use, such as household and personal effects, intangible personal property (such as bank accounts, stocks and bonds), business inventories and real property used for religious, non-profit hospital, scientific and charitable purposes; the State does not reimburse local agencies for any tax not levied due to these exemptions. State and federal government property also is not taxed, nor is local government property located within the jurisdiction of that local government. 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 that part of the assessment roll containing State-assessed property and other property having a tax lien on real property which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Unsecured property comprises all other taxable property. Unsecured property is assessed on the unsecured roll. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Valuation of secured property and a statutory tax lien is established as of January 1 prior to the tax year (the tax year is from July 1 through June 30) of the related tax levy, and the secured and unsecured tax rolls are certified on or before July 1 of the tax year by the County Assessor. New property and improvements are assessed and added to 16

23 a supplemental roll during the year acquired or when improvements are completed, and such property is taxed at the secured or unsecured rate then in effect, as appropriate, for the remaining portion of that year. The next year and thereafter such assets are assessed on the regular tax rolls. Future growth in assessed valuation allowed under Article XIIIA is allocated on the basis of situs among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and school districts 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. See DISTRICT TAX BASE INFORMATION herein for a history of assessed valuation and a list of the largest secured tax payers for the current tax year within the District. State-Assessed Utility Property The Constitution provides that the State Board of Equalization (the SBE ) rather than counties assess certain property owned or used by regulated utilities. Such property is grouped and assessed by the SBE as going concern operating units, which may cross local tax jurisdiction boundaries, rather than as individual parcels of real or personal property separately assessed. Such utility property is known as unitary property. The SBE assesses property at fair market value, determined by various methods and formulae depending on the nature of the property, except that certain railroad property is assessed at a specified percentage of the fair market value determined by the SBE, in conformity with federal law. The SBE assesses values as of January 1 prior to the tax year of the related tax levy. Property tax on SBEassessed property is then levied and collected by each county in the same manner as county assessed property, but at special county-wide tax rates, and distributed to each taxing agency within that county, subject to certain adjustments, according to the approximate percentage allocated to each taxing agency in the prior year. Ongoing changes in the California electric utility industry structure and in the way in which components of that industry are regulated and owned, including the sale of electric generation assets to largely unregulated, non-utility companies, may cause property that had been assessed by the SBE to be assessed locally instead. A change in property status from assessment by the SBE to assessment locally or the reverse may result in a change in property tax revenue received by local agencies and an adjustment in ad valorem tax rates and debt capacity for any local agency general obligation bonds. Tax Levies, Collections and Delinquencies Secured property tax rates are set annually by the first business day of September for the levy of property taxes in that tax year. The levy is payable in two equal installments due November 1 and February 1, and payments become delinquent if not postmarked or paid by end of the business day on December 10 and April 10, respectively. Taxes on unsecured property (personal property and leasehold interests) are levied at the preceding fiscal year's secured tax rate and have a due date set by each county effectively no earlier than July 1 and no later than July 31 of each year. Taxes on unsecured property become delinquent if not postmarked or paid by end of business day on August 31, or if added to the unsecured roll after July 31, become delinquent at the end of the month succeeding the month of enrollment. A 10% penalty attaches to any delinquent payment for secured roll taxes, plus a charge of $10 if unpaid after April 10. In addition, property on the secured roll for which taxes are delinquent becomes tax-defaulted if not paid by June 30 of the same fiscal year. Such property may thereafter be redeemed by payment of (a) the delinquent taxes, (b) the 10% penalty, (c) the $10 charge, (d) an additional penalty of 17

24 1.5% per month from July 1 to the time of redemption and (e) a redemption fee of $15 per parcel, $5 of which goes to the State (collectively, the Redemption Amount ). Properties may be redeemed under an installment plan of paying the Redemption Amount in five equal installments over a period of four years. A delinquent taxpayer may enter into the installment plan at any time up to the June 30 occurring five years after the property becomes tax defaulted. If taxes are unpaid five years after the property becomes tax defaulted or, if an installment plan is in place, at the end of an installment plan, the County can initiate a power to sell procedure for the County Tax Collector to sell the property at auction. Alternatively, in certain instances the County may institute a superior court action to foreclose the lien on delinquent property; if the lawsuit is successful, the delinquent property may be sold at a judicial foreclosure sale. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and after the last day of the second month after the 10% penalty attaches, an additional penalty of 1.5% per month begins to accrue and a lien is recorded against the assessee. The taxing authority may collect delinquent unsecured personal property taxes by: (a) a civil action against the taxpayer; (b) filing a certificate of delinquency in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on specific property of the taxpayer; and (c) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Supplemental roll taxes are due on the date the bill is mailed. If the tax bill is mailed within the months of July through October, the first installment shall become delinquent at 5 p.m., or the end of the business day, whichever is later, on December 10 of the same year and the second installment shall become delinquent at 5 p.m., or the end of the business day, whichever is later, on April 10 of the next year; if the bill is mailed within the months of November through June, the first installment shall become delinquent at 5 p.m., or the end of the business day, whichever is later, on the last day of the month following the month in which the bill is mailed and the second installment shall become delinquent at 5 p.m., or the end of the business day, whichever is later, on the last day of the fourth calendar month following the date the first installment is delinquent. A 10% penalty attaches to any delinquent payment for supplemental roll taxes. All tax due dates and delinquency dates become the next business day if they fall on a day that is not a business day. Teeter Plan Under the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code, each participating local agency levying secured property taxes, including school 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 a local agency, varies by county. The County of San Diego has implemented the Teeter Plan. The County applies the Teeter Plan to secured tax levy collections. See DISTRICT TAX BASE 18

25 INFORMATION Secured Tax Charges and Delinquencies herein for a history of property tax collections and delinquencies in the District. DISTRICT TAX BASE INFORMATION This section presents certain information concerning the property tax base in the District. For general information on how ad valorem property is assessed, and how taxes are levied and collected, see AD VALOREM PROPERTY TAXATION herein. Assessed Valuation The following table represents the five-year history of assessed valuation in the District. For more information regarding how property is assessed in the State of California, see AD VALOREM PROPERTY TAXATION Assessed Valuation herein. OCEANSIDE UNIFIED SCHOOL DISTRICT Assessed Valuation Fiscal Year Local Secured Utility (a) Unsecured Total % Change 2004/05 $ 8,349,738,790 $10,971,357 $291,229,763 $ 8,651,939, /06 9,907,382,178 11,176, ,583,319 10,173,142, % 2006/07 11,044,256,801 10,500, ,519,165 11,568,276, /08 12,353,947, , ,371,413 12,636,819, /09 12,654,531, , ,465,596 12,946,597, (a) Utility values are reported to the County by the State Board of Equalization. A change in accounting for the assessment of railroad properties is largely responsible for the decline in 2007/08. Source: California Municipal Statistics, Inc. The ad valorem property tax to pay debt service on the Bonds and all other outstanding bonds is levied on total assessed value of all taxable property within the District before deducting any redevelopment agency tax increment. The District s general fund property tax revenue is a percentage of the County-wide 1% general purpose tax rate levied on total assessed value of all taxable property within the District after deducting redevelopment agency tax increment. 19

26 Secured Tax Charges and Delinquencies The following table reflects the historical secured tax levy for the District. In large part because they are covered by the Teeter Plan, year-end delinquency figures for school districts have not been made readily available by the County OCEANSIDE UNIFIED SCHOOL DISTRICT Secured Tax Charges (a) Fiscal Year Secured Tax Charge (b) 2003/04 $25,878, /05 30,231, /06 35,640, /07 40,464, /08 44,243, (a) (b) San Diego County utilizes the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the County retaining all penalties and interest. % General Fund apportionment. Source: California Municipal Statistics, Inc. Under the Teeter Plan, the County funds the District its full tax levy allocation rather than funding only actual collections (levy less delinquencies). In exchange, the County receives the interest and penalties that accrue on delinquent payments, when the late taxes are collected. The 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 when and if year-end delinquencies for taxes levied on behalf of such agency exceed 3%. See AD VALOREM PROPERTY TAXATION Teeter Plan herein. Tax Rates The following is a summary of tax rates for a representative tax rate area, TRA 7-000, within the District. TRA has a total 2008/09 assessed valuation of $3,366,196,662, approximately 26% of the District's total assessed valuation. See AD VALOREM PROPERTY TAXATION for further information on establishing tax rates. OCEANSIDE UNIFIED SCHOOL DISTRICT Tax Rates - TRA / / / / /09 1% General Fund % % % % % Oceanside Unified School District Metropolitan Water District TOTAL % % % % % Source: California Municipal Statistics, Inc. 20

27 Largest Taxpayers The twenty largest taxpayers in the District for 2008/09, as shown on the secured tax roll, and the amounts of their assessed valuations for all taxing jurisdictions within the District, are shown below. OCEANSIDE UNIFIED SCHOOL DISTRICT Largest Taxpayers Name Primary Land Use Assessed Valuation Percent of Total (a) Genentech Inc. Industrial $ 522,873, % PK II El Camino North LP Shopping Center 135,219, Wyndham Vacation Resorts Inc. Resort/Timeshare 101,098, W2005 MRD Realty LLC Apartments 73,766, Northwestern Mutual Life Insurance Co. Apartments 65,833, AMBDFS Pacific Coast LLC Industrial 56,970, Essex CAL-WALP Apartments 51,729, K. Hovnanian at Piazza Doro LLC Residential Development 50,667, Pacific Coast Plaza Investments LP Shopping Center 44,175, Rock-Sea LLC Apartments 39,433, BankAmerica Realty Finance Inc. Residential Development 37,740, Wal Mart Stores East LP Commercial 36,191, UDR Presidio LP Apartments 35,939, Hydranautics Industrial 35,438, Oceanside Pier View LP Commercial 35,159, Continental Residential Inc. Residential Development 33,602, Trendwest Leasing LLC Apartments 32,110, K&G Banderas I LLC Commercial 27,062, WL Homes LLC Residential Development 26,255, Ocean Ranch Hotels LLC Hotel 25,917, $1,467,185, % (a) Total Local Secured Assessed Valuation for 2008/09: $12,654,531,987 Source: California Municipal Statistics, Inc. 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 dated as of December 1, The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such longterm 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 column lists local agencies with territory overlapping, at least in part, that of the District. The second column shows the portion of each overlapping entity's debt assignable within the boundaries of the District, and the third column shows the amount of that portion of the overlapping entity's existing debt. The total amount of debt for each overlapping entity is not given. The Debt Report also shows, at the top, the gross assessed valuation, less any redevelopment agency tax increment and the resulting net assessed valuation after deducting redevelopment agency tax increment. Ad valorem tax levy rates for paying general obligation bonds are determined on the basis of 21

28 gross assessed valuation; allocation of the basic 1% ad valorem tax levy to taxing agencies within a county is determined on the basis of the net assessed valuation after deducting redevelopment agency tax increment. OCEANSIDE UNIFIED SCHOOL DISTRICT Statement of Direct and Overlapping Debt 2008/09 Assessed Valuation: $12,946,597,583 Redevelopment Incremental Valuation: (1,089,025,866) Adjusted Assessed Valuation: $11,857,571,717 Percent DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Applicable Debt 12/1/08 Metropolitan Water District 0.639% $ 2,090,904 Oceanside Unified School District ,025,000 (a) City of Oceanside Community Facilities Districts ,793,646 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 157,909,550 DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Diego County General Fund Obligations ,616,334 San Diego County Pension Obligations ,747,840 San Diego County Superintendent of Schools Obligations ,043 Mira Costa Community College District Certificates of Participation ,971 Oceanside Unified School District Certificates of Participation ,055,000 City of Oceanside Certificates of Participation ,474,938 City of Oceanside Pension Obligations ,716,171 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $107,785,297 COMBINED TOTAL DEBT $265,694,847 (b) (a) (b) Excludes issue to be sold. Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2008/09 Assessed Valuation: Direct Debt ($116,025,000) % Direct and Overlapping Tax and Assessment Debt % Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($117,080,000) % Combined Total Debt % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/08 $0 Source: California Municipal Statistics, Inc. 22

29 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUE AND APPROPRIATIONS The information in this section concerning certain provisions of Articles XIIIA, XIIIB, XIIIC and XIIID of the State constitution, Propositions 98 and 111 and certain other law is provided as supplementary information only, to outline the principal constitutional and statutory laws under which the operating revenue and finances of K-12 school districts in the State are determined. The tax for the District Bonds was approved in conformity with all applicable constitutional and statutory limitations. For specific financial information on the District, see DISTRICT INFORMATION herein. Article XIIIA Article XIIIA of the State constitution (the Constitution ) limits, subject to certain exceptions, 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 tax 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 increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of those voting in an election to impose ad valorem taxes, and, except to pay debt service on certain voter approved indebtedness, prohibits the imposition of any additional ad valorem, sales or transaction taxes on real property. Article XIIIA does permit ad valorem taxes to be levied in excess of the basic 1% tax limitation as required to pay debt service (a) on any indebtedness approved by the voters prior to July 1, 1978, (b) 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 1, 1978, or (c) on any bonded indebtedness approved by fifty-five percent of the votes cast by the voters of a school or community college district for the construction, reconstruction, rehabilitation or replacement of, including furnishing and equipping of, or the acquisition or lease of real property for, school facilities, provided that certain accountability and other requirements are satisfied. 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, while prohibiting the imposition by the State Legislature of any new ad valorem, sales or transaction taxes on real property. 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 each county in the State and distributed according to a formula among taxing agencies within that county. The formula apportions the tax roughly in proportion to the relative shares of taxes last levied prior to 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 claims, if any, on tax increment and subject to changes in organization, 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. 23

30 Article XIIIB Article XIIIB of the Constitution, approved by voters in 1979 and subsequently amended by Propositions 98 and 111, 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 governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population, for transfers in the financial responsibility for providing services and for certain declared emergencies (the Gann limit ). 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. The appropriations of an entity of local government 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. For school districts, Article XIIIB constrains appropriations from State and local tax sources, but not federal aid or non-tax income, such as revenues from cafeteria sales or adult education fees. 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 government, (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 fiscal years. If a school district receives any proceeds of taxes in excess of its appropriations limit, it may increase its appropriations limit to equal that amount by taking the appropriations limit from the State. 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 Constitution. See Propositions 98 and 111 below. Article XIIIB does not impact the ability of the County to levy and collect the property tax or pay debt service on the Bonds. Propositions 98 and 111 On November 8, 1988 the voters approved Proposition 98, an initiative constitutional amendment and statute called The Classroom Instructional Improvement and Accountability Act ( Proposition 98 ). In addition to adding certain provisions to the Education Code, Proposition 98 also 24

31 amended Article XIIIB and Section 8 of Article XVI of the Constitution and added Section 8.5 of Article XVI to the Constitution, the effects of which are to establish a minimum level of State funding for school districts, to allocate to school districts, within limits, State revenues in excess of the State's appropriations limit and to exempt such excess funds from school district appropriations limits. On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) 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 Constitution with respect to appropriations limitations and school funding priority and allocation. Article XIIIB, as amended by both Proposition 98 and Proposition 111, is discussed above under Article XIIIB. The provisions of Sections 8 and 8.5 of Article XVI, as added to or amended by Propositions 98 and 111, may be summarized as follows: (a) State Funding of Schools (Section 8). Monies to be applied by the State for the support of school districts must be at a level equal to the greater of the following tests : (I) The amount which, as a percentage of the State general fund revenues which may be appropriated pursuant to Article XIIIB, equals the percentage of general fund revenues appropriated for school districts in fiscal year 1986/87; (ii) The amount actually appropriated to school districts in the prior fiscal year from general fund proceeds and from allocated local proceeds of taxes (excluding any excess state revenues allocated pursuant to Section 8.5), adjusted for changes in enrollment and for the change in the cost of living (operative only in a fiscal year in which the percentage growth in California per capita personal income is less than or equal to the percentage growth in per capita general fund revenues plus one-half of one percent); (iii) The amount actually appropriated to school districts in the prior fiscal year from general fund proceeds and from allocated local proceeds of taxes (excluding any excess State revenues allocated pursuant to Section 8.5) adjusted for changes in enrollment and for the change in per capita general fund revenues, and, in addition, an amount equal to one-half of one percent times the prior year appropriations (excluding any excess State revenues) adjusted for changes in enrollment (operative only in a fiscal year in which the percentage growth in California per capita personal income is greater than the percentage growth in per capita general fund revenues plus one-half of one percent). 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 the general fund revenue growth exceeds personal income growth. The State legislature by a two-thirds vote of both houses, with the Governor's concurrence, may suspend for one year the minimum funding provisions for school districts as provided for in Section 8. (b) Allocations to the State School Fund (Section 8.5). In addition to the amounts applied to school districts under the tests discussed above, the State Controller is directed to allocate available excess State revenues (pursuant to Article XIIIB) to the State School Fund. However, no such allocation is required at any time that the Director of Finance and the Superintendent of Public Instruction mutually determine that current annual expenditures per student equal or exceed the average annual expenditures 25

32 per student of the 10 states with the highest annual expenditures per student and the average class size equals or is less than the average class size of the 10 states with the lowest class size. Such allocations do not constitute appropriations subject to Article XIIIB limitations and are to be made in an equal amount per enrollment. Proposition 1A Since fiscal year 1992/93, the State has satisfied a portion of its Proposition 98 obligations for revenue limit funding of school districts by shifting part of the 1% local ad valorem property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and college districts through a local Educational Revenue Augmentation Fund (ERAF) in each county. At the November 2004 election State voters approved Proposition 1A, limiting the amount and frequency of such ERAF shifts of property tax revenue from other taxing agencies to school districts. Under Proposition 1A, beginning in fiscal year 2008/09, the State will be able to divert no more than eight percent of local property tax revenues for State purposes (including, but not limited to, funding K-12 education) only if: (a) the Governor declares such action to be necessary due to a State fiscal emergency; (b) two-thirds of both houses of the Legislature approve the action; (c) the amount diverted is required by statute to be repaid within three years; (d) the State does not owe to local agencies any repayment for past property tax or Vehicle License Fee diversions; and (e) such property tax diversions do not occur in more than two of any ten consecutive fiscal years. Because ERAF shifts will be capped and limited in frequency, the State will have to rely more heavily on State general fund moneys for Proposition 98 funding of school districts. Propositions 57 and 58 On March 2, 2004 State voters passed Proposition 57, the California Economic Recovery Bond Act, authorizing the issuance by the State of up to $15 billion of bonds to finance the State s negative general fund balance as of June 30, 2004 and other general fund obligations undertaken prior to June 30, The State has issued $14.1 billion Economic Recovery Bonds under this authorization. In the same election State voters passed Proposition 58, the Balanced Budget Amendment, requiring the State to adopt and maintain a balanced budget, establish a reserve and restrict future long-term deficit-related borrowing. Articles XIIIC and XIIID On November 5, 1996, the voters of the State approved Proposition 218, the so-called Right to Vote on Taxes Act. Proposition 218 added Articles XIIIC and XIIID to the Constitution, which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a general tax (imposed for general governmental purposes) or a special tax (imposed for specific purposes); prohibits special purpose government agencies such as 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. Article XIIIC also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. The ad valorem property tax levied to pay debt service on the Bonds is a "special tax" approved by the District's voters in the manner required by Article XIIIC. 26

33 Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. In respect to school district general obligation bonds, the Constitution and laws of the State impose a mandatory duty on county tax collectors to levy a property tax sufficient to pay debt service on such bonds coming due in each year. The initiative power cannot be used to reduce or repeal the authority and obligation to levy such taxes which are pledged as security for payment of such bonds or to otherwise interfere with performance of the mandatory duty of a school district and its county with respect to such taxes which are pledged as security for payment of such bonds. Legislation adopted in 1997 provides that Article XIIIC shall not be construed to mean that any owner or beneficial owner of a municipal security assumes the risk of, or consents to, any initiative measure which would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution. Voter approved special taxes (including those levied pursuant to the Mello-Roos Community Facilities Act), parcel taxes and assessments levied pursuant to the Landscape and Lighting District Act of 1972 (among other assessments), that are not pledged to the payment of bonds, may be subject to reduction or repeal by voter initiative under the provisions of Article XIIIC. Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall be construed to affect laws existing prior to enactment of Articles XIIIC and XIIID relating to the imposition of fees or charges as a condition of property development; however it is not clear whether the initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by a school district. By its terms, Article XIIID does not apply to ad valorem property tax of the type levied to pay debt service on the Bonds. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination. Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 98, 111 and 1A were each adopted as measures that qualified for the ballot pursuant to the State s initiative process. From time to time other initiative measures could be adopted, further affecting school districts revenues or ability to expend revenues. The District is unable to anticipate the nature of such initiatives nor their potential impact on the operations of the District. 27

34 GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION The information in this section concerning funding procedures of K-12 school districts in the State is provided as supplementary information only. It should not be inferred from the inclusion of this information here that any of the matters discussed in this section affect in any way the obligation of the County on behalf of the District to levy ad valorem taxes on the taxable property within the District in an amount sufficient to pay all amounts due on the Bonds. For specific financial information on the District, see DISTRICT INFORMATION herein. State Funding of School Districts Annual State apportionments of basic and equalization aid to K-12 school districts for general purposes are made according to a revenue limit per unit of average daily attendance ( A.D.A. ). If a district s total revenue limit exceeds its property tax revenue, its annual State apportionments, subject to certain adjustments, amount to the difference between the revenue limit and a district s actual property tax receipts (after any redevelopment agency tax increment or other deductions or shifts that may be in effect under State law). A.D.A. is determined by school districts twice a year, in December ( First Period A.D.A. ) and April ( Second Period A.D.A. ). The calculation of the amount of State apportionment a school district is entitled to receive each year is summarized as follows: first, the prior year Statewide revenue limit per A.D.A. is recalculated with certain adjustments for equalization and other factors; second, this adjusted prior year Statewide revenue limit per A.D.A. is inflated according to formulas based on the implicit price deflator for government goods and services and the Statewide average revenue limit per A.D.A. for each type of A.D.A., yielding the school district s current year component revenue limits per A.D.A.; third, the current year component revenue limits per A.D.A. are applied to the school district s A.D.A. for either the current or prior year, as the district elects; fourth, revenue limit adjustments known as add-ons are calculated for each school district if the school district qualifies for such add-ons (for example, add-ons to adjust for small school district size and providing meals for needy pupils, among others); and fifth, local property tax revenues are deducted from the total revenue limit calculated for each district to arrive at the amount of State apportionment each school district is entitled to for the current year. The State revenue limit is calculated three times a year for each school district on the basis of projections submitted by the district on or about December 10, based on First Period A.D.A., and April 15 and June 30, both based on Second Period A.D.A. A.D.A. calculations are based on actual attendance and do not include excused absences. Revenue limit calculations are made by each school district, reviewed by the County Office of Education and submitted to the State Department of Education. The State Department of Education reviews the calculations for accuracy, determines the amount of State apportionment owed to each school district and notifies the State Controller to distribute the apportionments. The first calculation is performed for the First Principal Apportionment in February, the second calculation for the Second Principal Apportionment in June, and the final calculation for the end of the fiscal year Annual Principal Apportionment, in essence a correction that is made in October of the next fiscal year. See DISTRICT INFORMATION herein for the District's specific annual revenue limit per A.D.A. 28

35 Basic Aid Districts In the event that a school district's property tax revenue exceeds its calculated revenue limit entitlement, that school district retains all of its property tax revenue, and State apportionments to that district are limited to the minimum basic aid amount of $120 per A.D.A. set forth in the Constitution. Currently the State allocates basic aid funding to categorical entitlements that would have been received in any event. Such districts are commonly known as basic aid districts. The District is not a basic aid district. State Budget The State budget approval process begins with the release to the State legislature by January 10th of the Governor's proposed budget for the following fiscal year. State fiscal years begin July 1st. In May, the Governor submits a revision of the proposed budget that reflects updated estimates of revenues and expenditures. After a series of public hearings and other steps in the legislative process, the budget must be approved by two-thirds vote in each house of the State legislature and submitted to the Governor. The Governor may reduce or eliminate any appropriation by line-item veto. Although the budget is required by the Constitution to be approved no later than June 15th, it often has not been approved until later. While the Constitution in large part dictates the formulae for determining the allocation of State revenues to the K-12 education portion of the State budget pursuant to Propositions 98 and 111 and other provisions (see CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUE AND APPROPRIATIONS herein), in the State budget process the Governor and State legislature still have significant leeway in deciding whether and by how much to exceed or reduce such allocation in the actual funding of K-12 school districts, and to decide what funds will be general purpose or restricted purpose. Final 2008/09 Budget. Governor Schwarzenegger s Final Budget for the 2008/09 fiscal year (the Final 2008/09 Budget ), signed into law on September 23, 2008, endeavors to resolve the $24.3 billion budget deficit identified in the May Revision. It provides a modest reserve of $1.7 billion for the 2008/09 fiscal year, but projects a deficit of $1.0 billion in fiscal year 2009/10. While the Final 2008/09 Budget does not resolve the state s persistent structural budget deficit, it includes reform measures designed to put California on the path to fiscal stability. Expenditure reductions account for 47% of all the Final 2008/09 Budget solutions and, as a result of these reductions, the Final 2008/09 Budget holds General Fund spending to virtually no growth for the 2008/09 fiscal year - $103.4 billion in 2008/09 compared to $103.3 billion in 2007/08. This reflects less than twopercent growth as compared to General Fund spending in 2006/07. The Final 2008/09 Budget includes a reduction of $850 million General Fund due to $510 million in General Fund vetoes which reflect the Governor s decision to reduce spending to the maximum extent possible within constitutional, statutory, and courtordered spending requirements. The Final 2008/09 Budget includes $41.9 billion in General Fund funding for K12 education and community colleges to fund the minimum Proposition 98 Guarantee in 2008/09. Total Proposition 98 funding for K14 education programs will increase year over year by $1.5 billion. Total expenditures from all sources for K12 education programs in 2008/09 are projected to be $71.9 billion ($42 billion General Fund). Of this amount, $68 billion is state, federal and local property tax funding accounted for in the Final 2008/09 Budget. As a result of a steady decline in birth rates throughout the 1990s, attendance growth in public schools is declining. For 2007/08, K12 average daily attendance (A.D.A.) is estimated to be 5,947,000, a decrease of 6,400 from the 2006/07 fiscal year. For 2008/09, K12 A.D.A. will decrease by an additional 31,000 to 5,916,

36 The Final 2008/09 Budget also provides the following for K-12 education: PerPupil Spending. Total perpupil expenditures from all sources are projected to be $12,042 in 2007/08 and $12,152 in 2008/09, including funds provided for prior year settleup obligations. It should be noted, however, that this is an indicator of the relative level of spending in California for support of K12 education programs and not the actual level of funding allocated to each school for a pupil. CostofLiving Adjustments. The Final 2008/09 Budget includes $244.3 million for a 0.68percent costof-living adjustment (COLA) for school apportionments. Of this amount, $239.8 million is for school district revenue limits and $4.5 million is for county office of education revenue limits. No COLA is provided for categorical programs. Proposition 98 Guarantee. For fiscal year 2006/07, the Proposition 98 Guarantee was $55.2 billion, of which the General Fund share was $41.4 billion. Local property taxes covered the balance. Proposition 98 General Fund appropriations for 2007/08 were $41.6 billion. Total Proposition 98 funding for 2007/08 was $56.6 billion. The Proposition 98 Guarantee for 2008/09 is projected to grow to $58.1 billion of which $41.9 billion will be from the General Fund. With this additional investment, K-12 Proposition 98 per-pupil funding is $8,784 in 2008/09, up from $8,509 in 2007/08. Revisions to 2008/09; 2009/10 Adopted State Budget. On November 6, 2008, the Governor called a special session of the State Legislature and announced a plan to address a projected revenue shortfall for fiscal year 2008/09, estimated as of December 10, 2008 to be approximately $14.8 billion, as well as substantial shortfalls in future fiscal years. This legislative special session ended without a resolution. Coinciding with the swearing-in of the new Legislature on December 1, 2008, the Governor declared a fiscal emergency for the State, allowing him to call a Proposition 58 legislative special session to address the shortfall. Under Proposition 58, the State Legislature had 45 days to pass and send a bill or bills addressing the State s budget crisis to the Governor s desk. In addition to the Proposition 58 special session, the Governor called a second legislative special session to address the State s economy. As part of the Governor s plan to close the budget shortfall, he proposed to reduce Proposition 98 General Fund spending by $2.5 billion in fiscal year 2008/09, including a $2.2 billion reduction in funding for K-12 education, a decline of more than 4 percent from the 2008/09 Budget Act level. On February 19, 2009, the State Legislature passed a budget-balancing reform proposal, signed by Governor Schwarzenegger on February 20, 2009 (the 2008/09 Budget Act ), which is intended to close the State s projected $42 billion deficit through June of The Department of Finance has reported that the 2008/09 Budget Act reduces spending by approximately $13 billion for fiscal year 2008/09 and creates a spending plan of $96.3 billion for the fiscal year 2009/10, as well as funding Proposition 98 at $58.1 billion. In addition, the 2008/09 Budget Act contains a proposal to securitize State Lottery proceeds and assumes that the securitization will generate $6 billion in revenues for fiscal year 2009/10. Such proposal will be presented to voters within the State at a special election in May The changes to the State Lottery preclude education from receiving Lottery funds and instead adds $1.2 billion of Lottery proceeds to the base of Proposition 98 funding. K-12 education will be removed from the State Lottery, beginning in fiscal year 2009/10 when the $1.2 billion amount will be included in K-12 revenue limits. Education cuts are reported to total approximately $8.6 billion of the total cuts of $15 billion by July 2010 and K-12 districts are expected to receive approximately $10 billion less than they were theoretically entitled to under Proposition 98. It is anticipated, therefore, that many K-12 programs will be cut and teachers will be laid off. The adoption of the spending reductions included in the 2008/09 Budget Act will have a significant impact on funding for the District and its programs. Detailed information regarding specific K-12 program reductions set forth in the 2008/09 Budget Act are expected to be forthcoming from the California Department of Finance s website: 30

37 Information about State budgets is regularly available at various State-maintained websites. See: under the heading California Budget. Additionally, an impartial analysis of the budget is posted by the Office of the Legislative Analyst at The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District takes no responsibility for the continued accuracy of the internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporate herein by these references. While the District is unable to predict what actions will be taken 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 future years for education, the adoption of any further spending reductions could result in a significant shortfall of revenue and cash. In addition, the State budget will continue to be affected by future national and State economic conditions and other factors over which the District has no control. Further information regarding specific K-14 program reductions set forth therein are available from the California Department of Finance s website: State Funding of Schools Without A State Budget On May 29, 2002, the Court of Appeal of the State of California for the Second Appellate District in White v. Davis et al. (combined with Howard Jarvis Taxpayers Association et al. v. Westly in appeal) held, among other things, that absent adoption of a budget bill or an emergency appropriation by the Legislature, the State Controller may disburse State funds authorized by (a) a continuing appropriation enacted by the Legislature, (b) a self-executing provision of the State constitution, including payment of certain funds for public schools under Article XVI, Section 8.5 of the State constitution, and (c) mandate of federal law, such as prompt payment of minimum wage and overtime compensation mandated by the federal Fair Labor Standards Act and benefits under federal food stamp, foster care and adoption, child support and child welfare programs. The Court of Appeal specifically concluded that Article XVI, Section 8.0 of the State constitution does not constitute a self-executing authorization to disburse revenue limit apportionment to school districts; legislative appropriation is required for revenue limit disbursement. On May 1, 2003, the California Supreme Court in its decision in White v. Davis et al. granted review to two other matters and let these particular conclusions of the Court of Appeal stand without ruling on them. During the 2003/04 State budget impasse, the State Controller announced that only payments of prior year obligations, constitutional authorizations, federal mandates and continuous legislative appropriations would be made. The State Controller concluded that revenue limit apportionments to school districts, under provisions of the Education Code implementing Article XVI, Section 8 of the State constitution, are authorized as continuous legislative appropriations, so disbursed these funds without a budget bill or emergency appropriation enacted. The State Controller did not disburse certain categorical and other funds to school districts until the 2003/04 Budget Act was enacted. State Funding of School Construction The State makes funding for school facility construction and modernization available to K-12 districts throughout the State through the Office of Public School Construction ( OPSC ) and the State Allocation Board ( SAB ), from proceeds of State general obligation bonds authorized and issued for this purpose. Such bond measures require approval of by a simple majority of those voting. Proposition 47, passed by 58.9% of the State-wide vote on November 5, 2002, authorized $13.05 billion, $11.40 billion of which were for K-12 school facilities and $1.65 billion of which were for higher education facilities. 31

38 Proposition 55, passed by 50.6% of the State-wide vote on March 2, 2004, authorized $12.3 billion, $10.0 billion of which was for K-12 school facilities and $2.3 billion of which was for higher education facilities. Proposition 1D, passed by 56.9% of the State-wide vote on November 7, 2006, authorized $7.329 billion for construction, modernization and related purposes for K-12 school districts. The SAB allocates bond funds for 50% of approved new construction costs, 60% of approved modernization costs (80% for modernization project applications made prior to February 1, 2002), or up to 100% of approved costs of any type if the school district is approved for hardship funding. The school district is responsible for the portion of costs not funded by the State, commonly funding their portion with their own general obligation bonds, certificates of participation or accumulated builder s fee revenue. School districts routinely apply for such funding whenever they have projects they believe meet OPSC and SAB criteria for funding. As of December 17, 2008, the SAB announced that it would be unable to release funds for approved school construction projects due to the temporary halt of cash disbursements from the State s Pooled Money Investment Account. The SAB further announced that school districts should not rely on State funds to proceed with projects, due to the unknown duration of the State s financial crisis. State Retirement Programs School districts participate in the State of California Teachers Retirement System ( STRS ). STRS covers all full-time and most part-time employees with teaching certificates. 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. School districts also participate in the State of California Public Employees Retirement System ( PERS ). PERS covers all classified personnel, generally those employees without teaching certificates, who are employed at least four hours per day. In order to receive PERS benefits, an employee must be at least 50 years old and have had five years of covered PERS service as a public employee. Contribution rates to PERS varies with changes in actuarial assumptions and other factors, such as changes in benefits and investment performance, and are set by a State retirement board for PERS. The contribution rates are set by statute for STRS at a constant 8.25% of salary. STRS has a substantial State-wide unfunded liability. Under current law, the liability is the responsibility of the State and not of individual school districts. See DISTRICT INFORMATION herein for information regarding the District's contributions to these retirement systems. County Office of Education In each county there is a county superintendent of schools (the County Superintendent ) and a county board of education. The Office of the County Superintendent, frequently known as the County Office of Education (the County Office herein) in each county provides the staff and organization that carries out the activities and policies of the County Superintendent and county board of education for that county. County Offices provide instructional and support services to school districts within their counties, and various State mandated services county-wide, particularly in special education and juvenile court education services. County Office business services departments act as a control point for a variety of information, including pupil data collection, attendance accounting, teacher credential registration, payroll accounting, retirement and tax information and school district budgets, and also report such information to the State Department of Education. All school district budgets must be approved by their County 32

39 Office and each district must provide its County Office with scheduled interim reports throughout the fiscal year. County Offices also act as enforcement entities which intervene in district fiscal matters should a district fail to meet State budget and reporting criteria. The District is under the jurisdiction of, and is served by, the County Office for San Diego County. School District Budget Process School districts are required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. School districts annual general fund expenditures are characterized in large part by multi-year expenditure commitments such as union contracts. Year-to-year fluctuations in State and local funding of school district general funds could result in revenue decreases which, if large enough, may not easily be offset by an equal reduction in expenditures until at least the following fiscal year. School districts are required by State law to maintain general fund reserves which can be drawn upon in the event of a resulting excess of expenditures over revenues for a given fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. School districts must adopt a budget no later than June 30 of each year. The budget must be submitted to the County Superintendent within five days of adoption or by July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget option requires a revised and readopted budget by September 1 that is subject to State mandated standards and criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The single budget is only readopted if it is disapproved by the County Superintendent, or as needed. Under either procedure, the school board must revise its adopted budget within 45 days after the Governor signs the State budget act to reflect any changes in budgeted revenues or expenditures made necessary by the adoption of the State s budget. For both dual and single budgets submitted on July 1, the County Superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, and will determine if the budget allows the district to meet its current obligations and is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. On or before August 15, the County Superintendent will approve or disapprove the adopted budget for each school district. Pursuant to State law, the county superintendent has available various remedies by which to impose and enforce a budget that complies with State criteria, depending on the circumstances, if a budget is disapproved. Subsequent to approval, the County Superintendent throughout the fiscal year is authorized to monitor each school district under his or her jurisdiction pursuant to its adopted budget to determine on an ongoing basis if the district can meet its current or subsequent year financial obligations. If a County Superintendent determines that a district cannot meet its current or subsequent year obligations, the County Superintendent will notify the district's governing board of the determination and the County Superintendent may do either or both of the following: (a) assign a fiscal advisor to enable the district to meet those obligations or (b) if a study and recommendations are made and a district fails to take appropriate action to meet its financial obligations, the County Superintendent will so notify the State Superintendent of Public Instruction, and then may do any or all of the following for the remainder of the fiscal year: (i) request additional information regarding the district's budget and operations; (ii) develop 33

40 and impose, after also consulting with the district's board, revisions to the budget that will enable the district to meet its financial obligations; and (iii) stay or rescind any action inconsistent with such revisions. However, the County Superintendent may not abrogate any provision of any collective bargaining agreement that was entered into prior to the date upon which the County Superintendent assumed authority. At minimum, school districts are required by statute to file with their County Superintendent and the State Department of Education a First Interim Financial Report by December 15 th covering financial operations from July 1 through October 31 st, and a Second Interim Financial Report by March 15 th covering financial operations from November 1 through January 31 st. Section of the Education Code requires that each interim report be certified by the school board as either (a) positive, certifying that the district, based upon current projections, will meet its financial obligations for the current fiscal year and subsequent two fiscal years, (b) qualified, certifying that the district, based upon current projections, may not meet its financial obligations for the current fiscal year or two subsequent fiscal years, or (c) negative, certifying that the district, based upon current projections, will be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year. A certification by a school board may be revised by the County Superintendent. If either the First or Second Interim Report is not positive, the County Superintendent may require the district to provide a Third Interim Financial Report by June 1 st covering financial operations from February 1 st through April 30 th. If not required, a Third Interim Financial Report is not prepared. Each interim report shows fiscal year to date financial operations and the current budget, with any budget amendments made in light of operations and conditions to that point. After the close of the fiscal year, an unaudited financial report for the fiscal year is prepared and filed without certification with the County Superintendent and the State Department of Education. Accounting Practices The accounting policies of California school districts conform to generally accepted accounting principles, as modified in accordance with policies and procedures of the California School Accounting Manual. This manual, pursuant to Section of the Education Code, is to be followed by all California school districts. 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. See also Note 1 in APPENDIX A herein for further discussion of applicable accounting policies. County Investment Pool In accordance with Education Code Section 41001, each California public school district maintains substantially all of its operating funds in the county treasury of the county in which it is located, and each county treasurer serves as ex officio treasurer for those school districts located within the county. Each county treasurer has the authority to invest school district funds held in the county treasury. Generally, the county treasurer pools county funds with school district funds and funds from certain other public agencies and invests the cash. These pooled funds are carried at cost. Interest earnings are accounted for on either a cash or accrual basis and apportioned to pool participants on a regular basis. Each county treasurer is required to invest funds, including those pooled funds described above, in accordance with Government Code Sections et seq. In addition, each county treasurer is required to establish an investment policy which may impose further limitations beyond those required by the Government Code. A copy of the County investment policy and periodic reports on the County 34

41 investment pool are available from the San Diego County Treasurer-Tax Collector, 1600 Pacific Highway, Room 101, San Diego, CA (619) ; It is not intended that such information be incorporated into this Official Statement by such references. Certain information concerning the County s pooled investment portfolio as of January 31, 2009, is included herein in APPENDIX D - EXCERPTS FROM THE SAN DIEGO COUNTY INVESTMENT PORTFOLIO REPORT. DISTRICT INFORMATION The description in this section concerning District general operating and financial information is provided as supplementary information only. It should not be inferred from the inclusion of this information that any of the matters discussed in this section affect in any way the obligation of the County on behalf of the District to levy ad valorem taxes on taxable property within the District in an amount sufficient to pay all amounts due on the Bonds. General Information The District was established in The District is located in the northwestern section of the County of San Diego County and provides public education within an approximately 63.5 square-mile area, including the City of Oceanside and surrounding unincorporated areas. Schools within the District consist of 16 elementary schools, 1 elementary community day school, 4 middle schools, 2 comprehensive high schools, and 1 continuation/alternative education high schools. The estimated population of the District is 129,500. The 2008/09 pupil-teacher ratios are expected to be as follows: OCEANSIDE UNIFIED SCHOOL DISTRICT Pupil - Teacher Ratios Grade Ratio K 20: 1 1 through 3 20: 1 4 through 8 30: 1 9 through 12 30: 1 Source: The District. The District is governed by a Board of Education consisting of five members. Members are elected to four-year terms in alternate slates of three and two. The day-to-day operations are managed by a board-appointed Superintendent of Schools. Larry Perondi has served in this capacity since July

42 Average Daily Attendance and Revenue Limit The following table reflects historical and estimated average daily attendance for the District. A.D.A. calculations are based on actual attendance. OCEANSIDE UNIFIED SCHOOL DISTRICT Average Daily Attendance Second Period Report Academic Year Average Daily Attendance (b) 2003/04 20, /05 20, /06 19, /07 19, /08 19, /09 (a) 19,280 (a) (b) Estimated from 2008/09 First Interim Report dated December 9, Includes K-12, special education, and continuation students; excludes Adult education and ROP. Source: The District. The District is not a Basic Aid District. The District's statutory base revenue limit per A.D.A. under the State revenue limit formula was $5, for 2007/08, and is projected to be $6, per A.D.A. for 2008/09. See GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION State Funding of School Districts herein. Labor Relations Currently the District employs 1,071.4 full-time equivalent (FTE) certificated employees, FTE classified employees and 66 management employees. There are 2 formal bargaining units operating in the District which are described in the table below. OCEANSIDE UNIFIED SCHOOL DISTRICT Labor Organizations Labor Organization Contract Expiration (a) Oceanside Teachers Association June 30, 2009 California School Employees Association Local No. 370 June 30, 2009 (a) Contracts currently under negotiation, Source: The District. See Comparative Financial Statements below for historical comparison of salary expense for the District. 36

43 Retirement Programs The District contribution to STRS for fiscal year 2007/08 was $7,628,994 and in fiscal year 2008/09 is estimated to be $7,486,407. The District's contribution to PERS for fiscal year 2007/08 was $2,901,327 and for fiscal year 2008/09 is projected to be $2,533,532. See GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION State Retirement Programs herein. Comparative Financial Statements The following table reflects the District's general fund revenues, expenditures, and fund balances from fiscal year 2004/05 through 2008/09. For the District s combined audited basic financial statements for the year ended June 30, 2008, independent auditor s letter and management s discussion and analysis, all prepared according to GASB 34, see APPENDIX A hereto. 37

44 The District s Second Interim Report for fiscal year 2007/08 was certified as positive. For a description of the interim report certification process, see GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION School District Budget Process herein. The District's 2008/09 budget has been approved by the County Superintendent. OCEANSIDE UNIFIED SCHOOL DISTRICT General Fund Revenue, Expenditures and Fund Balances 2004/05 through 2008/09 Actuals Actuals Actuals Actuals First Interim 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (b) Revenues Revenue Limit Sources $111,802,679 $113,517,120 State Aid $ 66,006,029 $ 63,560,664 $ 68,328,179 Property Taxes 37,063,723 41,861,001 42,231,708 Federal Revenue 20,055,910 18,436,474 15,675,411 16,473,204 18,969,126 Other State Revenue 22,318,107 25,018,360 31,362,677 28,761,777 26,751,510 Other Local Revenue 10,468,789 12,110,185 14,801,298 15,262,536 14,604,821 Total Revenues 155,912, ,986, ,399, ,300, ,842,577 Expenditures Certificated Salaries 84,572,678 80,550,983 88,554,181 91,881,977 90,550,138 Classified Salaries 24,356,812 24,003,745 26,013,694 28,390,874 27,736,189 Employee Benefits 27,833,564 28,057,736 28,663,881 29,999,398 30,977,691 Books and Supplies 6,552,817 9,059,165 7,707,907 11,126,158 14,407,152 Services, Other Operating Expenses 16,225,400 11,372,770 13,718,964 14,321,137 14,414,528 Capital Outlay 184, ,840 2,960, , ,913 Other Outlay 1,911,720 2,288,640 2,366, , ,671 Transfers of Indirect/Direct Support Costs (337,358) (336,660) (348,041) (273,418) (272,627) Total Expenditures 161,300, ,517, ,637, ,517, ,395,655 Other Financing Sources/(Uses) Interfund Transfers In / Other Sources 3, Interfund Transfers Out / Other Uses (845,300) (740,713) (845,300) (2,405,568) (909,020) Total Other Financing Sources/(Uses) (841,881) (740,713) (845,300) (2,405,568) (909,020) Excess of Revenues Over (Under) Expenditures (6,229,922) 4,728,752 1,916,964 (6,622,630) (5,462,098) Beginning Fund Balance 26,564,566 20,334,644 25,063,396 26,980,360 20,357,728 Ending Fund Balance $20,334,644 $25,063,396 $26,980,360 $20,357,730 $14,895,630 (a) (b) Based on audited financial statement data. District Budget as of December 9, 2008, First Interim Report. Audit Excerpts from the 2007/08 audited financial statements are included in APPENDIX A, herein. The District is required to accept its annual audit at a public meeting no later than January 31st of the following year. The District considers its audited financial statements to be documents of public record. The District has not requested its auditors to review this Official Statement, nor have they done so. 38

45 District Debt Short-Term Obligations. On July 1, 2008, the District issued $6,000,000 in tax and revenue anticipation notes (the Notes ). The Notes mature on June 30, The Notes are general obligations of the District payable from general fund and any other lawfully available revenues received during the 2008/09 fiscal year. General Obligation Bonds. The District received authorization from voters at an election held on March 7, 2000, to issue $125 million in general obligation bonds. All the bonds under the 2000 authorization have been issued and are listed in the table below. Concurrently with the issuance of the Bonds, the District intends to refund certain outstanding general obligation bonds through the issuance of refunding general obligation bonds. The District received authorization from voters at an election held on June 3, 2008, to issue $195 million in general obligation bonds. The Bonds are the first bonds to be issued from the 2008 authorization. See THE BONDS Authority for Issuance and THE BONDS Debt Service herein. OCEANSIDE UNIFIED SCHOOL DISTRICT Outstanding General Obligation Bonds Outstanding March 4, 2009 Amount of Outstanding (after issuance Date of Issue Series Original Issue February 1, 2009 of the Bonds) June 15, Election, Series A $ 9,500,000 $ 8,370,000 (a) $ 195,000 May 31, Election, Series B 20,000,000 17,750,000 (a) 12,085,000 April 4, Election, Series C 20,000,000 18,150,000 (a) 16,250,000 May 20, Election, Series D 25,000,000 23,340,000 23,340,000 July 6, Election, Series E 25,000,000 23,700,000 23,700,000 July 12, Election, Series F 25,500,000 24,715,000 24,715,000 $125,000,000 $ 116,025,000 $100,285,000 March 4, General Obligation Refunding 16,600, ,600,000 March 4, 2009 Election of 2008, Series A 49,995, ,995,054 $191,595,054 $116,025,000 $166,880,054 (a) Includes the Prior Bonds. Source: The District. All debt service payments on the bonds, including refunding bonds, are payable from an ad valorem tax levied and collected by the County on assessed property in the District. Debt service on the outstanding bonds is as follows: 39

46 BOND DEBT SERVICE BREAKDOWN Oceanside Unified School District (a) (b) (c) Period Election of 2000 Election of 2008 Ending Series A (a) Series B (a) Series C (a) Series D Series E Series F 2009 Refunding Series A (b) Total 8/1/2009 (c) $199, $ 750, $ 840, $1,098, $1,009, $1,049, $259, $ 533, $ 5,741, /1/ , , ,666, ,518, ,636, , ,307, ,176, /1/ , , ,668, ,522, ,631, , ,307, ,178, /1/ , , ,664, ,520, ,619, , ,307, ,159, /1/ , , ,664, ,529, ,627, , ,307, ,178, /1/ , ,338, ,664, ,526, ,629, , ,592, ,986, /1/ , ,338, ,668, ,525, ,628, ,559, ,477, ,799, /1/ , ,337, ,668, ,523, ,627, ,977, ,872, ,607, /1/ , ,334, ,667, ,528, ,627, ,980, ,872, ,612, /1/ , ,334, ,665, ,531, ,628, ,628, ,487, ,876, /1/ , ,338, ,661, ,531, ,627, ,874, ,717, ,350, /1/2020 1,331, ,334, ,655, ,529, ,629, ,756, ,607, ,844, /1/2021 1,334, ,334, ,647, ,532, ,629, ,020, ,862, ,361, /1/2022 1,331, ,337, ,642, ,538, ,628, ,294, ,122, ,894, /1/2023 1,335, ,332, ,636, ,536, ,629, ,977, ,449, /1/2024 1,328, ,331, ,627, ,544, ,629, ,567, ,028, /1/2025 1,334, ,327, ,622, ,540, ,631, ,172, ,628, /1/2026 1,331, ,331, ,614, ,542, ,626, ,662, ,109, /1/2027 1,331, ,322, ,609, ,548, ,629, ,067, ,508, /1/2028 1,333, ,321, ,602, ,551, ,624, ,402, ,835, /1/2029 1,327, ,317, ,592, ,552, ,627, ,747, ,164, /1/2030 1,329, ,311, ,589, ,555, ,627, ,097, ,510, /1/2031 1,318, ,312, ,579, ,555, ,628, ,462, ,855, /1/2032 1,299, ,570, ,557, ,621, ,127, ,177, /1/2033 1,564, ,557, ,617, ,771, ,511, /1/2034 1,560, ,614, ,175, /1/2035 1,619, ,619, TOTAL $199, $22,729, $29,330, $40,310, $39,470, $43,347, $23,525, $132,427, $331,342, Debt Service remaining on unrefunded bonds after issuance of the Bonds. Election of 2008, Series A General Obligation Bonds issued concurrently with the Bonds. Figures do not include interest payments made on February 1,

47 Certificates of Participation. On September 9, 1997, the District issued certificates of participation in the amount of $4,500,000 for the construction of certain improvements through the Oceanside Unified School Facilities Corporation, with interest rates ranging from 4.1% to 5/0%. At June 30, 2008, the principal balance outstanding on the certificates was $1,190,000. The certificates mature though 2012 as follows: OCEANSIDE UNIFIED SCHOOL DISTRICT Certificates of Participation Fiscal Year Principal Interest Total $ 275,000 $ 55,671 $ 330, ,000 42, , ,000 27, , ,000 12, ,000 Total $1,190,000 $137,224 $1,327,224 Source: The District Capital Leases. The District leases equipment under agreements that provide for title to pass upon expiration of the lease period. Future minimum lease payments are as follows: OCEANSIDE UNIFIED SCHOOL DISTRICT Capital Leases Fiscal Year Payment $ 26, ,000 Present Value of Minimum Lease Payments $ 52,000 Source: The District The District will receive no sublease rental revenues nor pay any contingent rentals for the equipment. Other Post Employment Benefits Oceanside Unified School District administers a single-employer defined benefit other postemployment plan (OPEB) that provides medical insurance benefits to eligible retirees and their spouses. The District implemented Governmental Accounting Standards Board Statement #45, Accounting and Financial report by Employers for Postemployment Benefit Plans Other than Pension Plans, in

48 To be eligible, the employee must have twenty years of service with the District and be between the age of fifty-five and the age of Medicare eligibility or be approved for STRS or PERS disability retirement within thirty-nine months of his/her fifty-five year birthday. Dependents of retirees are not eligible for benefits. The benefits are capped at age 65 and at $1,800 per year, as of the May 10, 2006 actuarial valuation date. As of June 30, 2008, 139 retirees are receiving benefits. The District s funding policy is based on the projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined annually by the governing board. For fiscal year 2007/08, the District contributed $436,553 for OPEB obligations. The annual required contribution for 2007/08 was $756,061. The District s net OPEB obligation as of June 30, 2008, is $319,508. As of May 10, 2006, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability (AAL) for benefits was $8.9 million and the unfunded actuarial accrued liability (UAAL) was $8.9 million. In July of 2004, the Governmental Accounting Standards Board issued GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which will significantly change the way state and local governments report their other postemployment benefits to the public. As a result of GASB 45, state and local governments will be required to (1) recognize the cost of these benefits in periods when the related services were rendered to the employer, (2) provide information about the actuarial accrued liabilities for promised benefits associated with past services and to what extent those benefits have been funded, (3) and provide information useful in assessing potential demands on the employer s cash flow. The District is required to begin to implement GASB 45 in the 2007/08 fiscal year. Availability of Documents Additional public documents will be made available upon request through the Business Office of the District. Such public documents include periodic financial reports such as interim reports, approved budget and audited financial statements. See INTRODUCTION Other Information herein for contact information. ECONOMIC PROFILE While the economics of the City and County and surrounding region influence the economics within the District, only property within the District is subject to an unlimited ad valorem tax levy to pay debt service on the Bonds. Introduction The District is located in the City of Oceanside in San Diego County. The County is the southern-most county in California. The County covers an area of approximately 4,280 square miles, about the size of the state of Connecticut. The County is bordered by the Pacific Ocean to the west, Orange and Riverside Counties to the north, Imperial County to the east, and the State of Baja California, Mexico to the south. The County includes 70 miles of the Pacific Ocean coastline, the Anza-Borrego Desert, which forms the eastern third of the county, the Laguna Mountains, 42

49 the San Diego Bay, one of the world s largest natural deep-water harbors, and the San Diego International Airport. Population The following table summarizes population figures for the City and for the County. CITY OF OCEANSIDE AND SAN DIEGO COUNTY Population Year City of Oceanside San Diego County ,698 1,861, ,090 2,498, ,039 2,813, ,301 3,017, ,404 3,039, ,986 3,064, ,755 3,100, ,806 3,146,274 Source: The 1980, 1990 and 2000 totals are U.S. Census figures. The figures for the years 2004 through 2008 are based upon adjusted January 1 estimates provided by the State. Employment The following table summarizes historical employment and unemployment in the San Diego Metropolitan Statistical Area. SAN DIEGO-CARLSBAD-SAN MARCOS MSA Civilian Labor Force, Employment and Unemployment Annual Averages Civilian Labor Force (a) Employment 1,415,500 1,440,900 1,453,300 1,485,900 1,478,000 Unemployment 66,700 62,100 57,300 58,100 77,200 Total 1,482,200 1,503,000 1,510,600 1,544,000 1,555,200 Unemployment Rate (b) 4.5% 4.1% 3.8% 3.8% 5.0% (a) (b) Based on place of residence; March 2007 Benchmark. The unemployment rate is calculated using unrounded data. Source: California Employment Development Department 43

50 The following table summarizes the historical number of workers in the San Diego Metropolitan Statistical Area, by industry. SAN DIEGO-CARLSBAD-SAN MARCOS MSA Estimated Number of Wage and Salary Workers by Industry (a) Farm 10,800 10,400 10,500 9,900 10,000 Natural Resources and Mining Construction 83,200 89,800 92,400 90,700 82,400 Manufacturing 104, , , , ,300 Trade, Transportation and Utilities 221, , , , ,000 Information 36,300 37,400 37,500 37,900 39,100 Financial Activities 80,600 83,000 84,400 82,600 77,900 Professional and Business Services 203, , , , ,900 Educational and Health Services 124, , , , ,500 Leisure and Hospitality 142, , , , ,700 Other Services 46,800 48,600 48,900 48,900 49,500 Government 216, , , , ,100 Total All Industries 1,271,300 1,295,500 1,314,400 1,329,400 1,329,800 (a) The industry employment data are now based upon the North American Industry Classification System (NAICS). Newly released data are not comparable to the data based on the Standard Industrial Classification (SIC). Items may not add to totals due to independent rounding. March 2007 Benchmark. Source: California Employment Development Department, Labor Market Information Division. Major Employers The following table summarizes the major private, non-public sector employers in the City: CITY OF OCEANSIDE Major Private, Non-public Sector Employers Company Product/Service Employees Children s Hospital & Health Center Medical hospital 1,700 Camp Pendleton Hospital Specialty hospital U.S. Marine Corp. 1,000 Bergensons Property Services Building maintenance service 865 Defense Aerospace Operations Manufactures electronic connectors 501 Genentech Inc. Manufactures nondiagnostic biological products 430 Cinemastar Luxury Theaters Indoor movie theater 350 Fenceworks Inc. Fence construction contractor; wire products 151 Fantasy Management Inc. Beauty salon; drinking establishment 150 Allied Swiss Limited Operators of commercial and industrial buildings 112 Alterra Healthcare Corp. Extended care facility 100 California Creative Foods Inc. Manufactures foods 100 California Infoplace Inc. Consumer information service 100 Federal Heath Sign Co. LLC Manufactures electrical signs 83 Fishel Co. Telephone equipment installation 75 El Camino County Club Membership golf club 75 Aegis Assisted Living Operators of retirement hotels 65 David Shaposhnick Inc. Plumbing service 60 Circuits Processing Technology Manufactures semiconductor integrated microcircuits 60 Dermatologist Medical Group Dermatologist office 53 Car Sound Exhaust System Inc. Manufactures motor vehicle exhaust systems and parts 50 Source: 2008 Harris InfoSource, February

51 The following table summarizes the major private, non-public sector employers in the San Diego County: SAN DIEGO COUNTY Major Private, Non-public Sector Employers Employer Product/Service Employees GSI (Go-Staff Inc.) Temporary help service; payroll services 2,500 World Famous San Diego Zoo Zoo and botanical garden; eating place retail shops 1,500 Qualcomm Inc. Manufactures integrated circuit semiconductors networks 1,200 Zoological Society of San Diego Zoo and botanical garden 1,200 GIA (Gemological Institute of America) Skill training center 700 GMI (Guard Management Inc.) Guard service 510 T B Penick & Sons Inc. New industrial building construction 455 L-3 Communications Corp. Manufactures telemetering equipment 450 DB Pharmingen Inc. Manufactures diagnostic substances 412 YMCA of San Diego County Youth organization 400 B.V. General Inc. Convalescent home 300 Fair Investments Multi-family housing construction 300 Wal-Mart Stores Inc. Discount department store 300 T E R I Inc. (Our Way) Home for the mentally challenged 250 Wackenhut Corp. Security protective devices 250 PC Vericare Clinical psychologist office 250 L Auberge Del Mar Resort & Spa Hotel 230 W-Emerald LLC Motel 230 Fairfield Development Inc. Multi-family housing construction 225 L A Swikard Inc. Landscaping services 225 Source: 2008 Harris InfoSource, February Construction Activity The following table summarizes historical residential building permit valuation for the City and the County. CITY OF OCEANSIDE AND SAN DIEGO COUNTY Residential Building Permit Valuation (Dollars in Thousands) City of Oceanside San Diego County Year (a) Residential Units (b) Residential Valuation (c) Residential Units (b) Residential Valuation (c) ,036 $185,859,492 18,031 $2,999,360, ,213,503 15,587 2,967,543, ,018,440 14,306 2,677,499, ,901,482 9,191 1,780,966, ,614,179 7,435 1,430,827,853 (a) (b) (c) As of January 1. Does not include alterations and additions. Includes all residential building activity. Source: "California Building Permit Activity," Economic Sciences Corporation. 45

52 Commercial Activity The following table summarizes historical taxable transactions in the City and the County. CITY OF OCEANSIDE AND SAN DIEGO COUNTY Taxable Transactions (Dollars in Thousands) City of Oceanside San Diego County Year Outlets Taxable Transactions Outlets Taxable Transactions ,659 $1,183,672 81,462 $38,595, ,921 1,274,718 84,829 40,863, ,995 1,379,271 88,295 44,470, ,127 1,524,982 90,620 46,679, ,265 1,564,635 91,251 47,835,514 Source: State Board of Equalization. Median Household Income Effective Buying Income (EBI) is defined as money income less personal income tax and non-tax payments, such as fines, fees or penalties. The following table summarizes historical median household EBI, for the City, the County, the State of California and the United States of America. CITY OF OCEANSIDE, SAN DIEGO COUNTY, STATE OF CALIFORNIA AND UNITED STATES OF AMERICA Median Household Effective Buying Income Year City of Oceanside San Diego County State of California United States of America 2004 $42,901 $43,346 $42,924 $38, ,806 44,506 43,915 39, Data Not Available 2007 Data Not Available ,393 50,024 48,203 41,792 Source: "Survey of Buying Power", Sales and Marketing Management Magazine. LEGAL MATTERS Tax Matters In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and 46

53 corporations. A complete copy of the proposed form of Opinion of Bond Counsel is set forth in APPENDIX B hereto. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes original issue discount for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes original issue premium for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded. Owners of Bonds with original issue discount or original issue premium, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to federal income tax and State of California personal income tax consequences of owning such Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above. 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 California Government Code, are eligible for security for deposits of public moneys in California. 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. Legal Opinion The legal opinions 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 legal opinion, certified by the official in whose office the original is filed, will be printed on each Bond. 47

54 Bond Counsel's employment is limited to a review of the legal proceedings required for authorization of the Bonds and to rendering an opinion as to the validity of the Bonds and the exclusion from gross income of interest on the Bonds. The opinion of Bond Counsel will not consider or extend to any documents, agreements, representations, offering circulars, official statements or other material of any kind concerning the Bonds. MISCELLANEOUS Ratings Moody s Investors Service and Standard & Poor s Rating Services are expected to assign their municipal bond rating of Aa2 and AAA, respectively, to the Insured Bonds, based solely upon the issuance of the Policy concurrently with the issuance of the Bonds. See BOND INSURANCE herein. Moody's Investors Service and Standard & Poor s Rating Services have assigned their municipal bond ratings of A1 and A+, respectively, to the Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agencies at the following addresses: Moody s Investors Service, 99 Church Street, New York, NY, 10007; Standard & Poor s Rating Services, 55 Water Street, 38th Floor, New York, NY Generally, a rating agency bases its rating on the information and materials furnished to it (some of which may not be included in this Official Statement) and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgement of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. Underwriting The Bonds are being purchased for reoffering by Morgan Stanley & Co. Incorporated and E. J. De La Rosa and Co., (the Underwriters ) pursuant to and subject to the conditions set forth in a Contract of Purchase for the Bonds between the District, the County and the Underwriters. The Contract of Purchase sets forth certain representations and agreements of both the District and the Underwriters, and certain conditions to closing. The Underwriters have certified to the District that all of the bonds of each maturity have been offered to the public and are expected to be sold, at the prices or yields stated on the inside cover hereof. Under the Contract of Purchase, the Underwriters have agreed to purchase the Bonds from the District at an aggregate purchase price of $50,259, (which represents the aggregate initial principal amount of the Bonds of $49,995,053.70, plus original issue premium of $1,536,238.60, less $525, of Underwriters discount, less $595, of original issue premium paid directly to the Insurer by the Underwriters, and less $150,000 of original issue premium deposited by the Underwriters with the Costs of Issuance Administrator to pay certain costs of issuance of the Bonds). The portion of net original issue premium retained by the Underwriters or deposited with the Fiscal Agent by the Underwriters will be applied to pay legally authorized costs of issuance or the Bonds pursuant to written orders of the District. The Contract of Purchase provides that the Underwriters will purchase all of the Bonds if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Contract of Purchase, the approval of certain legal matters by counsel and certain other conditions. 48

55 Closing Documents Bond Counsel in due course will furnish to the Underwriters, without charge, a transcript of all closing documents, each dated the date of delivery of the Bonds. Included therein, among other documents, will be the following: (a) (b) (c) (d) (e) (f) (g) The opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, substantially in the form attached as APPENDIX B hereto; The tax certificate of the District containing certifications and covenants relied upon by Bond Counsel in rendering its opinion that the interest on the Bonds is exempt from federal income taxation; The certificate on behalf of the District certifying that there is no litigation pending affecting the validity of the Bonds; The Certificate of an appropriate District official, acting on behalf of the District solely in his or her official and not in his or her personal capacity, certifying that at the time of the sale of the Bonds and at all times subsequent thereto up to and including the time of delivery of the Bonds to the initial purchasers thereof, to the best knowledge and belief of said Official, this Official Statement (excluding the description of the DTC and its bookentry system, information relating to a municipal bond insurance policy, if any, and the provider thereof, information provided by the Underwriters relating to the underwriting and the reoffering of the Bonds, and information relating to the investment of District funds, provided by the County Treasurer-Tax Collector), did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; The signature certificate of the officials of the County certifying that said officials have signed the Bonds, whether by facsimile or manual signature, and that they were duly authorized to do so; The receipt of the Treasurer-Tax Collector of the County for the purchase price of the Bonds, including interest accrued to the date of delivery thereof, if any; and The Continuing Disclosure Certificate of the District in substantially the form shown in APPENDIX C attached hereto. Continuing Disclosure 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 March 31 of each year commencing March 31, 2010, with the report for the 2008/09 Fiscal Year, and to provide notices of the occurrence of certain enumerated events, if material. The District will file, or cause to be filed, the Annual Report and notices of material events, if any, with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in an Annual Report or the notices of material events is set forth below under the caption APPENDIX C - Form of Continuing Disclosure 49

56 Certificate. These covenants have been made in order to assist the Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). The District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. Financial Advisor The District has entered into an agreement with KNN Public Finance, A Division of Zions First National Bank, whereunder the Financial Advisor provides financial recommendations and guidance to the District with respect to preparation and sale of the Bonds. The Financial Advisor has read and participated in the drafting of certain portions of this Official Statement and has supervised the completion and editing thereof. The Financial Advisor has not audited, authenticated or otherwise verified the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information, and the Financial Advisor makes no guaranty, warranty or other representation respecting accuracy and completeness of the Official Statement or any other matter related to the Official Statement. Additional Information The purpose of this Official Statement is to supply 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 documents, statutes and constitutional provisions referenced herein, do not purport to be complete, and reference is made to said documents, statutes, and constitutional provisions for full and complete statements of their provisions. This Official Statement has been reviewed and approved by the District. OCEANSIDE UNIFIED SCHOOL DISTRICT By: /s/ Larry Perondi Superintendent 50

57 APPENDIX A BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008, WITH INDEPENDENT AUDITOR S LETTER AND MANAGEMENT S DISCUSSION AND ANALYSIS Appendix - A

58 [THIS PAGE INTENTIONALLY LEFT BLANK]

59 OCEANSIDEUNIFIEDSCHOOLDISTRICT OCEANSIDE,CALIFORNIA COUNTYOFSANDIEGO AUDITREPORT June30,2008

60 OCEANSIDEUNIFIEDSCHOOLDISTRICT AUDITREPORT June30,2008 CONTENTS FINANCIALSECTION Page IndependentAuditors Report...1 Management sdiscussionandanalysis...3 BasicFinancialStatements: GovernmentwideFinancialStatements: StatementofNetAssets...14 StatementofActivities...15 FundFinancialStatements: BalanceSheet GovernmentalFunds...16 ReconciliationoftheGovernmentalFundsBalanceSheettothe StatementofNetAssets...17 StatementofRevenues,Expenditures,andChangesinFund Balances GovernmentalFunds...18 ReconciliationoftheGovernmentalFundsStatementofRevenues, Expenditures,andChangesinFundBalancestotheStatementof Activities...19 StatementofNetAssets ProprietaryFunds...20 StatementofRevenues,Expenditures,andChangesinFund NetAssets ProprietaryFunds...21 StatementofCashFlows ProprietaryFunds...22 StatementofFiduciaryNetAssets AgencyFunds...23 NotestotheBasicFinancialStatements...24

61 OCEANSIDEUNIFIEDSCHOOLDISTRICT AUDITREPORT June30,2008 CONTENTS (continued) REQUIREDSUPPLEMENTARYINFORMATIONSECTION Page BudgetaryComparisonSchedule GeneralFund...51 SchedulesofFundingProgress...52 SUPPLEMENTARYINFORMATIONSECTION LocalEducationAgencyOrganizationStructure...53 ScheduleofAverageDailyAttendance...54 ScheduleofInstructionalTime...55 ScheduleofFinancialTrendsandAnalysis...56 ScheduleofExpendituresofFederalAwards...57 ReconciliationofAnnualFinancialandBudgetReport WithAuditedFinancialStatements...58 ScheduleofExcessSickLeave...59 ScheduleofCharterSchools...60 NotestotheSupplementaryInformation...61 OTHERINDEPENDENTAUDITORS REPORTS ReportonInternalControloverFinancialReportingandonComplianceand OtherMattersBasedonanAuditofFinancialStatementsPerformedin AccordancewithGovernmentAuditingStandards...63 ReportonCompliancewithRequirementsApplicabletoEachMajorProgramand InternalControloverComplianceinAccordancewithOMBCircularA Auditors ReportonStateCompliance...67 FINDINGSANDQUESTIONEDCOSTSSECTION ScheduleofAuditFindingsandQuestionedCosts...69 SummaryofPriorYearAuditFindingsandQuestionedCosts...73

62 BoardofTrustees OceansideUnifiedSchoolDistrict Oceanside,California INDEPENDENTAUDITORS REPORT Wehaveauditedtheaccompanyingfinancialstatementsofthegovernmental activities,eachmajorfund,andtheaggregateremainingfundinformationofthe OceansideUnifiedSchoolDistrict,asofandfortheyearendedJune30,2008, whichcollectivelycomprisethedistrict sbasicfinancialstatements,aslistedin thetableofcontents.thesefinancialstatementsaretheresponsibilityofthe OceansideUnifiedSchoolDistrictsmanagement.Ourresponsibilityisto expressopinionsonthesefinancialstatementsbasedonouraudit. Weconductedourauditinaccordancewithauditingstandardsgenerally acceptedintheunitedstatesofamericaandthestandardsapplicableto financialauditscontainedingovernmentauditingstandards,issuedbythe ComptrollerGeneraloftheUnitedStates.Thosestandardsrequirethatweplan andperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancial statementsarefreeofmaterialmisstatement.anauditincludesexamining,ona testbasis,evidencesupportingtheamountsanddisclosuresinthefinancial statements.anauditalsoincludesassessingtheaccountingprinciplesusedand significantestimatesmadebymanagement,aswellasevaluatingtheoverall financialstatementpresentation.webelievethatourauditprovidesa reasonablebasisforouropinions. Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inall materialrespects,therespectivefinancialpositionofthegovernmentalactivities, eachmajorfund,andtheaggregateremainingfundinformationoftheoceanside UnifiedSchoolDistrictasofJune30,2008,andtherespectivechangesinfinancial position,andcashflows,whereapplicable,fortheyearthenendedinconformity withaccountingprinciplesgenerallyacceptedintheunitedstatesofamerica. 1

63 InaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedDecember5, 2008onourconsiderationoftheOceansideUnifiedSchoolDistrictsinternalcontroloverfinancial reportingandourtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrant agreementsandothermatters.thepurposeofthatreportistodescribethescopeofourtestingof internalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovide anopinionontheinternalcontroloverfinancialreportingoroncompliance.thatreportisanintegral partofanauditperformedinaccordancewithgovernmentauditingstandardsandshouldbeconsidered inassessingtheresultsofouraudit. Themanagement sdiscussionandanalysisonpages3through13,andtherequiredsupplementary informationlistedinthetableofcontentsaspages52and53aresupplementaryinformationrequiredby thegovernmentalaccountingstandardsboard.wehaveappliedcertainlimitedprocedures,consisting principallyofinquiriesofmanagementregardingthemethodsofmeasurementandpresentationofthe requiredsupplementaryinformation.however,wedidnotaudittheinformationandexpressnoopinion onit. Ourauditwasperformedforthepurposeofformingopinionsonthefinancialstatementsthatcollectively compriseoceansideunifiedschooldistrict s,basicfinancialstatements.theaccompanyingfinancial andstatisticalinformationlistedinthetableofcontents,includingthescheduleofexpendituresof FederalAwards,whichisrequiredbyU.S.OfficeofManagementandBudgetCircularA133,Auditsof States,LocalGovernments,andNonProfitOrganizations,ispresentedforpurposesofadditionalanalysis andisnotarequiredpartofthebasicfinancialstatements.suchinformationhasbeensubjectedtothe auditingproceduresappliedintheauditofthefinancialstatementsand,inouropinion,isfairlystated,in allmaterialrespects,inrelationtothefinancialstatementstakenasawhole. SanDiego,California December5,2008 2

64 Management sdiscussionandanalysis

65 OCEANSIDEUNIFIEDSCHOOLDISTRICT MANAGEMENTDISCUSSIONANDANALYSIS(MD&A) June30,2008 ThissectionoftheOceansideUnifiedSchoolDistrict sannualfinancialreportpresentsourdiscussion andanalysisofthedistrict sfinancialperformanceduringthefiscalyearthatendedjune30,2008. FINANCIALHIGHLIGHTS GeneralFundexpendituresexceededrevenuesby$4.2millionin200708,leavinganendingbalance of$20.4million. TheDistrictcontinuedtomaintainstaterequiredreserves,with$7.0milliondesignatedforeconomic uncertaintiesatyearend,whichis$3.4millionlessthantheprioryear.thisrepresents4%oftotal budget,comparedtothe3%minimumreserverequiredbythestate. Studentenrollmentincreasesby75pupilsin200708comparedtotheprioryear. Construction was completed on the new Cesar Chavez Middle School, which opened in February 2008.ThefirstphaseofModernizationatElCaminoHighSchoolcommencedthebeginningofJuly. ThedistrictalsosetinmotionthedemolitionofSanRafaelElementary,inordertoprepareitsuseas aswingsiteforfutureconstruction;andthemodernizationofdelrioelementary,whichstartedafter the200708schoolyearended.plansforarchitecturaldesignsareinprocessforseveralelementary and middle school projects to be modernized out of future Prop H bond proceeds. Total capital outlayforfacilityconstructioncameto$16.1millionforthe200708fiscalyear. Districtlongtermliabilitiesdecreasedby$2million,themajorityofthisduetotherepaymentof generalobligationbondsforfacilityconstruction. Overall,netassetsincreasedby$8.9millionforthedistrict. 3

66 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 OVERVIEWOFTHEFINANCIALSTATEMENTS ManagementDiscussionandAnalysis TheManagementDiscussionandAnalysis(MD&A)isanelementofthenewreportingmodeladoptedby thegovernmentalaccountingstandardsboard(gasb)intheirstatementno.34basicfinancial StatementsandManagementDiscussionandAnalysis forstateandlocalgovernment,issuedin1999. TheMD&Aprovidesanarrativeintroductionandacomparativeanalysisofthefinancialstatementsfor thecurrentandprioryears. DistrictWideFinancialStatements Thedistrictwidestatementsreportinformationaboutthedistrictasawhole,providingbothshortterm andlongterminformationaboutthedistrict soverallfinancialstatususingaccountingmethodssimilar tothoseusedbyprivatesectorcompanies.thestatementofnetassetsincludesalldistrictassetsand liabilities,suchasland,buildingsandlongtermdebt.allcurrentyearrevenuesandexpensesare accountedforinthestatements,regardlessofwhencashisreceivedorpaid(fullaccrual). Thedistrictwidestatementsreportthedistrict snetassetsandhowtheyhavechanged.netassets the differencebetweenthedistrict sassetsandliabilities areonemeasureofthedistrict sfinancialhealth. Overtime,increasesordecreasesinnetassetsareanindicatoroffwhetherthedistrict sfinancialposition isimprovingordeteriorating. Districtwidefinancialstatementsdistinguishbetweengovernmentalactivitiesandbusinesstypeactivities. SinceOceansideUnifiedSchoolDistricthasnobusinesstypeactivities,alldistrictoperationsarereported withinthecategoryofgovernmentalactivities. FundFinancialStatements Thefundfinancialstatementsprovidemoredetailedinformationaboutthecomponentfundsthatjointly comprisethedistrictbudget.fundsareaccountingdevicesusedtotrackspecificsourcesoffundingand spendingforparticularprograms.somefundsarerequiredbystatelaw;othersareestablishedtocontrol andmanagemoneyforparticularpurposes(e.g.,repayinglongtermdebt),ortoshowthatcertain revenuesareproperlyused. Thegovernmentalfundfinancialstatementstellhowdistrictoperationswerefinanced,aswellaswhat remainsforfuturespending.theyprovideadetailedviewoftheshorttermfinancialpositionofthe district,withoutconsiderationoflongtermassetsandliabilities. 4

67 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FINANCIALANALYSISOFTHEDISTRICTASAWHOLE NetAssets TableA1belowshowsthatdistrictassetstotaled$277millionasofJune30,2008.Cashdepositswiththe CountyTreasuryrepresentasignificantcomponentofdistrictassetsat$51.3million.Facilitiesrepresent thelargestcomponent,withbuildingsvaluedat$204.5millionplusanadditional$13.4millionfor facilitiesunderconstruction(workinprogress).landplussiteimprovementsarevaluedat$24.3million andequipmentat$16.3million.itshouldbenotedthatallcapitalassetsarevaluedathistoricalcostless depreciation,notmarketvalue.thecurrentmarketvalueforlandownedbythedistrictisconsiderably largerthanreportedhere. Liabilitiestotaled$132.2milliononJune30,2008.Generalobligationbonddebtissuedforfacility constructionandmodernizationconstitutesthemajority.otherlongtermliabilitiesinclude$1.2million inoutstandingobligationsforcertificatesofparticipation(cops)andcapitalleases. TableA1 OceansideUnifiedSchoolDistrictsStatementofNetAssets Total Percentage GovernmentalActivities Change Assets CurrentAssets: Cash $54,869,707 $51,816,337 6% Other 15,601,026 15,808,809 1% CapitalAssets: Land 16,718,461 16,825,171 1% ImprovementofSites 7,383,349 7,481,923 1% Buildings 169,029, ,499,091 21% Equipment 16,044,359 16,331,870 2% WorkinProgress 32,938,751 13,403,216 59% LessAccumulatedDepreciation (44,533,112) (49,191,869) 10% TotalAssets 268,052, ,974,548 3% Liabilities CurrentLiabilities 9,318,238 11,341,529 22% LongtermLiabilities 122,914, ,882,261 2% TotalLiabilities 132,232, ,223,790 0% NetAssets $135,819,360 $144,750,758 7% 5

68 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FINANCIALANALYSISOFTHEDISTRICTASAWHOLE(Continued) ChangesinNetAssets Overall,netassetsoftheOceansideUnifiedSchoolDistrictweredeterminedtobe$144.8millionon June30,2008.Thisrepresentsanincreaseof$8.9millionoverthecourseoftheyear(TableA2).The increaseinnetassetsisareflectionofonetimestateschoolfacilitiesgrantfundsreceived,addedcostsfor salariesandbenefitsandmodernizationoffacilitieswithinthedistrict. TableA2 ChangesinOceansideUnifiedSchoolDistrictsNetAssets Total Percentage GovernmentalActivities Change BeginningNetAssets $129,575,723 $135,819,360 5% EndingNetAssets 135,819, ,750,758 7% ChangeinNetAssets $6,243,637 $8,931,398 43% RevenuesandExpendituresforGovernmentalActivities Overall,thedistrictexpended$199.7millionin200708,whereasrevenuestotaled$208.4million.This representsa$14millionincreaseinexpendituresfromtheprioryear,mostlyrelatedtoenrollment growth,interestonlongtermdebtandincreasedinstructionalandpupilservices. TableA3onthefollowingpageshowsthatexpenserelatedtoeducatingandcaringforchildrenaccount for81%oftotaldistrictexpenditures.facilitiesrelatedcostsaccountfor11%,whilepurelyadministrative costsaccountforabout5%oftotalexpense. Totalgovernmentwiderevenuesfor200708were$208.4million,anincreaseof$16.4millionoverthe prioryear.usersofdistrictprogramscontributedaportionofthisrevenue,primarilyfromcafeteriafood sales.thefederalandstategovernmentssupportedcertainprogramswithgrantsandcontributions totaling$64million.interestandinvestmentearningsgenerated$1.4million.stateandlocaltaxpayers, however,paidmostofthecost. 6

69 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FINANCIALANALYSISOFTHEDISTRICTASAWHOLE(Continued) TableA3 OceansideUnifiedSchoolDistrict s GovernmentalActivities Total Percentage Change Expenditures Instruction $111,163,725 $119,720,380 8% InstructionRelatedServices 19,105,816 20,229,716 6% StudentSupportServices 19,698,679 21,070,009 7% Maintenance&Operations 20,643,075 21,095,666 55% Administration 9,479,840 9,196,107 12% InterestandOtherExpenditures 5,672,825 8,389,230 48% TotalExpenditures $185,763,960 $199,701,108 8% Revenues ProgramRevenues: ChargesforServices 4,924,053 5,100,736 4% GrantsandContributions 48,296,073 63,999,255 33% GeneralRevenues: TaxesLeviedforGeneralPurposes 42,231,708 45,272,886 7% TaxesLeviedforDebtServices 8,159,842 7,998,376 2% TaxesLeviedforOtherSpecificPurposes (1,335) 100% StateandFederalUnrestrictedAid 83,970,975 82,682,759 2% InterestandInvestmentEarnings 1,758,472 1,425,804 19% Miscellaneous 2,667,809 1,922,153 28% TotalRevenues $192,007,597 $208,401,969 9% 7

70 8 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FINANCIALANALYSISOFDISTRICTFUNDS Districtaccountsareorganizedintovariousfunds,eachofwhichisconsideredaseparateaccounting identity.theoperationsofeachfundareaccountedforwithaseparatesetofselfbalancingaccounts. Governmentalresourcesallocatedtoindividualfundsarerecordedforthepurposeofspecificactivitiesin accordancewithlaws,regulationsandotherrequirements.thegeneralfundservesasthegeneral operatingfundforthedistrict.itisusedtoaccountforallfinancialresourcesofthedistrictexceptthose requiredtobeaccountedforinaspecialrevenuefund,capitalprojectfund,debtservicefund, ProprietaryFund,orFiduciaryFund. GeneralFund GeneralFundrevenuestotaled$172millionfor200708,aboutthesameastheprioryear.GeneralFund expendituresplustransferstotaled$176.5million,anincreaseof4%.employeesalariesandbenefits jointlycomprisethelargestshareofexpendituresat85.1%,andarethemostrapidlygrowingcomponent. The$20.4millionendingbalanceatJune30,2008,included$6.97millionreservesdesignatedfor economicuncertainty,representing1%morethantheminimumreservesrequiredforcaliforniaschool districtsofthissize. SpecialRevenueFunds TheChildDevelopmentFundisusedtoaccountseparatelyforfederal,stateandlocalrevenueto operatechilddevelopmentprogramsforpreschoolstudents.statepreschoolprogramsoperateat severalschoolsservingstudentsfromlowincomefamilies. TheAdultEducationFundisusedtoaccountseparatelyforstateandlocalrevenuesforadult educationprograms.thedistrictoperatesasmalladulteducationprogramwithatotalbudget slightlyover$200,000. TheDeferredMaintenanceFundisusedtoaccountseparatelyforstateapportionmentsanddistrict contributionsfordeferredmaintenancepurposes.thedistrictcompletedprojectstotaling$1.8 millionforpainting,heatingandventilation,asphaltrepair,flooringandroofing,andendedtheyear withabalanceof$3.2million. TheCafeteriaFundisusedtoaccountseparatelyforfederal,stateandlocalresourcestooperatethe ChildNutritionprogram.Theprogramcontinuedtooperateonaselfsupportingbasisbyincreasing alacartefoodsalesandreimbursementrevenuestooffsetrisingpersonnelcosts.

71 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 CapitalProjectsFunds The Building Fund accounts for the construction of capital facilities and buildings from the sale of bondproceeds.nogeneralobligationbondswereissuedduringtheyear.acarryoverbalanceof $17.5 million from the previous year, plus interest of $651,000, provided matching funding for constructionofchavezmiddleschool.also,wewereabletoconstructnewplaygroundsat3ofour elementaryschools;aswellasplanningforanewperformingartscenteratoceansidehighschool and modernization at several of our elementary and middle schools. Expenditures for facility constructiontotaled$10.2millionfortheyear,inaccordancewiththefacilitymasterplanadoptedin TheCapitalFacilitiesFundisusedtoaccountforresourcesreceivedfromdeveloperimpactfees.This yearlocalconstructionactivitygeneratedfeerevenueof$765,000,whichisearmarkedforfacilitiesto accommodateenrollmentgrowth.$1.9millionwasexpendedthisyear,primarilyforleasingmodular classrooms. The County School Facilities Fund was established to receive apportionments from the State School FacilitiesFundfornewfacilityconstructionandmodernizationprojects.TheDistrictreceived$18.1 million in , that enabled the offset of $5.4 million in costs incurred to build Foussat Elementary in the previous fiscal year. The remaining $12.7 million will be utilized for the modernizationofelcaminohighschool. DebtServiceFunds TheBondInterestandRedemptionFundisusedtoaccountfortheaccumulationofresourcesforthe repaymentofdistrictgeneralobligationbonds. TheTaxOverrideFundisusedtoaccountfortheaccumulationofresourcesfromadvalortaxleviesfor therepaymentofstateschoolbuildingfundapportionments. ProprietaryFunds TheSelfInsuranceFundisusedtoseparatemoniesassociatedwiththeselfinsuranceactivitiesof thedistrict.endingbalancereservesof$1.05millionaresufficienttocoverdistrictliabilities. FiduciaryFunds StudentBodyFundsareusedtoaccountfortheactivitiesofstudentgroups.TheDistrictservesas fiscalagentforthesestudentfunds. 9

72 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 CAPITALASSETANDDEBTADMINISTRATION CapitalAssets During , the district invested $9 million in capital assets, mostly for facility construction and modernization funded from local and state bond proceeds. Construction was completed on the new ChavezMiddleSchool,whichopenedinFebruary2008.ElCaminoHighSchooliscurrentlyundergoing modernization, including new classrooms, and will continue into next fiscal year. Planning for a new performing arts center at Oceanside High school is still in the design phase, along with several elementaryandmiddleschoolprojects. LongtermDebt TheDistrictpaid$2.5indebtserviceduringtheyearforrepaymentofCOPobligations,bond redemptionsandcapitalleases.therewerenonewbondsissuedduringtheyear.onnet,totaldebt decreased$2.0millionduring

73 11 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FACTORSBEARINGONTHEDISTRICT SFINANCIALFUTURE OnSeptember23,2008,GovernorSchwarzeneggersignedthe200809Budget,endingthelongestbudget stalemateincalifornia shistory.thefinalspendingplanincludes$24.0billionof solutions,including $10.3billioninspendingcuts,$9.6billioninrevenuerelatedprovisions,and$4.0billioninborrowing. Thefinalbudgetagreementincludes: Atotalof$10.3billioninspendingreductions,including$3.3billionincutsto base K14 educationspending. Changestothebudgetprocessthatwouldsubstantiallyincreasethesizeofthestate sreserveand limittheuseoffuturerevenuesthatexceedanticipatedlevels.theagreementalsowouldgive governorsvastnewpowertounilaterallyreducespendingmidwaythroughthebudgetyear. Assumesthatthestatewillissuebondsbackedbylotteryproceedsin Thebudget agreementincludesprovisionsaimedatdoublingtheamountcaliforniansspendonlottery purchasesandwouldreplaceschools allocationfromlotteryproceedswithageneralfund appropriationequivalenttotheamountallocatedtoeducationfromthelotteryin the GeneralFundallocationforeducationwouldincreaseovertimebasedonenrollmentandper capitapersonalincomegrowth. Aonetimeshiftof$350millioninpropertytaxrevenuesfromredevelopmentagenciestoschools andacommensuratereductioninstategeneralfundsupportforschoolsandcommunity colleges. AssignedbytheGovernor,the200809Budgetprovides$58.1billioninfundingforK14education programsundertheproposition98guarantee.thebudgetreduces base K14educationspendingby $3.3billion. The200809Budgetandrelatedlegislation: Providea0.68percentCOLAtofundrevenuelimitsforschooldistrictsandcountyofficesof education,whichisbelowthe5.66percentstatutorycolaandthe2.12percentcolaproposed bytheconferencecommittee.the200809budgetdoesnotprovideacolaforcategorical programs,suchasclasssizereductionandinstructionalmaterials. Donotprovide$150millionin200809Proposition98 settleup fundsneededtomeetprior yearproposition98obligations. ProposedtomodifyProposition49,theAfterSchoolEducationandSafetyProgram(ASES)Act, bysubmittingaballotmeasuretovotersinnovember2008.however,thegovernorvetoedthe billthatwouldhavesubmittedthemeasuretovoters.themeasurewouldhaveremoved Proposition49 sminimumfundinglevelof$550millionandwouldhaveallowedannualases budgetingdecisionstobemadebythelegislature.

74 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 FACTORSBEARINGONTHEDISTRICT SFUTURE(continued) Enrollmentcanfluctuateduetofactorssuchaspopulationgrowth,competitionfromprivate,parochial, andpubliccharterschools,interdistricttransfersinorout,andothercauses.lossesinenrollmentwill causeaschooldistricttoloseoperatingrevenueswithoutnecessarilypermittingthedistricttomake adjustmentsinfixedoperatingcosts.whileenrollmenthasstabilized,asopposedtomanyyearsof decliningenrollment,thedistrictiscontinuingtocloselymonitorenrollmenttoensurethattrendsin enrollmentaredetectedearlyandarebudgetedforappropriately. Figure1 23,000 CBEDS ENROLLMENT HISTORY 22,000 STUDENTS 21,000 20,000 19, YEAR Lookingtothefuture,theOceansideUnifiedSchoolDistrictfacesthefinancialchallengeofcoveringthe costofemployeesalariesandsignificantincreasesinmedicalpremiumsaswellasotherfixedcostswith minimalornostatefundingincreases.fortunately,thedistrictisnolongerexperiencingdeclining enrollmentasithasstabilizedandispredictedtoremainconstantinthenearfuture.theleadershipteam andgoverningboardalongwiththebargainingunitssupportremaincommittedtomaintainingthefiscal healthofthedistrict. 12

75 OCEANSIDEUNIFIEDSCHOOLDISTRICT Management sdiscussionandanalysis(unaudited) June30,2008 CONTACTINGTHEDISTRICT SFINANCIALMANAGEMENT Thisfinancialreportisdesignedtoprovideourcitizens,taxpayers,customers,andinvestorsand creditorswithageneraloverviewofthedistrict sfinancesandtodemonstratethedistrict s accountabilityforthemoneyitreceives.ifyouhaveanyquestionsaboutthisreportorneedadditional financialinformation,pleasecontactthedistrictbusinessofficeat2111missionave.,oceanside, California

76 FinancialSection

77 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofNetAssets June30,2008 Total Governmental ASSETS Activities Cash $51,816,337 Accountsreceivable 14,136,818 Stores 225,788 Prepaidexpenses 1,446,203 Capitalassets: Land 16,825,171 Improvementofsites 7,481,923 Buildings 204,499,091 Furnitureandequipment 16,331,870 Workinprogress 13,403,216 Lessaccumulateddepreciation (49,191,869) Totalcapitalassets,netofdepreciation 209,349,402 Totalassets 276,974,548 LIABILITIES Accountspayableandcurrentliabilities 10,474,454 Deferredrevenues 867,075 Longtermliabilities: Portiondueorpayablewithinoneyear: Generalobligationbondspayable 2,545,000 Certificatesofparticipationpayable 275,000 Capitalleasepayable 26,000 Compensatedabsencespayable 870,753 Portiondueorpayableafteroneyear Generalobligationbondspayable 115,905,000 Certificatesofparticipationpayable 915,000 Compensatedabsencespayable Otherpostemploymentbenefitspayable 319,508 Capitalleasepayable 26,000 Totalliabilities 132,223,790 NETASSETS Investedincapitalassets,netofrelateddebt 102,166,438 Restrictedfor: Capitalprojects 10,715,064 Debtservice 6,293,725 Educationalprograms 10,514,279 Unrestricted 15,061,252 TotalNetAssets $144,750,758 14

78 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofActivities FortheYearEndedJune30,2008 Functions/Programs Net(Expense) Revenueand Changesin ProgramRevenues NetAssets Operating Capital Chargesfor Grantsand Grantsand Governmental Expenses Services Contributions Contributions Activities InstructionalServices: Instruction $119,720,380 $2,820,109 $25,951,013 $ 18,071,233 $ (72,878,025) InstructionRelatedServices: Supervisionofinstruction 5,268, ,239 3,767,157 (1,389,831) Instructionallibrary,mediaandtechnology 2,071,801 3, ,107 (1,936,097) Schoolsiteadministration 12,889,688 12,318 3,245,602 (9,631,768) PupilSupportServices: Hometoschooltransportation 6,754,660 43,521 3,230,070 (3,481,069) Foodservices 6,044,127 1,762,873 4,493, ,888 Allotherpupilservices 8,271,222 10,514 1,299,405 (6,961,303) GeneralAdministrationServices: Dataprocessingservices 1,631,280 (1,631,280) Othergeneraladministration 7,564,827 99, ,798 (6,809,878) Plantservices 21,095, ,414 1,336,304 (19,521,948) Communityservices 259, ,706 (73,550) Enterpriseactivities 10,658 (10,658) Ancillaryservices 152,036 (152,036) Interestonlongtermdebt 7,864,529 (7,864,529) Otheroutgo 102,751 1,631,718 1,528,967 TotalGovernmentalActivities $199,701,108 $5,100,736 $45,928,022 $ 18,071,233 (130,601,117) GeneralRevenues: Taxes: Propertytaxes,leviedforgeneralpurposes 45,272,886 Propertytaxes,leviedfordebtservice 7,998,376 Propertytaxes,leviedforspecialpurposes 230,539 Federalandstateaidnotrestricted tospecificpurpose 82,682,759 Interestandinvestmentearnings 1,425,804 Miscellaneous 1,922,153 Totalgeneralrevenues 139,532,517 Changeinnetassets 8,931,398 NetassetsJuly1, ,819,360 NetassetsJune30,2008 $144,750,758 15

79 OCEANSIDEUNIFIEDSCHOOLDISTRICT BalanceSheet GovernmentalFunds June30,2008 GeneralFund Building Fund CountySchool FacilitiesFund AllNonMajor Funds Total Governmental Funds ASSETS Cash $14,103,655 $ 14,981,829 $ 7,946,495 $13,706,680 $50,738,659 Inventories 49, , ,788 Accountsreceivable 12,130, ,427 96,031 1,594,117 13,934,143 Duefromotherfunds 450, , ,218 Prepaidexpenses 625, ,270 TotalAssets $ 27,359,062 $ 15,095,516 $ 8,042,526 $15,578,974 $66,076,078 LIABILITIESANDFUNDBALANCES LIABILITIES Accountspayableandaccruedliabilities $6,046,810 $ 1,393,737 $ 600,219 $236,898 $8,277,664 Duetootherfunds 87,447 2, , ,218 Deferredrevenue 867, ,075 TotalLiabilities 7,001,332 1,396, , ,187 9,696,957 FundBalances Reservedfor: Revolvingcash 80,000 Inventories 49,428 Prepaidexpenses 625,270 Categoricalprograms 10,395,207 Debtservicefund Unreserved;reportedin: Generalfund 9,367,825 Capitalprojectfunds Specialrevenuefunds 10,000 90, , , , ,072 10,514,279 6,293,725 6,293,725 9,367,825 13,699,297 7,442,307 3,272,757 24,414,361 5,007,873 5,007,873 TotalFundBalances 20,357,730 13,699,297 7,442,307 14,879,787 56,379,121 TotalLiabilitiesandFundBalances $ 27,359,062 $ 15,095,516 $ 8,042,526 $15,578,974 $66,076,078 16

80 OCEANSIDEUNIFIEDSCHOOLDISTRICT ReconciliationoftheGovernmentalFundsBalanceSheettotheStatementofNetAssets June30,2008 Totalfundbalancesgovernmentalfunds $ 56,379,121 Amountsreportedforgovernmentalactivities inthestatementofnetassetsare differentbecausecapitalassetsusedforgovernmentalactivitiesarenotfinancialresources andthereforearenotreportedasassetsingovernmentalfunds.thecostofthe assetsis$258,541,271andtheaccumulateddepreciationis($49,191,869). 209,349,402 Ingovernmentalfunds,debtissuecostsarerecognizedasexpendituresintheperiod theyareincurred.inthegovernmentwidestatements,debtissuecostsareamortizedoverthe lifeofthedebt.unamortizeddebtissuecostsincludedinprepaidexpenseonthestatementof netassetsare: 792,670 Unmaturedinterestonlongtermdebt:Ingovernmentalfunds,interestonlongtermdebtis notrecognizeduntiltheperiodinwhichitmaturesandispaid.inthegovernmentwide statementofactivities,itisrecognizedintheperiodthatisincurred.theadditionalliability forunmaturedinterestowingattheendoftheperiodwas: (1,963,880) Longtermliabilities,includingbondspayable,arenotdueandpayableinthecurrent periodandthereforearenotreportedasliabilitiesinthefunds.longtermliabilities atyearendconsistof: Generalobligationspayable $118,450,000 Compensatedabsences 870,753 OtherPostemploymentBenefitspayable 319,508 Certificatesofparticipationpayable 1,190,000 Capitalleasespayable 52,000 (120,882,261) Internalservicefundsareusedtoconductcertainactivitiesforwhichcostsarechargedto otherfundsonafullcostrecoverybasis.becauseinternalservicefundsarepresumedto operateforthebenefitofgovernmentalactivities,assetsandliabilitiesofinternalservice fundsarereportedwithgovernmentalactivitiesinthestatementofnetassets.netassets forinternalservicefundsare: 1,047,443 Totalnetassetsgovernmentalactivities $144,750,758 17

81 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofRevenues,Expenditures,andChangesinFundBalances GovernmentalFunds FortheYearEndedJune30,2008 REVENUES GeneralFund BuildingFund GeneralRevenues: Propertytaxes $43,095,785 Federalandstateaidnotrestricted tospecificpurpose 84,859,859 Earningsoninvestments 1,062,181 Miscellaneous 1,540,343 ProgramRevenues: Chargesforservices 3,268,583 $ Operatinggrantsandcontributions 38,473, ,544 Capitalgrantsandcontributions CountySchool FacilitiesFund AllNonMajor Funds Total Governmental Funds $ $8,228,915 $51,324,700 84,859, ,622 1,425, ,810 1,922,153 1,832,154 5,100,737 6,803,034 45,928,023 18,071,233 18,071,233 Totalrevenues 172,300, ,544 18,071,233 17,609, ,632,508 EXPENDITURES InstructionalServices: Instruction 114,569,339 InstructionRelatedServices: Supervisionofinstruction 5,030,294 Instructionallibrary,mediaandtechnology 2,301,189 Schoolsiteadministration 12,685,411 PupilSupportServices: Hometoschooltransportation 6,623,463 Foodservices 1,812 Allotherpupilservices 8,246,832 GeneralAdministrationServices: Dataprocessingservices 1,660,135 Othergeneraladministration 6,947, , ,551, ,445 5,264,739 2,301,189 12,685,411 6,623,463 6,006,028 6,007,840 8,194 8,255,026 1,660, ,681 7,234,438 Plantservices 17,565, ,613 15,418 2,291,445 20,816,783 Facilityacquisitionandconstruction 39,928 9,253,826 5,377,816 1,467,775 16,139,345 Ancillaryservices 151,774 Communityservices 258,852 Otheroutgo: Transfersbetweenagencies 74,488 Debtserviceprincipal 291,000 Debtserviceinterest 68,378 Debtserviceissuancecostsanddiscounts 1, , ,852 74,488 2,245,000 2,536,000 5,832,269 5,900,647 1,299 TotalExpenditures 176,517,258 10,198,439 5,393,234 19,353, ,462,782 Excess(Deficiency)ofRevenues Over(Under)Expenditures (4,217,062) (9,546,895) 12,677,999 (1,744,316) (2,830,274) OTHERFINANCINGSOURCES(USES) Interfundtransfersin Interfundtransfersout (2,405,568) 5,745,774 (5,745,774) 2,405,568 8,151,342 (8,151,342) TotalOtherFinancingSourcesandUses (2,405,568) 5,745,774 (5,745,774) 2,405,568 NetChangeinFundBalances (6,622,630) (3,801,121) 6,932, ,252 (2,830,274) FundBalances,July1,2007, 26,980,360 17,500, ,082 14,218,535 59,209,395 FundBalances,June30,2008 $ 20,357,730 $13,699,297 $7,442,307 $14,879,787 $ 56,379,121 18

82 OCEANSIDEUNIFIEDSCHOOLDISTRICT ReconciliationoftheGovernmentalFundsStatementofRevenues,Expenditures,and ChangesinFundBalancestotheStatementofActivities FortheYearEndedJune30,2008 Totalnetchangeinfundbalancesgovernmentalfunds $(2,830,274) Amountsreportedforgovernmentalactivities inthestatementofactivitiesaredifferentbecause: Capitaloutlaysarereportedingovernmentalfundsasexpenditures.However,inthestatement ofactivities,thecostofthoseassetsisallocatedovertheirestimatedusefullivesasdepreciation expense.thisistheamountbywhichcapitaloutlays$16,766,529exceeddepreciation expense($4,966,579)intheperiod. 11,799,950 Debtservice:Ingovernmentalfunds,repaymentsoflongtermdebtarereportedas expenditures.inthegovernmentwidestatements,repaymentsoflongtermdebtarereported asreductionsofliabilities.expendituresforrepaymentoftheprincipalportionoflongtermdebt were: 2,536,000 Debtissuecosts:Ingovernmentalfunds,debtissuecostsarerecognizedasexpendituresinthe periodtheyareincurred.inthegovernmentwidestatements,issuecostsareamortizedoverthe lifeofthedebt.thedifferencebetweendebtissuecostsrecognizedinthecurrentperiodand issuecostsamortizedfortheperiodis: (26,964) Gainorlossfromdisposalofcapitalassets:Ingovernmentalfunds,theentireproceedsfrom disposalofcapitalassetsarereportedasrevenue.inthestatementofactivities,onlytheresulting gainorlossisreported.thedifferencebetweentheproceedsfromdisposalofcapitalassets andtheresultinggainorlossis: (31,854) Unmaturedinterestonlongtermdebt:Ingovernmentalfunds,interestonlongtermdebtis recognizedintheperiodthatitbecomesdue.inthegovernmentwidestatementofactivities, itisrecognizedintheperiodthatitisincurred.unmaturedinterestowingattheendoftheperiod, lessmaturedinterestpaidduringtheperiodbutowingfromthepriorperiod,was: (1,963,881) Compensatedabsences:Ingovernmentalfunds,compensatedabsencesaremeasuredbythe amountspaidduringtheperiod.inthestatementofactivities,compensatedabsencesaremeasured bytheamountsearned.thedifferencebetweencompensatedabsencespaidandcompensated absencesearnedwas: (184,311) Postemploymentbenefitsotherthanpensions(OPEB):Ingovernmentalfunds,OPEBcostsarerecognized whenemployercontributionsaremade.inthestatementofactivities,opebcostsarerecognizedontheaccrual basis.thisyear,thebasis.thisyear,thedifferencebetweenopebcostsandactualemployercontributionwas: (319,508) InternalServiceFunds:Internalservicefundsareusedtoconductcertainactivitiesforwhichcosts arechargedtootherfundsonafullcostrecoverybasis.becauseinternalservicefundsare presumedtobenefitgovernmentalactivities,internalserviceactivitiesarereportedas governmentalinthestatementofactivities.thenetdecreaseininternalservicefundswas: (47,760) Changeinnetassetsofgovernmentalactivities $8,931,398 19

83 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofFundAssets ProprietaryFunds June30,2008 Governmental Activities: SelfInsurance Fund ASSETS Cash $1,077,678 Accountsreceivable 202,675 TotalAssets 1,280,353 LIABILITIES Accountspayableandaccruedliabilities 232,910 Totalliabilities 232,910 NETASSETS Unrestricted 1,047,443 Totalnetassets $1,047,443 20

84 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofRevenues,Expenses,andChangesinFundNetAssets ProprietaryFunds FortheYearEndedJune30,2008 Governmental Activities: SelfInsurance Fund OPERATINGREVENUES Contributionsfromotherfunds $ 1,980,885 Totaloperatingrevenues 1,980,885 OPERATINGEXPENSES Insuranceexpense 2,069,932 Totaloperatingexpenses 2,069,932 OperatingIncome(Loss) (89,047) NONOPERATINGREVENUES Interestincome 41,287 TotalNonOperatingRevenue 41,287 CHANGEINNETASSETS (47,760) NETASSETS,JULY1,2007 1,095,203 NETASSETS,JUNE30,2008 $ 1,047,443 21

85 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofCashFlows ProprietaryFunds FortheYearEndedJune30,2008 Governmental Activities: InternalService Fund CASHFLOWSFROMOPERATINGACTIVITIES Cashreceivedfromassessmentsmadetootherfunds $ 1,791,304 Cashpaymentsforinsuranceexpenses (1,837,022) Netcashprovidedbyoperatingactivities (45,718) CASHFLOWSFROMINVESTINGACTIVITIES Interestincome 41,287 Netcashprovidedbyinvestingactivities 41,287 Netincreaseincash (4,431) Cash,July1,2007 1,082,109 Cash,June30,2008 $ 1,077,678 Reconciliationofoperatingincometonetcashused byoperatingactivities: Operatingincome $(89,047) Adjustmentstoreconcileoperatingincometonetcash providedbyoperatingactivities: Changesinassetsandliabilities: Decreaseinaccountsreceivable (189,581) Decreaseinclaimspayable 232,910 Netcashusedbyoperatingactivities $(45,718) 22

86 OCEANSIDEUNIFIEDSCHOOLDISTRICT StatementofFiduciaryNetAssets AgencyFunds June30,2008 Agency Funds ASSETS DepositsandInvestments $608,344 TotalAssets $608,344 LIABILITIES DuetoStudentGroups $608,344 TotalLiabilities $608,344 23

87 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES A. ReportingEntity TheDistrictoperatesunderalocallyelectedfivememberBoardformofgovernmentandprovides educationalservicestogradesk12asmandatedbythestate.areportingentityiscomprisedofthe primarygovernment,componentunits,andotherorganizationsthatareincludedtoensurethe financialstatementsarenotmisleading.theprimarygovernmentofthedistrictconsistsofallfund, departmentsandagenciesthatarenotlegallyseparatefromthedistrict.forthedistrict,this includesgeneraloperations,foodservice,andstudentrelatedactivities. ComponentunitsarelegallyseparateorganizationsforwhichtheDistrictisfinanciallyaccountable. ComponentunitsmayalsoincludeorganizationsthatarefiscallydependentontheDistrictinthat thedistrictapprovestheirbudget,theissuanceoftheirdebtorthelevyingoftheirtaxes.inaddition, componentunitsareotherlegallyseparateorganizationsforwhichthedistrictisnotfinancially accountablebutthenatureandsignificanceoftheorganization srelationshipwiththedistrictissuch thatexclusionwouldcausethedistrict sfinancialstatementstobemisleadingorincomplete. ThefollowingarethoseaspectsoftherelationshipbetweentheDistrictandthecomponentunitsthat satisfygasbstatementno.14criteria. Accountability: 1. TheDistrict sboardoftrusteesappointedthecorporation sboardofdirectors. 2. TheDistrictisabletoimposeitswilluponthecorporation,basedonthefollowing: a. Allmajorfinancingarrangements,contracts,andothertransactionsofthecorporationmust havetheconsentofthedistrict. b. TheDistrictexercisessignificantinfluenceoveroperationsofthecorporation,astheDistrict isthesolelesseeofallfacilitiesownedbythecorporation.likewise,thedistrict slease paymentsarethemajorrevenuesourceofthecorporation. 3. Thecorporationprovidesspecificfinancialbenefitsorimposesspecificfinancialburdensonthe District,basedonthefollowing: a. Anydeficitsincurredbythecorporationwillbereflectedintheleasepaymentsofthe District. b. AnysurplusesofthecorporationreverttotheDistrictattheendoftheleaseperiod. c. TheDistricthasassumeda moralobligation, andpotentiallyalegalobligation,forany debtincurredbythecorporations. 24

88 25 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(Continued) A. ReportingEntity(continued) ScopeofPublicService: Thecorporationisanonprofit,publicbenefitcorporationincorporatedunderthelawsoftheStateof CaliforniaandrecordedbytheSecretaryofState.Thecorporationwasformedforthesolepurposeof providingfinancialassistancetothedistrictforthefinancingofconstructionandacquisitionofmajor capitalfacilitiesandmodernizationofexistingschoolsites.thedistrictwillleasecertainschool facilitiesfromthecorporationunderaleasepurchaseagreement. FinancialPresentation: Forfinancialpresentationpurposes,thecorporation sfinancialactivitywillbeblended,orcombined, withthefinancialdataofthedistrict.thefinancialstatementswillpresentthecorporation s financialactivitywithinthegeneralfund.certificatesofparticipationissuedbythecorporationwill beincludedinthestatementofnetassets.separatefinancialstatementsfortheindividual componentunitsarenotprepared. B. AccountingPolicies TheDistrictaccountsforitsfinancialtransactionsinaccordancewiththepoliciesandproceduresof thedepartmentofeducationscaliforniaschoolaccountingmanual.theaccountingpoliciesofthe DistrictconformtogenerallyacceptedaccountingprinciplesasprescribedbytheGovernmental AccountingStandardsBoard(GASB)andtheAmericanInstituteofCertifiedPublicAccountants (AICPA). C. BasisofPresentation GovernmentwideFinancialStatements: Thegovernmentwidefinancialstatements(i.e.,thestatementofnetassetsandthestatementof activities)reportinformationonallofthenonfiduciaryactivitiesofthedistrict. Thegovernmentwidestatementsarepreparedusingtheeconomicresourcesmeasurementfocus. Thisisthesameapproachusedinthepreparationofthefiduciaryfundfinancialstatementsbut differsfromthemannerinwhichgovernmentalfundfinancialstatementsareprepared. Governmentalfundfinancialstatements,therefore,includereconciliationwithbriefexplanationsto betteridentifytherelationshipbetweenthegovernmentwidestatementsandthestatementsforthe governmentalfunds.

89 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) C. BasisofPresentation(continued) CertaineliminationshavebeenmadeasprescribedbyGASBStatementNo.34inregardstointerfund activities,payables,andreceivables.allinternalbalancesinthestatementofnetassetsand StatementofActivitieshavebeeneliminated,includingdueto/fromotherfundsandtransfersin/out. Thegovernmentwidestatementofactivitiespresentsacomparisonbetweendirectexpensesand programrevenuesforeachfunctionorprogramofthedistrict sgovernmentalactivities.direct expensesarethosethatarespecificallyassociatedwithaservice,program,ordepartmentandare thereforeclearlyidentifiabletoaparticularfunction.thedistrictdoesnotallocateindirectexpenses tofunctionsinthestatementofactivities.programrevenuesincludechargespaidbytherecipientsof goodsorservicesofferedbyaprogram,aswellasgrantsandcontributionsthatarerestrictedto meetingtheoperationalorcapitalrequirementsofaparticularprogram.revenueswhicharenot classifiedasprogramrevenuesarepresentedasgeneralrevenuesofthedistrict,withcertain exceptions.thecomparisonofdirectexpenseswithprogramrevenuesidentifiestheextenttowhich eachgovernmentalfunctionisselffinancingordrawsfromthegeneralrevenuesofthedistrict. FundFinancialStatements: Fundfinancialstatementsreportdetailedinformationaboutthedistrict.Thefocusofgovernmental fundfinancialstatementsisonmajorfundsratherthatreportingfundsbytype.eachmajor governmentalfundispresentedinaseparatecolumn,andallnonmajorfundsareaggregatedinto onecolumn.fiduciaryfundsarereportedbyfundtype. Theaccountingandfinancialtreatmentappliedtoafundisdeterminedbyitsmeasurementfocus. Allgovernmentfundsareaccountedforusingaflowofcurrentfinancialresourcesmeasurement focus.withthismeasurementfocus,onlycurrentassetsandcurrentliabilitiesaregenerallyincluded onthebalancesheet.thestatementofrevenues,expenditures,andchangesinfundbalancesfor thesefundspresentincreases(i.e.,revenuesandotherfinancingsources)anddecreases(i.e., expendituresandotherfinancinguses)innetcurrentassets. Allproprietaryfundtypesareaccountedforonaflowofeconomicresourcesmeasurementfocus. Withthismeasurementfocus,allassetsandallliabilitiesassociatedwiththeoperationofthesefunds areincludedontheproprietaryfund sstatementoffundnetassets.thestatementofrevenues, Expenses,andChangesinFundNetAssetsforproprietaryfundspresentincreases(i.e.,revenues) anddecreases(i.e.,expenditures)innettotalassets.thestatementofcashflowsprovides informationabouthowthedistrictfinancesandmeetsthecashflowneedsofitsproprietary activities. 26

90 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) C. BasisofPresentation(continued) Proprietaryfundsdistinguishoperatingrevenuesandexpensesfromnonoperatingitems.Operating revenuesandexpensesgenerallyresultfromprovidingservicesandproducinganddeliveringgoods inconnectionwithaproprietaryfund sprincipalongoingoperations.theprincipaloperating revenuesoftheinternalservicefundarechargestootherfundforselfinsurancecosts.operating expensesforinternalservicefundsincludethecostsofinsurancepremiumsandclaimsrelatedto selfinsurance. TheDistrictappliesallGASBpronouncements,aswellastheFinancialAccountingStandardsBoard (FASB)pronouncementsissuedonorbeforeNovember30,1989,unlessthosepronouncements conflictwithorcontradictgasbpronouncements. Fiduciaryfundsarereportedusingtheeconomicresourcesmeasurementfocus.Fiduciaryfundsare excludedfromthegovernmentfinancialstatementsbecausetheydonotrepresentresourcesofthe District. D. BasisofAccounting Basisofaccountingreferstowhenrevenuesandexpendituresorexpensesarerecognizedinthe accountsandreportedinthefinancialstatements.governmentwidefinancialstatementsare preparedusingtheaccrualbasisofaccounting.governmentalfundsusethemodifiedaccrualbasis ofaccounting.fiduciaryfundsusetheaccrualbasisofaccounting. Revenues exchangeandnonexchangetransactions: Revenueresultingfromexchangetransactions,inwhicheachpartygivesandreceivesessentially equalvalue,isrecordedundertheaccrualbasiswhentheexchangetakesplace.onamodified accrualbasis,revenueisrecordedinthefiscalyearinwhichtheresourcesaremeasurableand becomeavailable. Available meanstheresourceswillbecollectedwithinthecurrentfiscalyearor areexpectedtobecollectedsoonenoughthereaftertobeusedtopayliabilitiesofthecurrentfiscal year.forthedistrict, available meanscollectedwithinthecurrentperiodorwithin60daysafter yearend. 27

91 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) D. BasisofAccounting(continued) Nonexchangetransactions,inwhichtheDistrictreceivesvaluewithoutdirectlygivingequalvalue inreturn,includepropertytaxes,grants,andentitlements.undertheaccrualbasis,revenuefrom propertytaxesisrecognizedinthefiscalyearforwhichthetaxesarelevied.revenuefromgrants andentitlementsisrecognizedinthefiscalyearinwhichalleligibilityrequirementshavebeen satisfied.eligibilityrequirementsincludetimingrequirements,whichspecifytheyearwhenthe resourcesaretobeusedorthefiscalyearwhenuseisfirstpermitted;matchingrequirements,in whichthedistrictmustprovidelocalresourcestobeusedforaspecificpurpose;andexpenditure requirements,inwhichtheresourcesareprovidedtothedistrictonareimbursementbasis.under themodifiedaccrualbasis,revenuefromnonexchangetransactionsmustalsobeavailablebeforeit canberecognized. Deferredrevenue: Deferredrevenueariseswhenassetsarereceivedbeforerevenuerecognitioncriteriahavebeen satisfied.grantsandentitlementsreceivedbeforeeligibilityrequirementsaremetarerecordedas deferredrevenue.ongovernmentalfundfinancialstatements,receivablesassociatedwithnon exchangetransactionsthatwillnotbecollectedwithintheavailabilityperiodhavealsobeenrecorded asdeferredrevenue. Expenses/expenditures: Ontheaccrualbasisofaccounting,expensesarerecognizedatthetimealiabilityisincurred.Onthe modifiedaccrualbasisofaccounting,expendituresaregenerallyrecognizedintheaccountingperiod inwhichtherelatedfundliabilityisincurred,asundertheaccrualbasisofaccounting.however, underthemodifiedaccrualbasisofaccounting,debtserviceexpenditures,aswellasexpenditures relatedtocompensatedabsencesandclaimsandjudgments,arerecordedonlywhenpaymentisdue. Allocationsofcost,suchasdepreciationandamortization,arenotrecognizedinthegovernmental funds. Whenbothrestrictedandunrestrictedresourcesareavailableforuse,itistheDistrict spolicytouse restrictedresourcesfirst,thenunrestrictedresourcesastheyareneeded. 28

92 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) E. FundAccounting TheaccountsoftheDistrictareorganizedonthebasisoffundsoraccountgroups,eachofwhichis consideredtobeaseparateaccountingentity.theoperationsofeachfundareaccountedforwitha separatesetofselfbalancingaccountsthatcompriseitsassets,liabilities,fundequity,revenues,and expendituresorexpenses,asappropriate.districtresourcesareallocatedtoandaccountedforin individualfundsbaseduponthepurposeforwhichtheyaretobespentandthemeansbywhich spendingactivitiesarecontrolled.thedistrict saccountsareorganizedintomajor,nonmajor,and fiduciaryfundsasfollows: MajorGovernmentalFunds: TheGeneralFundisthegeneraloperatingfundoftheDistrict.Itisusedtoaccountforallfinancial resourcesexceptthoserequiredtobeaccountedforinanotherfund. TheBuildingFundisusedtoaccountfortheacquisitionofmajorgovernmentalcapitalfacilitiesand buildingsfromthesaleofbondproceeds. TheCountySchoolFacilitiesFundisusedtoaccountforstateapportionmentsprovidedfor modernizationofschoolfacilitiesundersb50. NonMajorGovernmentalFunds: SpecialRevenueFundsareusedtoaccountfortheproceedsofspecificrevenuesourcesthatarelegally restrictedtoexpendituresforspecificpurposes.thedistrictmaintainsfournonmajorspecial revenuefunds: 1. TheAdultEducationFundisusedtoaccountforresourcescommittedtoadulteducationprograms maintainedbythedistrict. 2. TheCafeteriaFundisusedtoaccountforrevenuesreceivedandexpendituresmadetooperatethe District sfoodserviceoperations. 3. TheDeferredMaintenanceFundisusedforthepurposeofmajorrepairorreplacementofDistrict property. 4. TheChildDevelopmentFundisusedtoaccountseparatelyforfederal,stateandlocalrevenueto operatechilddevelopmentprogramsforpreschoolstudents.statepreschoolprogramsoperate atseveralschoolsservingstudentsfromlowincomefamilies. 29

93 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) E. FundAccounting(continued) CapitalProjectsFundsareusedtoaccountfortheacquisitionand/orconstructionofmajor governmentalgeneralfixedassets.thedistrictmaintainsonenonmajorcapitalprojectsfund: 1. TheCapitalFacilitiesFundisusedtoaccountforresourcesreceivedfromdeveloperimpactfees assessedunderprovisionsofthecaliforniaenvironmentalqualityact. DebtServiceFundsareusedtoaccountfortheaccumulationofresourcesfor,andthepaymentof, generallongtermdebtprincipal,interest,andrelatedcosts.thedistrictmaintainsonenonmajor debtservicefund: 1. TheBondInterestandRedemptionFundisusedtoaccountfortheaccumulationofresourcesfor, andtherepaymentof,districtbonds,interest,andrelatedcosts. ProprietaryFunds: InternalServiceFundsareusedtoaccountforservicesrenderedonacostreimbursementbasiswithin thedistrict.thedistrictmaintainsoneinternalservicefund,theselfinsurancefund. FiduciaryFunds: AgencyFundsareusedtoaccountforassetsofothersforwhichtheDistrictactsasanagent.The Districtmaintainstwoagencyfunds,oneforeachschoolthatoperatesastudentbodyfund.The amountsreportedforstudentbodyfundsrepresentthecombinedtotalsofallschoolswithinthe District. F. Encumbrances Encumbranceaccountingisusedinallbudgetedfundstoreserveportionsofapplicableappropriations forwhichcommitmentshavebeenmade.encumbrancesarerecordedforpurchaseorders,contracts,and othercommitmentswhentheyarewritten.encumbrancesareliquidatedwhenthecommitmentsare paid.allencumbrancesareliquidatedasofjune30. 30

94 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) G. BudgetsandBudgetaryAccounting Annualbudgetsareadoptedonabasisconsistentwithgenerallyacceptedaccountingprinciplesfor allgovernmentfunds.bystatelaw,thedistrictsgoverningboardmustadoptabudgetnolaterthan July1.Apublichearingmustbeconductedtoreceivecommentspriortoadoption.TheDistricts governingboardsatisfiedtheserequirements. ThesebudgetsarerevisedbytheDistrictsgoverningboardduringtheyeartogiveconsiderationto unanticipatedincomeandexpenditures.itistheoriginalandfinalrevisedbudgetthatispresented forthegeneralfundinthefinancialstatements. Formalbudgetaryintegrationwasemployedasamanagementcontroldeviceduringtheyearforall budgetedfunds.thedistrictemploysbudgetcontrolbyminorobjectandbyindividual appropriationaccounts.expenditurescannotlegallyexceedappropriationsbymajorobjectaccount. H. Assets,Liabilities,andEquity 1. CashandCashEquivalents TheDistrict scashandcashequivalentsareconsideredtobecashonhand,demanddepositsandshort terminvestmentswithoriginalmaturitiesofthreemonthsorlessfromthedateofacquisition.cash heldinthecountytreasuryisrecordedatcost,whichapproximatesfairvalue,inaccordancewith GASBStatementNo StoresInventories Inventoriesarerecordedusingthepurchasesmethodinthatthecostisrecordedasanexpenditureat thetimetheindividualinventoryitemsarerequisitioned.inventoriesarevaluedataveragecostand consistofexpendablesuppliesheldforconsumption.reportedinventoriesareequallyoffsetbyafund balancereserve,whichindicatesthattheseamountsarenot availableforappropriationand expenditure eventhoughtheyareacomponentofnetcurrentassets. 3. CapitalAssets Theaccountingandreportingtreatmentappliedtothecapitalassetsassociatedwithafundis determinedbyitsmeasurementfocus.capitalassetsarereportedinthegovernmentalactivities columnofthegovernmentwidestatementofnetassets,butarenotreportedinthefundfinancial statements. 31

95 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) H. Assets,Liabilities,andEquity(continued) 3. CapitalAssets(continued) Capitalassetsarecapitalizedatcost(orestimatedhistoricalcost)andupdatedforadditionsand retirementsduringtheyear.donatedfixedassetsarerecordedattheirfairmarketvaluesasof thedatereceived.thedistrictmaintainsacapitalizationthresholdof$5,000.thedistrictdoes notownanyinfrastructureasdefinedingasbno.34.improvementsarecapitalized;thecosts ofnormalmaintenanceandrepairsthatdonotaddtothevalueoftheassetormateriallyextend anasset slifearenotcapitalized. Allreportedcapitalassets,exceptforlandandconstructioninprogress,aredepreciated. Improvementsaredepreciatedovertheremainingusefullivesoftherelatedcapitalassets. Depreciationiscomputedusingthestraightlinemethodoverthefollowingusefullives: Description EstimatedLives BuildingsandImprovements 2550years FurnitureandEquipment 520years Vehicles 8years 4. DeferredRevenue Cashreceivedforfederalandstatespecialprojectsandprogramsisrecognizedasrevenuetothe extentthatqualifiedexpenditureshavebeenincurred.deferredrevenueisrecordedtotheextent cashreceivedonspecificprojectsandprogramsexceedqualifiedexpenditures. 5. CompensatedAbsences Accumulatedunpaidvacationbenefitsareaccruedasaliabilityonthegovernmentwide statementofnetassetsasthebenefitsareearned.forgovernmentalfunds,unpaidcompensated absencesarerecognizedasafundliabilityonlyupontheoccurrenceofrelevanteventssuchas employeeresignationandretirementsthatoccurpriortoyearendthathavenotyetbeenpaid withexpendableavailablefinancialresources.theseamountsarerecordedasaccountspayable inthefundfromwhichtheemployeeswhohaveaccumulatedleavearepaid. AccumulatedsickleavebenefitsarenotrecognizedasliabilitiesoftheDistrict.TheDistricts policyistorecordsickleaveasanoperatingexpenseintheperiodtakenbecausesuchbenefitsdo notvest,norispaymentprobable;however,unusedsickleaveisaddedtothecreditableservice periodforcalculationofretirementbenefitswhentheemployeeretires. 32

96 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) H. Assets,Liabilities,andEquity(continued) 6. LongTermObligations Inthegovernmentwidefinancialstatements,longtermdebtandotherlongtermobligationsare reportedasliabilitiesinthestatementofnetassets.bondpremiumsanddiscountsaswellas issuancecostsaredeferredandamortizedoverthelifeofthebondsusingtheeffectiveinterest method.bondspayablearereportednetofapplicablebondpremiumordiscount.bond issuancecostsarereportedasprepaidexpendituresandamortizedoverthetermoftherelated debt. Inthefundfinancialstatements,governmentalfundsrecognizebondpremiumsanddiscountsas wellasbondissuancecosts,duringthecurrentperiod.thefaceamountofthedebtissued, premiums,ordiscountsisreportedasotherfinancingsources/uses. 7. FundBalanceReservesandDesignations Reservationsoftheendingfundbalanceindicatetheportionsofthefundbalancenot appropriableforexpenditureoramountslegallysegregatedforaspecificfutureuse. Designationsoftheendingfundbalanceindicatetentativeplansforfinancialresourceutilization inafutureperiod. 8. NetAssets Netassetsrepresentthedifferencebetweenassetsandliabilities.Netassetsinvestedincapital assets,netofrelateddebtconsistsofcapitalassets,netofaccumulateddepreciation,reducedby theoutstandingbalancesofanyborrowingsusedfortheacquisition,constructionor improvementsofthoseassets.netassetsarereportedasrestrictedwhentherearelimitations imposedontheirusethroughexternalrestrictionsimposedbydonors,grantors,orlawsor regulationsofothergovernments. 33

97 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) I. RevenueLimit/PropertyTax TheDistrict srevenuelimitisreceivedfromacombinationoflocalpropertytaxes,state apportionments,andotherlocalsources. Thecountyisresponsibleforassessing,collecting,andapportioningpropertytaxes.Taxesarelevied foreachfiscalyearontaxablerealandpersonalpropertyinthecounty.thelevyisbasedonthe assessedvaluesasoftheprecedingmarch1,whichisalsotheliendate.propertytaxesonthe securedrollaredueonnovember1andfebruary1,andtaxesbecomedelinquentafterdecember10 andapril10,respectively.propertytaxesontheunsecuredrollaredueontheliendate(march1), andbecomedelinquentifunpaidbyaugust31. Securedpropertytaxesarerecordedasrevenuewhenapportioned,inthefiscalyearofthelevy.The countyapportionssecuredpropertytaxrevenueinaccordancewiththealternativemethodof distributionprescribedbysection4705ofthecaliforniarevenueandtaxationcode.thisalternate methodprovidesforcreditingeachapplicablefundwithitstotalsecuredtaxesuponcompletionof thesecuredtaxroll approximatelyoctober1ofeachyear. TheCountyAuditorreportstheamountoftheDistrict sallocatedpropertytaxrevenuetothe CaliforniaDepartmentofEducation.Propertytaxesarerecordedaslocalrevenuelimitsourcesby thedistrict. TheCaliforniaDepartmentofEducationreducestheDistrict sentitlementbythedistrict slocal propertytaxrevenue.becausethedistrict slocalpropertytaxrevenueexceedsitstotalbaserevenue limit,thedistrictreceivesfromthestategeneralfundonlyanamountknownas basicaid.the basicaidentitlementisequaltoamountsforvariousothersupplementalinstructionalprograms. J. UseofEstimates Thepreparationoffinancialstatementsinconformitywithgenerallyacceptedaccountingprinciples requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassets andliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatements andthereportedamountsofrevenuesandexpendituresduringthereportingperiod.actualresults coulddifferfromthoseestimates. 34

98 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE1SIGNIFICANTACCOUNTINGPOLICIES(continued) K. NewGASBPronouncements Duringthe200708fiscalyear,thefollowingGASBPronouncementsbecameeffectivefortheDistrict. GASBStatementNo.48SalesandPledgesofReceivablesandFutureRevenuesandIntraEntityTransfersof AssetsandFutureRevenueswasissuedinSeptember2006.Thisstatementestablishescriteriathat governmentsusetoascertainwhetherproceedreceivedaslumpsumpaymentinexchangefor certainreceivablesshouldbereportedasarevenueorliability.thedistricthadnosuchtransactions duringtheyear. GASBStatementNo.50PensionDisclosuresandamendmentofGASBStatementsNo.25andNo.27was issuedinmay2007.thisstatementamendsstatements25and27torequiredefinedbenefitpension plansandsoleandagentemployerspresentcertaininformationrelatedtonotedisclosures. NOTE2 DEPOSITSANDINVESTMENTS SummaryofDepositsandInvestments DepositsandinvestmentsasofJune30,2008areclassifiedintheaccompanyingfinancialstatementsas follows: Governmental Proprietary Fiduciary funds funds funds Cashincountytreasury $ 50,202,424 $1,077,678 Cashonhandandinbanks 93,402 Cashinrevolvingfund 90,000 Cashwithfiscalagent 352,833 $ 608,344 Totaldeposits $ 50,738,659 $1,077,678 $608,344 PoliciesandPractices TheDistrictisauthorizedunderCaliforniaGovernmentCodetomakedirectinvestmentsinlocalagency bonds,notes,orwarrantswithinthestate;u.s.treasuryinstruments;registeredstatewarrantsor treasurynotes;securitiesoftheu.s.government,oritsagencies;bankersacceptances;commercialpaper; certificatesofdepositplacedwithcommercialbanksand/orsavingsandloancompanies;repurchaseor reverserepurchaseagreements;mediumtermcorporatenotes;sharesofbeneficialinterestissuedby diversifiedmanagementcompanies,certificatesofparticipation,obligationswithfirstprioritysecurity; andcollateralizedmortgageobligations. 35

99 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE2 DEPOSITSANDINVESTMENTS(continued) CashinCountyTreasury TheDistrictisconsideredtobeaninvoluntaryparticipantinanexternal investmentpoolasthedistrictisrequiredtodepositallreceiptsandcollectionsofmonieswiththeir CountyTreasurer(EducationCodeSection41001).ThefairvalueoftheDistrict sinvestmentinthepool isreportedintheaccountingfinancialstatementsatamountsbaseduponthedistrict sproratashareof thefairvalueprovidedbythecountytreasurerfortheentireportfolio(inrelationtotheamortizedcost ofthatportfolio).thebalanceavailableforwithdrawalisbasedontheaccountingrecordsmaintainedby thecountytreasurer,whichisrecordedontheamortizedcostbasis. CashwithFiscalAgent TheDistricthasshorttermcashequivalentinvestmentsheldwiththeBankof NewYorkTrustDepartmentfortheCertificatesofParticipationfacilitiesfinancing. Limitationsastheyrelatetointerestraterisk,creditrisk,andconcentrationofcreditriskaredescribed below: InterestRateRisk Interestrateriskistheriskthatchangesinmarketinterestrateswilladverselyaffectthefairvalueofan investment.generally,thelongerthematurityofaninvestment,thegreaterthesensitivityofitsfair valuetochangesinmarketinterestrates.thedistrictmanagesitsexposuretointerestrateriskby investinginthecountytreasuryandinmoneymarketmutualfundu.s.treasuryfundobligations. TheDistrictmaintainsaninvestmentwiththeSanDiegoCountyInvestmentPoolwithafairvalueof approximately$51,454,455andanamortizedbookvalueof$51,280,102.theaverageweightedmaturity forthispoolis427days.inaddition,thedistrictmaintainsinvestmentsinjpmorganmoneymarket fundswithanamortizedcostof$353,833.fairvalueforthisinvestmentapproximatesamortizedcost. CreditRisk Creditriskistheriskthatanissuerofaninvestmentwillnotfulfillitsobligationtotheholderofthe investment.thisismeasuredbytheassignmentofaratingbyanationallyrecognizedstatisticalrating organization.theinvestmentwiththesandiegocountyinvestmentpoolisratedbymoody sinvestor Service.TheinvestmentwithJPMorganmoneymarketfundsisratedbyMoody sinvestorservice. 36

100 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE2 DEPOSITSANDINVESTMENTS(continued) CustodialCreditRisk Deposits Custodialcreditriskistheriskthatintheeventofabankfailure,theDistrict sdepositsmaynotbe returnedtoit.thedistrictdoesnothaveapolicyforcustodialcreditriskfordeposits.however,the CaliforniaGovernmentcoderequiresthatafinancialinstitutionsecuredepositsmadebyStateorlocal governmentalunitsbypledgingsecuritiesinanundividedcollateralpoolheldbyadepositoryregulated understatelaw(unlesssowaivedbythegovernmentalunit).themarketvalueofthepledgedsecurities inthecollateralpoolmustequalatleast110percentofthetotalamountdepositedbythepublicagencies. Californialawalsoallowsfinancialinstitutionstosecurepublicdepositsbypledgingfirsttrustdeed mortgagenoteshavingavalueof150percentofthesecuredpublicdepositsandlettersofcreditissuedby thefederalhomeloanbankofsanfranciscohavingavalueof105percentofthesecureddeposits.as ofjune30,2008,$754,608ofthedistrict sbankbalancewasexposedtocustodialcreditriskbecauseitwas uninsuredandcollateralizedwithsecuritiesheldbythepledgingfinancialinstitution strustdepartment oragency,butnotinthenameofthedistrict. ConcentrationofCreditRisk TheinvestmentpolicyoftheDistrictcontainsnolimitationsontheamountthatcanbeinvestedinany oneissuerbeyondtheamountstipulatedbythecaliforniagovernmentcode.districtinvestmentsthat aregreaterthan5percentoftotalinvestmentsareineitheranexternalinvestmentpoolormutualfunds andarethereforeexempt. 37

101 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE3 ACCOUNTSRECEIVABLE AccountsreceivableasofJune30,2008consistofthefollowing: GeneralFund Federalgovernment Categoricalaid $ 1,785,191 BuildingFund $ CountySchool FacilitiesFund NonMajor Governmental Funds $ $1,189,893 Proprietary Funds Total $ $2,975,084 Stategovernment Revenuelimit 4,721,536 6,006 4,727,542 Categoricalaid 303, , ,141 Lottery 834, ,472 Classsizereduction 84,932 84,932 Localsources Interest 238, ,427 96,031 48,828 8, ,156 Miscellaneous 4,162,970 14, ,972 4,371,491 Total $12,130,568 $113,427 $96,031 $1,594,117 $202,675 $14,136,818 38

102 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE4 CAPITALASSETSANDDEPRECIATION CapitalassetactivityfortheyearendedJune30,2008isshownbelow: Beginning Ending Balance Balance July1,2007 Additions Deletions June30,2008 Land $16,718,461 $106,710 $ $16,825,171 Siteimprovements 7,383,348 98,575 7,481,923 Buildingsandimprovements 169,029,497 35,469, ,499,091 Furnitureandequipment 16,044, , ,673 16,331,870 Workinprogress 32,938,750 8,609,914 28,145,448 13,403,216 Totalathistoricalcost $242,114,415 $44,911,977 $28,485,121 $258,541,271 Lessaccumulateddepreciation: Siteimprovements (3,879,996) (2,637) Buildings (29,558,545) (3,760,342) (3,882,633) (33,318,887) Furnitureandequipment (11,094,568) (1,203,600) (307,819) (11,990,349) Totalaccumulateddepreciation (44,533,109) (4,966,579) (307,819) (49,191,869) Governmentalactivitiescapital assets,net $197,581,306 $39,945,398 $28,177,302 $209,349,402 Depreciationexpenseisallocatedtothefollowingfunctionsinthestatementofactivities. Instruction $4,103,639 SupervisionofInstruction 1,499 InstructionalLibrary,Media,andTec 57,289 SchoolSiteAdministration 179,301 HometoSchoolTransportation 120,579 FoodServices 51,069 AllOtherPupilServices 382 AllOtherGeneralAdministration 110,728 DataProcessingServices 23,037 PlantServices 319,056 Total $4,966,579 39

103 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE5INTERFUNDACTIVITIES Interfundactivityisreportedasloans,servicesprovidedreimbursements,ortransfers.Loansare reportedasinterfundreceivablesandpayables,asappropriate,andaresubjecttoeliminationupon consolidation.servicesprovided,deemedtobeatmarketornearmarketrates,aretreatedasrevenues andexpenditures/expenses.reimbursementsarewhenonefundincursacost,chargestheappropriate benefitingfund,andreducesitsrelatedcostasareimbursement.allotherinterfundtransactionsare treatedastransfers.transfersamonggovernmentalorproprietaryfundsarenettedaspartofthe reconciliationtothegovernmentwidefinancialstatements. DueFrom/DueToOtherFunds IndividualfundinterfundreceivableandpayablebalancesasofJune30,2008areasfollows: GeneralFund BuildingFund 260 NonMajorGovernmentalFunds 87,187 DuetoOtherFunds NonMajor General Building Governmental Fund Fund Funds Total $ $ 2,482 $447,659 $450, , ,817 Total $87,447 $ 2,482 $462,289 $552,218 GeneralFundduetoChildDevelopmentFundforindirectcharges GeneralFundduetoCafeteriaFundforrevenuereceived GeneralFundduetoDeferredMaintenanceFundforcontributionstatematch GeneralFundduetoCapitalFacilitiesFundforsalestaxcredit GeneralFundduetoAdultEducationFundforPYApportionment GeneralFundduetoBuildingFundforclericalexpenses AdultEducationFundduetoGeneralFundforOfficeDepot ChildDevelopmentFundduetoGeneralFundforpreeschoolrent ChildDevelopmentFundduetoGeneralFundforOfficeDepot ChildDevelopmentFundduetoCafeteriaFundforcafeteriasales CafeteriaFundduetoGeneralFundforindirectcharges CafeteriaFundduetoGeneralFundforOfficeDepotandWarehousestockorders BuildingFundduetoGeneralFundforPERSreductionexpenses CapitalFacilitiesFundduetoGeneralFundforDeveloperFees Total $ 13,753 70, , ,610 46,655 62,150 14, , ,231 2,481 12,606 $552,218 40

104 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE5INTERFUNDACTIVITIES(continued) InterfundTransfers Interfundtransfersconsistofoperatingtransfersfromfundsreceivingresourcestofundsthroughwhich theresourcesaretobeexpended.interfundtransfersforthe200708fiscalyearconsistedofthe following: InterfundTransferOut General NonMajor Fund Funds Total BuildingFund $ $5,745,774 $5,745,774 OtherGovernmentalFunds 2,405,568 2,405,568 Total $2,405,568 $5,745,774 $8,151,342 TransferfromtheCountyFacilitiesFundtotheBuildingFundforconstruction TransferfromtheGeneralFundtoDeferredMaintenanceforStaterequiredmatch $5,745,774 2,405,568 Total $8,151,342 NOTE6 GENERALLONGTERMDEBT AscheduleofchangesinlongtermdebtfortheyearendedJune30,2008isshownbelow: Balance Additionsand Deductionsand Balance Duein July1,2007 Adjustments Adjustments June30,2008 OneYear Generalobligationbonds $120,695,000 Capitalleases 78,000 Certificatesofparticipation 1,455,000 $ $2,245,000 $118,450,000 2,545,000 26,000 52,000 26, ,000 1,190, ,000 Compensatedabsences 686, , , ,753 Otherpostemploymentbenefits 319, ,508 $122,914,442 $ 503,819 $2,536,000 $120,882,261 $3,716,753 41

105 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE6 GENERALLONGTERMDEBT(continued) A.GeneralObligationBonds(continued) TheoutstandingbondeddebtofOceansideUnifiedSchoolDistrictatJune30,2008is: Issue Matutity Interest Original Beginning Date Date Rate Issue Balance Issued Redeemed 06/15/00 08/01/ % $9,500,000 $ 8,730,000 05/17/01 08/01/ % 20,000,000 18,545,000 03/21/02 08/01/ % 20,000,000 18,945,000 05/05/04 08/01/ % 25,000,000 24,340,000 06/22/05 08/01/ % 25,000,000 24,635,000 06/20/06 08/01/ % 25,500,000 25,500,000 Ending Balance $ $ 175,000 $8,555, ,000 18,155, ,000 18,555, ,000 23,850, ,000 24,180, ,000 25,845,000 $ 125,000,000 $ 120,695,000 $ $ 2,245,000 $ 118,450,000 Theannualrequirementstoamortizeallgeneralobligationbondspayable,outstandingasofJune30, 2008,areasfollows: FiscalYear Principal Interest Total $ 2,425,000 $5,696,406 $ 8,121, ,545,000 5,554,956 8,099, ,685,000 5,409,486 8,094, ,825,000 5,263,246 8,088, ,950,000 5,124,569 8,074, ,915,000 23,470,503 40,385, ,275,000 18,994,873 40,269, ,830,000 13,199,411 40,029, ,165,000 5,844,087 37,009, ,835, ,601 9,326,601 Total $118,450,000 $89,049,139 $207,499,139 PropositionHGeneralObligationBondAuthorization OnJune3,2008,thevotersintheDistrictpassedby71%PropositionH,a$195milliongeneralobligation bondauthorization.withthepassingofpropositionh,thedistrictwillcontinuemodernizationplansfor asmanyas19campusesdistrictwide.bondfundswillbesupplementedwithstatematchingfundsand otherfundingsourcestohelpcompletethework.asofjune30,2008,noneofthepropositionhbonds wereissued. 42

106 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE6 GENERALLONGTERMDEBT(continued) B. CapitalLeases TheDistrictleasesequipmentunderagreementsthatprovidefortitletopassuponexpirationofthe leaseperiod.futureminimumleasepaymentsareasfollows: FiscalYear LeasePayment $26, ,000 PresentValueofNet MinimumLeasePayments $52,000 TheDistrictwillreceivenosubleaserentalrevenuesnorpayanycontingentrentalsforthe equipment. C.CertificatesofParticipation OnSeptember9,1997theOceansideUnifiedSchoolDistrictissuedcertificatesofparticipationinthe amountof$4,500,000fortheconstructionofcertainimprovementsthroughtheoceansideunified SchoolFacilitiesCorporationandhavingstatedinterestratesrangingfrom4.1%to5.0%.AtJune30, 2008theprincipalbalanceoutstandingonthecertificateswas$1,190,000. Thecertificatesmaturethrough2012asfollows: FiscalYear Principal Interest Total $275,000 $55,671 $330, ,000 42, , ,000 27, , ,000 12, ,000 Totals $1,190,000 $137,224 $1,327,224 43

107 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE7COMMITMENTSANDCONTINGENCIES A. StateandFederalAllowances,Awards,andGrants TheDistricthasreceivedstateandfederalfundsforspecificpurposesthataresubjecttoreviewand auditbythegrantoragencies.althoughsuchauditscouldgenerateexpendituredisallowances undertermsofthegrants,itisbelievedthatanyrequiredreimbursementwillnotbematerial. B. ConstructionCommitments AsofJune30,2008,therewas$18,844,861inoutstandingconstructioncommitmentstoconstruction, engineeringandarchitecturalfirmsrelatedtothenewconstructionandmodernizationofvarious schoolsites. NOTE8 JOINTVENTURES(JointPowersAgreement) TheOceansideUnifiedSchoolDistrictparticipatesinonejointventureunderajointpowersagreement (JPA),theSanDiegoCountySchoolsRiskManagementJPA(RM).TherelationshipbetweentheDistrict andthejpaissuchthatthejpaisnotacomponentunitofthedistrictforfinancialreportingpurposes. TheJPAarrangesforandprovidesworkers compensation,health,andpropertyandliabilityinsurance foritsmemberschooldistricts.thejpaisgovernedbyaboardconsistingofarepresentativefromeach memberdistrict.thegoverningboardcontrolstheoperationsofthejpaindependentofanyinfluence bythememberdistrictsbeyondtheirrepresentationonthegoverningboard.eachmemberdistrictpays apremiumcommensuratewiththelevelofcoveragerequestedandsharessurplusesanddeficits proportionatelytoitsparticipationinthejpa. CondensedauditedfinancialinformationforthemostcurrentlyavailableyearendedJune30,2007isas follows: RM TotalAssets $ 91,261,574 TotalLiabilities 44,556,823 FundEquity $46,704,751 TotalRevenue $ 53,931,705 TotalExpenditures 40,909,826 NetIncome $13,021,879 44

108 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE9EMPLOYEERETIREMENTPLANS Qualifiedemployeesarecoveredundermultipleemployerdefinedbenefitpensionplansmaintainedby agenciesofthestateofcalifornia.certificatedemployeesaremembersofthestateteachers Retirement System(STRS),andclassifiedemployeesaremembersofthePublicEmployees RetirementSystem (PERS). PlanDescriptionandProvisions PublicEmployees RetirementSystem(PERS) PlanDescription TheDistrictcontributestotheSchoolEmployerPoolundertheCaliforniaPublicEmployees Retirement System(CalPERS),acostsharingmultipleemployerpublicemployeeretirementsystemdefinedbenefit pensionplanadministeredbycalpers.theplanprovidesretirementanddisabilitybenefits,annual costoflivingadjustments,anddeathbenefitstoplanmembersandbeneficiaries.benefitprovisionsare establishedbystatestatutes,aslegislativelyamended,withinthepublicemployees RetirementLaw. CalPERSissuesaseparatecomprehensiveannualfinancialreportthatincludesfinancialstatementsand requiredsupplementaryinformation.copiesofthecalpersannualfinancialreportmaybeobtained fromthecalpersexecutiveoffice,400pstreet,sacramento,california FundingPolicy Activeplanmembersarerequiredtocontribute7.0%oftheirsalaryandtheDistrictisrequiredto contributeanactuariallydeterminedrate.theactuarialmethodsandassumptionsusedfordetermining theratearethoseadoptedbythecalpersboardofadministration.therequiredemployercontribution rateforfiscalyear200708was9.306%.thecontributionrequirementsoftheplanmembersare establishedbystatestatute.thedistrictmade$2,901,327,incontributionstocalpersforthefiscalyear endingjune30,2008,$2,610,842incontributionstocalpersforthefiscalyearendingjune30,2007,and $2,172,482incontributionstoCalPERSforthefiscalyearendingJune30,2006,whichrepresents100%of therequiredcontributionsforeachfiscalyear. 45

109 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE9EMPLOYEERETIREMENTPLANS(continued) StateTeachers RetirementSystem(STRS) PlanDescription TheDistrictcontributestotheStateTeachers RetirementSystem(STRS),acostsharingmultipleemployer publicemployeeretirementsystemdefinedbenefitpensionplanadministeredbystrs.theplanprovides retirement,disabilityandsurvivorbenefitstobeneficiaries.benefitprovisionsareestablishedbystate statutes,aslegislativelyamended,withinthestateteachers RetirementLaw.STRSissuesaseparate comprehensiveannualfinancialreportthatincludesfinancialstatementsandrequiredsupplementary information.copiesofthestrsannualfinancialreportmaybeobtainedfromstrs,7667folsom Boulevard,Sacramento,California FundingPolicy Activeplanmembersarerequiredtocontribute8.0%oftheirsalary.Therequiredemployercontribution rateforfiscalyear200708was8.25%ofannualpayroll.thecontributionrequirementsoftheplan membersareestablishedbystatestatute.thedistrict scontributionstostrsforthefiscalyearsending June30,2008,2007,and2006,were$7,628,994,$7,348,583,and$6,578,447,respectively,andequal100%of therequiredcontributionsforeachyear. OnBehalfPayments TheDistrictwastherecipientofonbehalfpaymentsmadebytheStateofCaliforniatoSTRSforK12 education.thesepaymentsconsistofstategeneralfundcontributionsofapproximately$7,126,056 milliontostrs(4.517%ofsalariessubjecttostrsin200708and2.237%ofsalariessubjecttostrsin ). NOTE10RISKMANAGEMENT TheDistrictisexposedtovariousrisksoflossrelatedtotorts,thefts,damagetoDistrictassets,errorsand omissions,employeeinjuriesandnaturaldisasters.thedistrictparticipatesinapublicentityriskpool,as describedinnote8,isselfinsuredfordentalandvisionbenefitsandpurchasescommercialinsurance coverageforothertypesofrisk.therehavebeennosignificantreductionsininsurancecoveragefrom theprioryear.settledclaimshavenotexceededthiscommercialcoverageinanyofthepastthreefiscal years. 46

110 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE11 FUNDBALANCES Thefollowingamountsweredesignatedasfollows: GeneralFund EconomicUncertainties $ 6,967,434 OtherDesignations 2,240,390 Total $ 9,207,825 NOTE12EXCESSOFEXPENDITURESOVERAPPROPRIATIONS AsofJune30,2008,expendituresexceededappropriationsinindividualfundsasfollows: AppropriationsCategory ExcessExpenditures GeneralFund: CertificatedSalaries $475,108 ClassifiedSalaries 339,258 OtherOutgo 12,960 Total $827,326 NOTE13 TAXREVENUEANTICIPATIONNOTES TheDistrictissued$6,000,000ofTaxRevenueAnticipationondatedJuly1,2008throughtheCountyof SanDiegoandSanDiegoSchoolDistrictpool,Series2008.ThenotesmatureonJune30,2009andyield 1.63%interest.ThenotesweresoldbytheDistricttosupplementitscashflow. ThefundswillbeheldwiththeSanDiegoCountyTreasurer,unlessanduntiltheDistrictneedstodraw fundsout.thedistrictrepaidonjune20,2009,$6,000,000inprincipalplus$209,416ininterest. 47

111 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE14 OTHERPOSTEMPLOYMENTBENEFITS OceansideUnifiedSchoolDistrictadministerssingleemployerdefinedbenefitotherpostemployment plan(opeb)thatprovidesmedicalinsurancebenefitstoeligibleretireesandtheirspouses.thedistrict implementedgovernmentalaccountingstandardsboardstatement#45,accountingandfinancial reportingbyemployersforpostemploymentbenefitplansotherthanpensionplans,in PlanDescriptionandContributionInformation Membershipintheplanconsistedofthefollowing: Retireesandbeneficiariesreceivingbenefits* 139 Activeplanmembers* 1616 Total 1755 *AsofMay10,2006 Numberofparticipatingemployers 1 TobeeligibletheemployeemusthavetwentyyearsofservicewiththeDistrictandbebetweentheageof fiftyfiveandtheageofmedicareeligibilityorbeapprovedforstrsorpersdisabilityretirementwithin thirtynonemonthsofhis/herfiftyfiveyearbirthday.dependentsofretireesarenoteligibleforbenefits. Thebenefitsarecappedatage65andat$1,800peryear,asoftheMay10,2006actuarialvaluationdate. TheDistrict sfundingpolicyisbasedontheprojectedpayasyougofinancingrequirements,with additionalamountstoprefundbenefitsasdeterminedannuallybythegoverningboard.forfiscalyear ,theDistrictcontributed$319,508,whichis42%oftheannualrequiredcontribution. AnnualOPEBCostandNetOPEBObligation TheDistrict sannualopebcostiscalculatedbasedontheannualrequiredcontribution(arc),an amountactuariallydeterminedinaccordancewiththeparametersofgasbstatement45.thearc representsaleveloffundingthat,ifpaidonanongoingbasis,isprojectedtocovernormalcosteachyear andamortizeanyunfundedactuarialliabilities(orfundingexcess)overaperiodnottoexceedthirty years. 48

112 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE14 OTHERPOSTEMPLOYMENTBENEFITS(continued) AnnualOPEBCostandNetOPEBObligation(continued) ThefollowingtableshowsthecomponentsoftheDistrict sannualopebcostfortheyear,theamount actuallycontributedtotheplanandchangesinthedistrict snetopebobligation: Annualrequiredcontribution $756,061 InterestonnetOPEBobligation Adjustmenttoannualrequiredcontribution AnnualOPEBcost 756,061 Contributionsmade 436,553 IncreaseinnetOPEBobligation 319,508 NetOPEBobligationJuly1,2007 NetOPEBobligationJuly1,2008 $319,508 TheDistrict sannualopebcost,thepercentageofannualopebcostcontributedtotheplan,andthenet OPEBobligationfor200708areasfollows: Annual Net YearEnded Required Percentage OPEB June30, Contribution Contributed Obligation 2008 $756,061 0% $319,508 FundedStatusandFundingProgress OPEBPlans AsofMay10,2006,themostrecentactuarialvaluationdate,theplanwasunfunded.Theactuarial accruedliability(aal)forbenefitswas$8.9millionandtheunfundedactuarialaccruedliability(uaal) was$8.9million. Actuarialvaluationsofanongoingplaninvolveestimatesofthevalueofreportedamountsand assumptionsaboutprobabilityofoccurrenceofeventsforintothefuture.examplesincludeassumptions aboutfutureemployment,mortality,andthehealthcarecosttrend.actuariallydeterminedamountsare subjecttocontinualrevisionasactualresultsarecomparedwithpastexpectationsandnewestimatesare madeaboutthefuture.theschedulesoffundingprogress,presentedasrequiredsupplementary informationfollowingthenotestothefinancialstatements,presentmultiyeartrendinformationabout whethertheactuarialvaluesofplanassetsareincreasingordecreasingovertimerelativetotheactuarial accruedliabilitiesforbenefits. 49

113 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotestoFinancialStatements June30,2008 NOTE14 OTHERPOSTEMPLOYMENTBENEFITS(continued) ActuarialMethodsandAssumptions Projectionsofbenefitsforfinancialreportingpurposesarebasedonthesubstantiveplan(theplanas understoodbytheemployerandplanmembers)andincludethetypesofbenefitsprovidedatthetimeof eachvaluationandthehistoricalpatternofsharingofbenefitcostsbetweentheemployerandplan memberstothatpoint.theactuarialmethodsandassumptionsusedincludetechniquesthatare designatedtoreducetheeffectsofshorttermvolatilityinactuarialaccruedliabilitiesandtheactuarial valueofassets,consistentwiththelongtermperspectiveofthecalculations. Additionalinformationasofthelatestactuarialvaluationfollows: ValuationDate 5/10/2006 ActuarialCostMethod Entryagenormal AmortizationMethod Leveldollarbasis Remainingamortizationperiod 28years AssetValuation Marketvaluebasis ActuarialAssumptions: Investmentrateofreturn 5% Healthcarecosttrendrate 4% 50

114 RequiredSupplementaryInformation

115 OCEANSIDEUNIFIEDSCHOOLDISTRICT BudgetaryComparisonSchedule GeneralFund June30,2008 BudgetedAmounts Variancewith Actual FinalBudget Original Final (BudgetaryBasis) Pos(Neg) Revenues RevenueLimitSources $ 111,342,060 $ 111,568,054 $111,802,679 $ 234,625 Federal 17,360,298 16,138,991 16,473, ,213 OtherState 26,650,609 29,418,334 28,761,776 (656,558) OtherLocal 13,488,207 15,450,518 15,262,537 (187,981) TotalRevenues 168,841, ,575, ,300,196 (275,701) Expenditures CertificatedSalaries 89,788,615 91,406,869 91,881,977 (475,108) ClassifiedSalaries 27,950,087 28,051,616 28,390,874 (339,258) EmployeeBenefits 30,066,838 30,012,391 29,999,398 12,993 BooksandSupplies 12,002,528 11,249,319 11,126, ,161 ServicesandOtherOperatingExpenditures 14,087,868 14,432,801 14,321, ,664 CapitalOutlay 178, , ,266 9,434 OtherOutgo 450, , ,866 (9,450) DirectSupport/IndirectCosts (249,368) (286,378) (273,418) (12,960) TotalExpenditures 174,275, ,937, ,517,258 (579,524) Excess(Deficiency)ofRevenues Over(Under)Expenditures (5,434,162) (3,361,837) (4,217,062) (855,225) OtherFinancingSourcesandUses Interfundtransfersout (845,300) (2,405,568) (2,405,568) TotalOtherFinancingSourcesandUses (845,300) (2,405,568) (2,405,568) Excess(Deficiency)ofRevenuesandOther FinancingSourcesOver(Under) ExpendituresandOtherFinancingUses (6,279,462) (5,767,405) (6,622,630) (855,225) FundBalances,July1, ,980,360 26,980,360 26,980,360 3,285,715 FundBalances,June30,2008 $ 20,700,898 $ 21,212,955 $ 20,357,730 $(855,225) 51

116 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofFundingProgressandEmployerContributions YearEndedJune30,2008 ThefollowingscheduleshowstheDistrict sactuariallydeterminedfundingprogressforother postemploymentbenefits. ScheduleofFundingProgress Actuarial UAALasa Actuarial Accrued Unfunded Percentageof Valuation Valueof Liability AAL Funded Covered Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll May10,2006 $ $8,958,856 $8,958,856 0% $110,971,050 8% Seeaccompanyingnotetothesupplementaryinformation. 52

117 SupplementaryInformationSection

118 OCEANSIDEUNIFIEDSCHOOLDISTRICT LocalEducationAgencyOrganizationStructure June30,2008 TheOceansideUnifiedSchoolDistrictwasestablishedin1970.Thedistrictboundariesencompassthe cityofoceanside,aswellaspartofmarinecorpsbasecamppendleton.therewerenochangesinthe boundariesofthedistrictduringthecurrentyear.thedistrictprovidesprimaryandsecondaryeducation forallstudentswithinthedistrictboundaries.thedistrictiscurrentlyoperatingtwentyfiveschools: CesarChavezMiddleSchool,ChallengesCommunityDaySchool,ClairW.BurgenerAcademy,DelRio Elementary,DitmarElementary,ElCaminoHigh,GarrisonElementary,IveyRanchElementary,Jefferson Middle,KingMiddle,LaurelElementary,LibbyElementary,LincolnMiddle,McAuliffeElementary, MissionElementary,NicholsElementary,NorthTerraceElementary,OceanShoresHigh,Oceanside High,PacificaElementary,PalmquistElementary,ReynoldsElementary,SanLuisReyElementary,Santa MargaritaElementary,SouthOceansideElementary,andStuartMesaElementary. GOVERNINGBOARD Member Office TermExpires JanetBledsoeLacy President December,2010 AdrianneHakes,Ed.D. VicePresident December,2008 RoyYoungblood Clerk December,2008 LillianV.Adams Member December,2010 EmilyOrtizWichmann Member December,2010 DISTRICTADMINISTRATORS LarryPerondi Superintendent Dr.RobynPhillips AssociateSuperintendent,BusinessServices Dr.LuisIbarra AssociateSuperintendent,HumanResources JoseBanda AssociateSuperintendent,EducationServices KarenHuddleston Controller 53

119 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofAverageDailyAttendance YearEndedJune30,2008 SecondPeriod Annual Report Report Elementary: Kindergarten 1,618 1,618 Grades1Through3 4,619 4,613 Grades4Through6 4,343 4,326 Grades7and8 2,731 2,724 HomeandHospital 4 4 SpecialEducation CommunityDaySchool 4 6 TotalElementary 13,813 13,789 Secondary: Grades9Through12,regularclasses 4,834 4,780 ContinuationEducation HomeandHospital 8 10 SpecialEducation OpportunitySchools TotalSecondary 5,384 5,327 ClassesforAdults: NotConcurrentlyEnrolled TotalAdultClasses TotalAverageDailyAttendance 19,264 19,184 SupplementalInstructionHours Hoursof Attendance Elementary 6,637 Secondary 180,199 Seeaccompanyingnotetothesupplementaryinformation. 54

120 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofInstructionalTime YearEndedJune30, NumberofDays Minutes Traditional GradeLevel ActualMinutes Requirement ActualMinutes Calendar Status Kindergarten 36,000 36,000 36, Grade1 45,000 50,400 53, Grade2 45,000 50,400 53, Grade3 45,000 50,400 53, Grade4 50,000 54,000 54, Grade5 50,000 54,000 54, Grade6 50,000 54,000 54, Grade7 55,000 54,000 62, Grade8 55,000 54,000 62, Grade9 61,300 64,800 66, Grade10 61,300 64,800 66, Grade11 61,300 64,800 66, Grade12 61,300 64,800 66, Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Seeaccompanyingnotetothesupplementaryinformation. 55

121 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofFinancialTrendsandAnalysis YearEndedJune30,2008 (Budget) GeneralFund 2009*** Revenuesandotherfinancing sources $166,921,024 $172,300,196 $172,399,273 $160,986,684 Expenditures,otherusesand transfersout 168,360, ,111, ,482, ,257,932 Changeinfundbalance(deficit) (1,439,916) (6,622,630) 1,916,964 4,728,752 Endingfundbalance $18,917,814 $20,357,730 $ 26,980,360 $25,063,396 Availablereserves* $7,866,290 $6,967,434 $ 10,422,831 $12,398,770 Availablereservesasapercentage oftotaloutgo 4.7% 4.0% 6.1% 7.9% Totallongtermdebt $117,165,508 $120,882,261 $ 122,914,442 $99,374,557 AveragedailyattendanceatP2** 19,130 19,196 19,179 19,364 TheGeneralFundbalancehasdecreasedby$4,705,666overthepasttwoyears.Thefiscalyear200708adopted budgetprojectsadecreaseof$1,439,916.foradistrictofthissize,thestaterecommendsavailablereservesofat least3%oftotalgeneralfundexpenditures,transfersout,andotheruses(totaloutgo). *Availablereservesconsistofallundesignatedfundbalancesandallfundsdesignatedforeconomic uncertaintyinthegeneralfundandspecialreservefundforotherthancapitaloutlay. **ExcludesadulteducationandcountyoperatedprogramsADA ***AdoptedSeptember2008 Seeaccompanyingnotetothesupplementaryinformation. 56

122 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofExpendituresofFederalAwards YearEndedJune30,2008 Federal PassThrough FederalGrantor/PassThrough CFDA EntityIdentifying Federal Grantor/ProgramorClusterTitle Number Number Expenditures FederalPrograms: U.S.DepartmentofAgriculture: PassedthroughCaliforniaDept.ofEducation(CDE): NeedySchoolBreakfast $856,391 NationalSchoolLunch ,234,657 SummerFoodService ,687 TotalU.S.DepartmentofAgriculture 4,183,735 U.S.DepartmentofEducation: PassedthroughCaliforniaDept.ofEducation(CDE): NoChildLeftBehindAct(NCLB) TitleI,BasicSchoolSupport ,111,885 TitleI,PartA,ProgramImprovementDistrictIntervention A ,008 TitleII,PartD,EnhancingEducationThroughTechnology ,956 TitleII,PartA,ImprovingTeacherQuality ,192,080 TitleII,PartA,PrincipalTraining TitleIII,ImmigrantEducationProgram ,621 TitleIIILimitedEnglishProficiency ,670 TitleIV,SafeandDrugFreeSchools ,637 TitleV,PartA,InnovativeEducationStrategies ,167 VocationalEducation ,488 MigrantEducation ,862 SchoolBasedStudentDrugTesting n/a 165,230 Unrestricted:FederalImpactAidUnrestricted ,273,543 AdultBasicEducationAct: EnglishLiteracyandCivicsEducation A ,250 IndividualswithDisabilitiesEducationAct(IDEA): BasicLocalAssistanceEntitlement ,260,178 PreschoolStaffDevelopment PreschoolGrants,PartB ,903 TotalU.S.DepartmentofEducation 16,180,717 U.S.DepartmentofHealth&HumanServices: PassedthroughCaliforniaDeptofHealthServices: MediCalBillingOptions ,690 ChildDev:Infant/ToddlerChildCare ,973 ChildDevQualityImprovement ,465 TotalU.S.DepartmentofHealth&HumanServices 120,128 TotalExpendituresofFederalAwards $20,484,580 Seeaccompanyingnotetothesupplementaryinformation. 57

123 OCEANSIDEUNIFIEDSCHOOLDISTRICT ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatements YearEndedJune30,2008 Therewerenodifferencesbetweentheannualfinancialandbudgetreportandtheauditedfinancial statements. Seeaccompanyingnotetothesupplementaryinformation. 58

124 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofExcessSickLeave June30,2008 Section (a)(3)or(a)(3)(b)disclosure OceansideUnifiedSchoolDistrictdoesnotprovidemorethan12sickleavedaysinaschoolyeartoany CalSTRSmember. Seeaccompanyingnotetothesupplementaryinformation. 59

125 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofCharterSchools YearEndedJune30,2008 ThefollowingcharterschoolsarecharteredbytheOceansideUnifiedSchoolDistrict: CharterSchools Included PacificViewCharterSchool SchoolofBusinessandTechnologyCharterSchool CoastalAcademyCharterSchool No No No Seeaccompanyingnotetothesupplementaryinformation. 60

126 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotetotheSupplementaryInformation June30,2008 NOTE1 PURPOSEOFSCHEDULES ScheduleofAverageDailyAttendance(ADA) Averagedailyattendance(ADA)isameasurementofthenumberofpupilsattendingclassesofthe District.Thepurposeofattendanceaccountingfromafiscalstandpointistoprovidethebasisonwhich apportionmentsofstatefundsaremadetoschooldistricts.thisscheduleprovidesinformation regardingtheattendanceofstudentsatvariousgradelevelsandindifferentprograms. ScheduleofInstructionalTime TheDistricthasreceivedincentivefundingforincreasinginstructionaltimeasprovidedbytheIncentives forlongerinstructionalday.thisschedulepresentsinformationontheamountofinstructionaltime offeredbythedistrictandwhetherthedistrictcompliedwiththeprovisionsofeducationcodesections 46200through Districtsmustmaintaintheirinstructionalminutesateitherthe198283actualminutesorthe requirement,whicheverisgreater,asrequiredbyeducationcodesection ScheduleofFinancialTrendsandAnalysis ThisscheduledisclosestheDistrict sfinancialtrendsbydisplayingpastyears dataalongwithcurrent yearbudgetinformation.thesefinancialtrenddisclosuresareusedtoevaluatethedistrict sabilityto continueasagoingconcernforareasonableperiodoftime. ScheduleofExpendituresofFederalAwards TheaccompanyingscheduleofexpendituresofFederalawardsincludestheFederalgrantactivityofthe Districtandispresentedonthemodifiedaccrualbasisofaccounting.Theinformationinthisscheduleis presentedinaccordancewiththerequirementsoftheunitedstatesofficeofmanagementandbudget CircularA133,AuditsofStates,LocalGovernments,andNonProfitOrganizations.Therefore,someamounts presentedinthisschedulemaydifferfromamountspresentedin,orusedinthepreparationofthe financialstatements. Subrecipients OftheFederalexpenditurespresentedintheschedule,theDistrictprovidednoFederalawardstosub recipients. ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatements Thisscheduleprovidestheinformationnecessarytoreconcilethefundbalanceofallfundsreportedon theunauditedactualfinancialreporttotheauditedfinancialstatements. 61

127 OCEANSIDEUNIFIEDSCHOOLDISTRICT NotetotheSupplementaryInformation June30,2008 NOTE1 PURPOSEOFSCHEDULES(continued) ScheduleofExcessLeave ThisscheduleprovidesinformationonwhethertheDistrictgrantsexcesssickleave,asthattermis definedinsubdivision(c)ofeducationcodesection ,toemployeeswhoaremembersofthe CaliforniaStateTeachersRetirementSystem. ScheduleofCharterSchools ThisschedulelistsallCharterSchoolscharteredbytheDistrict,anddisplaysinformationforeachCharter SchoolandwhetherornottheCharterSchoolisincludedintheDistrictaudit. 62

128 OtherIndependentAuditors Reports

129 BoardofTrustees OceansideUnifiedSchoolDistrict Oceanside,California REPORTONINTERNALCONTROLOVERFINANCIALREPORTINGAND ONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOF FINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITH GOVERNMENTAUDITINGSTANDARDS WehaveauditedthefinancialstatementsofOceansideUnifiedSchoolDistrictas ofandfortheyearendedjune30,2008,andhaveissuedourreportthereon dateddecember5,2008.weconductedourauditinaccordancewithgenerally acceptedauditingstandardsandthestandardsapplicabletofinancialaudits containedingovernmentauditingstandards,issuedbythecomptrollergeneral oftheunitedstates. InternalControloverFinancialReporting Inplanningandperformingouraudit,weconsideredOceansideUnifiedSchool District sinternalcontroloverfinancialreportingasabasisfordesigningour auditingproceduresforthepurposeofexpressingouropiniononthefinancial statements,butnotforthepurposeofexpressinganopinionontheeffectiveness oftheoceansideunifiedschooldistrict sinternalcontroloverfinancial reporting.accordingly,wedonotexpressanopinionontheeffectivenessofthe OceansideUnifiedSchoolDistrict sinternalcontroloverfinancialreporting. Acontroldeficiencyexistswhenthedesignoroperationofacontroldoesnot allowmanagementoremployees,inthenormalcourseofperformingtheir assignedfunctions,topreventordetectmisstatementsonatimelybasis.a significantdeficiencyisacontroldeficiency,orcombinationofcontrol deficiencies,thatadverselyaffectstheentity sabilitytoinitiate,authorize, record,process,orreportfinancialdatareliablyinaccordancewithgenerally acceptedaccountingprinciplessuchthatthereismorethanaremotelikelihood thatamisstatementoftheentity sfinancialstatementsthatismorethan inconsequentialwillnotbepreventedordetectedbythedistrict sinternal control. Amaterialweaknessisasignificantdeficiency,orcombinationofsignificant deficiencies,thatresultsinmorethanaremotelikelihoodthatamaterial misstatementofthefinancialstatementswillnotbepresentedordetectedbythe entity sinternalcontrol. 63

130 Ourconsiderationofinternalcontroloverfinancialreportingwasforthelimitedpurposedescribedinthe firstparagraphofthissectionandwouldnotnecessarilyidentifyalldeficienciesininternalcontrolthat mightbesignificantdeficienciesormaterialweaknesses.wedidnotidentifyanydeficienciesininternal controloverfinancialreportingthatweconsidertobematerialweaknesses,asdefinedabove. ComplianceandOtherMatters AspartofobtainingreasonableassuranceaboutwhetherOceansideUnifiedSchoolDistrict sfinancial statementsarefreeofmaterialmisstatement,weperformedtestsofitscompliancewithcertainprovisions oflaws,regulations,contractsandgrantagreements,noncompliancewithwhichcouldhaveadirectand materialeffectonthedeterminationoffinancialstatementamounts.however,providinganopinionon compliancewiththoseprovisionswasnotanobjectiveofourauditand,accordingly,wedonotexpress suchanopinion.theresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatare requiredtobereportedundergovernmentauditingstandards. ThisreportisintendedsolelyfortheinformationanduseoftheBoard,management,theCalifornia DepartmentofEducation,theStateController soffice,andfederalawardingagenciesandpassthrough entitiesandisnotintendedtobeandshouldnotbeusedbyanyoneotherthanthesespecifiedparties. SanDiego,California December5,

131 BoardofTrustees OceansideUnifiedSchoolDistrict Oceanside,California REPORTONCOMPLIANCEWITHREQUIREMENTSAPPLICABLETO EACHMAJORPROGRAMANDINTERNALCONTROLOVER COMPLIANCEINACCORDANCEWITHOMBCIRCULARA133 Compliance WehaveauditedthecomplianceofOceansideUnifiedSchoolDistrictwiththe typesofcompliancerequirementsdescribedintheu.s.officeofmanagementand Budget(OMB)CircularA133ComplianceSupplementthatareapplicabletoeachof itsmajorfederalprogramsfortheyearendedjune30,2008.oceansideunified SchoolDistrict smajorfederalprogramsareidentifiedinthesummaryof auditors resultssectionoftheaccompanyingscheduleoffindingsand questionedcosts.compliancewiththerequirementsoflaws,regulations, contractsandgrantsapplicabletoeachofitsmajorfederalprogramsisthe responsibilityofoceansideunifiedschooldistrict smanagement.our responsibilityistoexpressanopiniononoceansideunifiedschooldistrict s compliancebasedonouraudit. Weconductedourauditofcomplianceinaccordancewithauditingstandards generallyacceptedintheunitedstatesofamerica;thestandardsapplicableto financialauditscontainedingovernmentauditingstandards,issuedbythe ComptrollerGeneraloftheUnitedStates;andOMBCircularA133,Auditsof States,LocalGovernments,andNonProfitOrganizations.Thosestandardsand OMBCircularA133requirethatweplanandperformtheaudittoobtain reasonableassuranceaboutwhethernoncompliancewiththetypesof compliancerequirementsreferredtoabovethatcouldhaveadirectandmaterial effectonamajorfederalprogramoccurred.anauditincludesexamining,ona testbasis,evidenceaboutoceansideunifiedschooldistrict scompliancewith thoserequirementsandperformingsuchotherproceduresasweconsidered necessaryinthecircumstances.webelievethatourauditprovidesareasonable basisforouropinion.ourauditdoesnotprovidealegaldeterminationon OceansideUnifiedSchoolDistrictscompliancewiththoserequirements. Inouropinion,OceansideUnifiedSchoolDistrictcomplied,inallmaterial respects,withtherequirementsreferredtoabovethatareapplicabletoeachofits majorfederalprogramsfortheyearendedjune30,

132 InternalControloverCompliance ThemanagementofOceansideUnifiedSchoolDistrictisresponsibleforestablishingandmaintaining effectiveinternalcontrolovercompliancewithrequirementsoflaws,regulations,contractsandgrants applicabletofederalprograms.inplanningandperformingouraudit,weconsideredoceansideunified SchoolDistrict sinternalcontrolovercompliancewithrequirementsthatcouldhaveadirectandmaterial effectonamajorfederalprograminordertodetermineourauditingproceduresforthepurposeof expressingouropiniononcompliance,butnotforthepurposeofexpressinganopiniononthe effectivenessofinternalcontrolovercompliance.accordingly,wedonotexpressanopiniononthe effectivenessofthedistrict sinternalcontrolovercompliance. Acontroldeficiencyinanentity sinternalcontrolovercomplianceexistswhenthedesignoroperationofa controldoesnotallowmanagementoremployees,inthenormalcourseofperformingtheirassigned functions,topreventordetectnoncompliancewithatypeofcompliancerequirementofafederal programonatimelybasis.asignificantdeficiencyisacontroldeficiency,orcombinationofcontrol deficiencies,thatadverselyaffectstheentity sabilitytoadministerafederalprogramsuchthatthereis morethanaremotelikelihoodthatnoncompliancewithatypeofcompliancerequirementofafederal programthatismorethaninconsequentialwillnotbepreventedordetectedbytheentity sinternal control. Amaterialweaknessisasignificantdeficiency,orcombinationofsignificantdeficiencies,thatresultsin morethanaremotelikelihoodthatmaterialnoncompliancewithatypeofcompliancerequirementofa federalprogramwillnotbepreventedordetectedbytheentity sinternalcontrol. Ourconsiderationofinternalcontrolovercompliancewasforthelimitedpurposedescribedinthefirst paragraphofthissectionandwouldnotnecessarilyidentifyalldeficienciesininternalcontrolthatmight besignificantdeficienciesormaterialweaknesses.wedidnotidentifyanydeficienciesininternalcontrol overcompliancethatweconsidertobematerialweaknesses,asdefinedabove. Thisreportisintendedsolelyfortheinformationanduseofmanagement,theBoard,otherswithinthe entity,thecaliforniadepartmentofeducation,thestatecontroller soffice,andfederalawarding agenciesandpassthroughentitiesandisnotintendedtobeandshouldnotbeusedbyanyoneotherthan thesespecifiedparties. SanDiego,California December5,

133 BoardofTrustees OceansideUnifiedSchoolDistrict Oceanside,California AUDITORS REPORTONSTATECOMPLIANCE WehaveauditedthebasicfinancialstatementsoftheOceansideUnifiedSchool District,asofandfortheyearendedJune30,2008,andhaveissuedourreport thereondateddecember5,2008.ourauditwasmadeinaccordancewith auditingstandardsgenerallyacceptedintheunitedstatesofamerica;the standardsapplicabletofinancialauditscontainedingovernmentauditing Standards,issuedbytheComptrollerGeneraloftheUnitedStates;andStandards andproceduresforauditsofcaliforniak12localeducationalagencies200708, publishedbytheeducationauditappealspanel.thosestandardsrequirethat weplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthe financialstatementsarefreeofmaterialmisstatement.anauditincludes examining,onatestbasis,evidencesupportingtheamountsanddisclosuresin thefinancialstatements.anauditalsoincludesassessingtheaccounting principlesusedandsignificantestimatesmadebymanagement,aswellas evaluatingtheoverallfinancialstatementpresentation.webelievethatour auditprovidesareasonablebasisforouropinion. TheDistrictsmanagementisresponsiblefortheDistrictscompliancewithlaws andregulations.inconnectionwiththeauditreferredtoabove,weselectedand testedtransactionsandrecordstodeterminethedistrictscompliancewiththe lawsandregulationsapplicabletothefollowingitems: Description Proceduresin AuditGuide Procedures Performed AttendanceAccounting: AttendanceReporting 8 Yes KindergartenContinuance 3 Yes IndependentStudy 23 Yes ContinuationEducation 10 Yes AdultEducation 9 No(seebelow) RegionalOccupationalCentersandPrograms 6 Notapplicable InstructionalTime: SchoolDistricts 6 Yes CountyOfficesofEducation 3 Notapplicable CommunityDaySchools 9 No(seebelow) MorganHartClassSizeReductionProgram 7 Yes 67

134 Description Proceduresin AuditGuide Procedures Performed InstructionalMaterials: GeneralRequirements 12 Yes K8only 1 Yes Grades912only 1 Yes RatiosofAdministrativeEmployeestoTeachers 1 Yes ClassroomTeacherSalaries 1 Yes EarlyRetirementIncentiveProgram 4 Notapplicable GannLimitCalculation 1 Yes SchoolConstructionFunds: SchoolDistrictBonds 3 Yes StateSchoolFacilitiesFunds 1 Yes ExcessSickLeave 2 Yes NoticeofRighttoElectCalSTRSMembership 1 Yes Proposition20LotteryFunds 2 Yes StateLotteryFunds 2 Yes CaliforniaSchoolAgeFamiliesEducation(CalSAFE)Program 3 Yes SchoolAccountabilityReportCard 3 Yes MathematicsandReadingProfessionalDevelopment 4 Yes ClassSizeReductionProgram: GeneralRequirements 7 Yes OptionOne 3 Yes OptionTwo 4 Notapplicable DistrictswithonlyoneschoolservingK3 4 Notapplicable AfterSchoolEducationandSafetyProgram: GeneralRequirements 4 Notapplicable AfterSchool 4 Notapplicable BeforeSchool 5 Notapplicable CharterSchools: ContemporaneousRecordsofAttendance 1 Notapplicable ModeofInstruction 1 Notapplicable NonclassroomBasedInstruction/IndependentStudy 15 Notapplicable DeterminationofFundingforNonclassroomBasedInstruction 3 Notapplicable AnnualInstructionalMinutes ClassroomBased 3 Notapplicable WedidnotperformtestingforAdultEducationandCommunityDaySchoolbecausetheADAwas underthelevelthatrequirestesting. Basedonouraudit,wefoundthat,fortheitemstested,theOceansideUnifiedSchoolDistrictcomplied withthestatelawsandregulationsreferredtoabove.further,basedonourexamination,foritemsnot tested,nothingcametoourattentiontoindicatethattheoceansideunifiedschooldistricthadnot compliedwiththestatelawsandregulations. ThisreportisintendedsolelyfortheinformationanduseoftheBoard,management,theCalifornia DepartmentofEducation,theStateController soffice,andfederalawardingagenciesandpassthrough entitiesandisnotintendedtobeandshouldnotbeusedbyanyoneotherthanthesespecifiedparties. SanDiego,California December5,

135 FindingsandQuestionedCostsSection

136 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofAuditFindingsandQuestionedCosts YearEndedJune30,2008 SectionISummaryofAuditorsResults FinancialStatements Typeofauditorsreportissued Internalcontroloverfinancialreporting: Materialweakness(es)identified? Significantdeficiency(s)identifiednotconsidered tobematerialweaknesses? Noncompliancematerialtofinancialstatementsnoted? Unqualified No No No FederalAwards Internalcontrolovermajorprograms: Materialweakness(es)identified? No Significantdeficiency(s)identifiednotconsidered tobematerialweaknesses? No Typeofauditorsreportissuedoncompliancefor majorprograms: Unqualified Anyauditfindingsdisclosedthatarerequiredtobereported inaccordancewithcirculara133,section.510(a) No Identificationofmajorprograms: CFDANumbers NameofFederalProgramorCluster NSLPCluster TitleIIILEP TitleII,PartDEETT FederalImpactAid DollarthresholdusedtodistinguishbetweenTypeAand TypeBprograms: $614,537 Auditeequalifiedaslowriskauditee? Yes StateAwards Internalcontroloverstateprograms: Materialweakness(es)identified? Significantdeficiency(s)identifiednotconsidered tobematerialweaknesses? Typeofauditorsreportissuedoncompliancefor stateprograms: No No Unqualified 69

137 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofAuditFindingsandQuestionedCosts YearEndedJune30,2008 SectionII FinancialStatementFindings Thissectionidentifiesthereportableconditions,materialweaknesses,andinstancesofnoncompliance relatedtothefinancialstatementsthatarerequiredtobereportedinaccordancewithgovernment AuditingStandards.PursuanttoAssemblyBill(AB)3627,allauditfindingsmustbeidentifiedasoneor moreofthefollowingcategories: FiveDigitCode AB3627FindingTypes Attendance InventoryofEquipment InternalControl StateCompliance CalSTRS FederalCompliance Miscellaneous ClassroomTeacherSalaries InstructionalMaterials TeacherMisassignments SchoolAccountabilityReportCard Therewerenoauditfindingsrelatedtothefinancialstatementsin

138 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofAuditFindingsandQuestionedCosts YearEndedJune30,2008 SectionIII FederalAwardFindingsandQuestionedCosts ThissectionidentifiestheauditfindingsrequiredtobereportedbyCircularA133,Section.510(a)(e.g., reportableconditions,materialweaknesses,andinstancesofnoncompliance,includingquestionedcosts). Therewerenoauditfindingsandquestionedcostsrelatedtofederalawardsduring

139 OCEANSIDEUNIFIEDSCHOOLDISTRICT ScheduleofAuditFindingsandQuestionedCosts YearEndedJune30,2008 SectionIV StateAwardFindingsandQuestionedCosts Thissectionidentifiestheauditfindingspertainingtononcompliancewithstateprogramrulesand regulations. Therewerenoauditfindingsandquestionedcostsrelatedtostateawardsduring

140 OCEANSIDEUNIFIEDSCHOOLDISTRICT SummaryScheduleofPriorAuditFindings YearEndedJune30,2008 Therewerenoauditfindingsandquestionedcostsduring

141 APPENDIX B PROPOSED FORM OF LEGAL OPINION Appendix - B

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143 APPENDIX B PROPOSED FORM OF LEGAL OPINION March 4, 2009 Board of Education Oceanside Unified School District 2111 Mission Avenue Oceanside, CA OPINION: $49,995, Oceanside Unified School District (San Diego County, California) General Obligation Bonds, Election of 2008, Series A Members of the Board of Education: We have acted as bond counsel to the Oceanside Unified School District (the District ) in connection with the issuance by the Board of Supervisors of the County of San Diego (the Board ) of the Oceanside Unified School District (County of San Diego, California) General Obligation Bonds, Election of 2008, Series A in the aggregate principal amount of $49,995, (the Bonds ), under Chapter 1.5 of Part 10, Division 1, Title 1 of the Education Code of the State of California, commencing with Section of said Code (the Bond Law ), and under a resolution of the Board adopted on October 14, 2008 (the Bond Resolution ). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Board contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The District is duly created and validly existing as a school district with the power to cause the Board to issue the Bonds on its behalf and to perform its obligations under the Bond Resolution and the Bonds. 2. The Bond Resolution has been duly adopted by the Board and constitutes a valid and binding obligation of the District enforceable against the District in accordance with its terms.

144 Board of Education Oceanside Unified School District March 4, 2009 Page 2 3. The Bonds have been duly authorized, executed and delivered by the Board and are valid and binding general obligations of the District, and the Board is obligated and is authorized under the laws of the State of California to cause to be levied a tax, without limit as to rate or amount, upon the taxable property in the District for the payment when due of the principal of and interest on the Bonds. 4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, Jones Hall, A Professional Law Corporation B-2

145 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE Appendix - C

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147 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the Oceanside Unified School District (the District ) in connection with the issuance of $49,995, aggregate principal amount of Oceanside Unified School District (County of San Diego, California) General Obligation Bonds Election of 2008, Series A (the Bonds ). The Bonds are being issued pursuant to a Resolution adopted by the Board of Supervisors of the County on October 14, 2008 (the Bond Resolution ). The District covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms have the following meanings: Annual Report means any Annual Report provided by the District under and as described in Sections 3 and 4. Annual Report Date means the date that is nine months after the end of the District s fiscal year (currently March 31 based on the District s fiscal year end of June 30). Dissemination Agent means the District or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. Implementation Date means July 1, 2009, or any later date set by the Securities and Exchange Commission for implementation of the EMMA Continuing Disclosure Service. Listed Events means any of the events listed in Section 5(a). MSRB means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. Participating Underwriter means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

148 Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to provide, not later than nine months after the end of the District s fiscal year (which currently would be March 31), commencing no later than March 31, 2009 with the report for the Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate; provided, however, that any Annual Report due before the Implementation Date (if any), shall be filed with each nationally recognized municipal securities information repository and state repository designated as such by the Securities and Exchange Commission for purposes of the Rule, and otherwise in accordance with then-applicable procedures prescribed under the Rule. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the District s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District hereunder. (b) If the District does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) With respect to the Annual Report, the Dissemination Agent shall: (i) (ii) determine each year prior to the Annual Report Date the thenapplicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. C - 2

149 (b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, financial information and operating data with respect to the District for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement: (i) (ii) (iii) the average daily attendance in District schools on an aggregate basis for the preceding fiscal year; pension plan contributions made by the District for the preceding fiscal year; aggregate principal amount of short-term borrowings, lease obligations and other long-term borrowings of the District as of the end of the preceding fiscal year; (iv) description of amount of general fund revenues and expenditures which have been budgeted for the current fiscal year, together with audited actual budget figures for the preceding fiscal year; (v) the District s total revenue limit for the preceding fiscal year; (vi) prior fiscal year total secured property tax levy and collections, showing current collections as a percent of the total levy; and (vii) current fiscal year assessed valuation of taxable properties in the District. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB s Internet web site or filed with the Securities and Exchange Commission. (e) The items of subsection 4(b) shall be supplemented, if applicable, by event notices which have been filed under Section 5. Section 5. Reporting of Significant Events. (a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, to each National Repository or to the Municipal Securities Rulemaking Board, and to the State Repository (if any): (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. C - 3

150 (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled bond calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (11) Rating changes. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall, or shall cause the Dissemination Agent (if not the District) to, promptly file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds. provided, however, that any notice of the occurrence of a Listed Event that is filed before the Implementation Date shall be filed with each nationally recognized municipal securities information repository and state repository designated as such by the Securities and Exchange Commission for purposes of the Rule, and otherwise in accordance with thenapplicable procedures prescribed under the Rule. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The District s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. Section 9. Amendment; Waiver. Notwithstanding any other provision hereof, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: C - 4

151 (a) (b) (c) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Bond Resolution for amendments to the Bond Resolution with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended under the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. If the District fails to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Bond C - 5

152 Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: March 4, 2009 OCEANSIDE UNIFIED SCHOOL DISTRICT By: Superintendent C - 6

153 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Oceanside Unified School District Name of Bond Issue: $49,995, aggregate principal amount of Oceanside Unified School District (County of San Diego, California) General Obligation Bonds, Election of 2008, Series A Date of Issuance: March 4, 2009 NOTICE IS HEREBY GIVEN to [(i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository] [the CPO and the Municipal Securities Rulemaking Board] that the District has not provided an Annual Report with respect to the above-named Bonds as required by the District s Bond Resolution authorizing the issuance of the Bonds. The District anticipates that the Annual Report will be filed by. Dated:, 20 OCEANSIDE UNIFIED SCHOOL DISTRICT By Authorized Officer A-1

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155 APPENDIX D EXCERPTS FROM THE SAN DIEGO COUNTY INVESTMENT PORTFOLIO REPORT DECEMBER 31, 2008 Appendix - D

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157 County of San Diego Treasurer Investment Report MONTH ENDING January 31, 2009

158 Table of Contents 3 Summary Portfolio Statistics as of January 31, Investment Inventory with Market Value 17 Purchases/Sales/Maturities 20 Cash Flow Analysis 21 Participant Cash Balances 22 Pooled Money Fund Participants 23 Pooled Money Fund Asset Allocation 24 Pooled Money Fund Assets Credit Quality 25 Investment Policy Compliance Standards DISCLAIMER: The information provided, including all charts, tables, graphs and numerical representations, is provided to readers solely as a general overview of the economic and market conditions which the Treasurer utilizes in making investment decisions. Note: All Investments held during the month of January, 2009 were in compliance with the Investment Policy dated January 1, The projected cash flows indicate sufficient liquidity to meet all scheduled expenditures for the next 6 months. 2

159 Summary Portfolio Statistics County of San Diego Pooled Money Fund as of January 31, 2009 Net Average Percent of Market Accrued Unrealized Yield to Days to Portfolio Book Value Price Interest Market Value Gain/(Loss) Maturity Maturity U S Treasury Notes 5.87% 300,119, % 3,375, ,305,660 $16,185, % 804 FNMA Discount Notes 4.54% 242,168, % 0 244,476,000 $2,307, % 144 Federal Farm Credit Bank Notes 3.69% 194,876, % 1,647, ,752,000 $3,875, % 732 Federal Home Loan Bank Discount Notes 6.13% 329,733, % 0 330,095,285 $361, % 54 Federal Home Loan Bank Notes 14.00% 746,169, % 8,515, ,002,349 $10,832, % 339 Federal Home Loan Mortg. Corp.Disc Notes 9.08% 486,894, % 0 489,026,734 $2,132, % 105 Federal Home Loan Mortg. Corp. Notes 10.94% 582,507, % 8,549, ,212,818 $6,705, % 837 Fannie Mae 12.28% 656,355, % 8,809, ,945,865 $5,590, % 329 Corporate Medium Term Notes 3.30% 178,602, % 983, ,323,750 ($1,278,986) 1.92% 309 Asset Backed Notes 0.73% 38,952, % 288,386 39,104,500 $151, % 107 Bond Fund 0.66% 35,000, % 81,238 34,719,720 ($280,280) 2.44% 1 Money Market Funds 5.23% 281,660, % 110, ,660,000 $0 0.39% 1 Repurchase Agreements 4.69% 252,517, % 5, ,517,763 $0 0.36% 2 Negotiable Certificates of Deposit 8.35% 450,000, % 59, ,955,000 ($45,570) 0.25% 14 Commercial Paper 8.83% 475,566, % 0 475,560,000 ($6,697) 0.29% 8 Collateralized/FDIC Certificates of Deposit 1.68% 90,100, % $112,332 90,100,000 $0 2.06% 152 Totals for January % $5,341,226, % $32,538,999 $5,387,757,444 $46,531, % 286 Totals for December % $5,666,574, % $33,253,153 $5,726,093,070 $59,518, % 332 Change From Prior Month ($325,348,329) (0.17%) ($714,154) ($338,335,626) ($12,987,297) (0.28%) (46) Portfolio Effective Duration years Fiscal Year January To Date Calendar Year Return Annualized Return Annualized To Date Return Annualized Book Value 0.194% 2.282% 1.746% 2.964% 0.194% 2.282% Market Value 0.170% 2.000% 1.522% 2.584% 0.170% 2.000% 3

160 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS US TREASURY N B ,000, ,080, , , /29/07 02/28/ ,003, US TREASURY N B ,000, ,112, , , /29/07 04/15/ ,945, US TREASURY N B ,000, ,266, , , /29/07 06/15/ ,962, US TREASURY N B ,000, ,470, , , /29/07 08/15/ ,034, US TREASURY N B ,000, ,514, , , /04/07 12/15/ ,915, US TREASURY N B ,000, ,820, , , /04/07 04/15/ ,991, US TREASURY N B ,000, ,034, , , /15/08 09/15/ ,582, US TREASURY N B ,000, ,069, , ,218, /16/07 11/30/ ,851, US TREASURY N B ,000, ,360, , ,505, /16/07 02/29/ ,855, US TREASURY N B ,000, ,502, , ,637, /08/07 05/31/ ,864, US TREASURY N B ,000, ,609, , ,723, /16/07 05/31/ ,885, US TREASURY N B ,000, ,552, , , /12/07 08/31/ ,021, US TREASURY N B ,005, ,753, , ,679, /12/07 08/31/ ,073, US TREASURY N B ,000, ,165, , ,963, /26/07 10/31/ ,201, US TREASURY N B ,000, ,345, , ,253, /15/08 01/31/ ,091, US TREASURY N B ,000, ,652, , ,812, /30/08 04/30/ ,839, TREASURY NOTES SUBTOTAL 5.87%(M) ,005, ,305, ,375, ,185, ,119, FNMA DISCOUNT NOTES ,000, ,997, , /06/08 02/23/ ,960,

161 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FNMA DISCOUNT NOTES ,000, ,996, , /06/08 03/06/ ,960, FNMA DISCOUNT NOTES ,000, ,960, , /06/08 05/01/ ,721, FNMA DISCOUNT NOTES ,000, ,960, , /17/08 06/05/ ,741, FNMA DISCOUNT NOTES ,000, ,945, , /17/08 07/10/ ,663, FNMA DISCOUNT NOTES ,000, ,815, , /15/08 09/08/ ,087, FNMA DISCOUNT NOTES ,000, ,902, , /15/08 09/18/ ,522, FNMA DISCOUNT NOTES ,000, ,900, , /15/08 09/24/ ,510, FNMA DISCOUNT NOTES SUBTOTAL 4.54%(M) ,000, ,476, ,307, ,168, FHLB DISCOUNT NOTES ,000, ,000, , /01/08 02/06/ ,978, FHLB DISCOUNT NOTES ,000, ,997, /24/08 02/17/ ,997, FHLB DISCOUNT NOTES ,000, ,994, , /01/08 02/20/ ,901, FHLB DISCOUNT NOTES ,000, ,997, , /10/08 02/24/ ,955, FHLB DISCOUNT NOTES ,159, ,154, , /21/08 02/24/ ,137, FHLB DISCOUNT NOTES ,869, ,864, , /10/08 03/16/ ,799, FHLB DISCOUNT NOTES ,250, ,237, , /06/08 04/17/ ,113, FHLB DISCOUNT NOTES ,000, ,850, , /30/09 07/02/ ,849, FHLB DISCOUNT NOTES SUBTOTAL 6.13%(M) ,278, ,095, , ,733,

162 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FFCB ,000, ,132, , , /14/08 05/14/ ,000, FFCB ,000, ,300, , , /09/07 10/23/ ,012, FFCB ,000, ,202, , , /11/08 06/11/ ,000, FFCB ,000, ,288, , , /10/07 07/07/ ,789, FFCB ,000, ,522, , , /10/07 08/06/ ,995, FFCB ,000, ,672, , , /10/07 02/01/ ,021, FFCB ,000, ,325, , , /22/08 10/28/ ,122, FFCB ,000, ,655, , , /18/08 11/18/ ,967, FFCB ,000, ,655, , , /18/08 11/18/ ,967, FFCB SUBTOTAL 3.69%(M) ,000, ,752, ,647, ,875, ,876, FHLB ,150, ,150, , /07/08 02/02/ ,150, FHLB ,000, ,147, , , /20/08 04/20/ ,000, FHLB ,000, ,254, , , /09/08 05/05/ ,042, FHLB ,000, ,295, , , /12/08 05/12/ ,000, FHLB ,000, ,072, , , /09/08 06/03/ ,014, FHLB ,000, ,044, , , /16/08 06/16/ ,000, FHLB ,980, ,004, , , /10/08 06/30/ ,979,

163 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FHLB ,500, ,837, , , /10/08 06/30/ ,804, FHLB ,000, ,220, , , /17/08 07/17/ ,000, FHLB ,185, ,846, , , /09/08 07/17/ ,624, FHLB ,060, ,383, ,454, , /05/08 08/05/ ,181, FHLB ,000, ,266, , , /09/07 09/11/ ,023, FHLB ,000, ,330, ,020, , /03/08 09/11/ ,738, FHLB ,000, ,610, , , /05/08 09/23/ ,443, FHLB ,000, ,632, , , /05/08 10/09/ ,343, FHLB ,000, ,125, , , /10/08 11/19/ ,891, FHLB ,275, ,926, , , /11/07 02/12/ ,518, FHLB ,000, ,422, , , /11/07 03/12/ ,007, FHLB ,000, ,441, , , /12/07 05/26/ ,970, FHLB ,000, ,428, , , /12/07 06/09/ ,949, FHLB ,000, ,581, , , /10/07 09/29/ ,024, FHLB ,000, ,290, , , /11/07 09/29/ ,015, FHLB ,500, ,851, , , /28/08 10/28/ ,500, FHLB ,000, ,891, , , /10/07 11/15/ ,278, FHLB ,000, ,597, , , /10/07 12/10/ ,985,

164 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FHLB ,000, ,631, , , /10/07 03/11/ ,006, FHLB ,000, ,950, , , /12/07 08/15/ ,184, FHLB ,520, ,079, , , /14/07 04/30/ ,493, FHLB ,000, ,647, , , /29/08 01/29/ ,000, FHLB ,000, ,047, , ,051, /24/08 10/18/ ,996, FHLB SUBTOTAL 14.00%(M) ,170, ,002, ,515, ,833, ,169, FNMA ,715, ,722, , , /04/08 02/06/ ,717, FNMA ,285, ,292, , , /04/08 02/06/ ,287, FNMA ,000, ,315, , , /12/08 05/12/ ,000, FNMA ,000, ,140, , , /10/08 06/10/ ,000, FNMA ,265, ,069, , , /09/08 06/15/ ,832, FNMA ,000, ,340, ,843, , /07/08 08/04/ ,660, FNMA ,970, ,829, , , /31/08 08/15/ ,449, FNMA ,000, ,759, , , /05/08 08/15/ ,644, FNMA ,000, ,765, ,251, , /10/08 09/15/ ,229, FNMA ,000, ,882, , , /31/08 09/15/ ,605, FNMA ,000, ,110, , ,110, /28/08 04/28/ ,000,

165 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FNMA ,000, ,555, , , /28/08 04/28/ ,000, FNMA ,000, ,190, , , /14/08 01/14/ ,932, FNMA ,000, ,015, , , /08/08 02/08/ ,000, FNMA ,000, ,015, , , /17/08 02/08/ ,000, FNMA ,000, ,015, , , /14/08 02/14/ ,996, FNMA ,000, ,930, , , /21/08 10/15/ ,998, FNMA SUBTOTAL 12.28%(M) ,235, ,945, ,809, ,590, ,355, FHLMC ,000, ,605, , , /30/08 06/30/ ,000, FHLMC ,637, ,850, , , /09/08 07/15/ ,755, FHLMC ,000, ,845, , , /03/08 07/15/ ,386, FHLMC ,494, ,110, , , /05/08 07/15/ ,827, FHLMC ,000, ,907, , , /31/08 09/15/ ,609, FHLMC ,425, ,912, , , /31/08 09/15/ ,744, FHLMC ,000, ,294, , , /09/07 11/03/ ,995, FHLMC ,000, ,735, , , /10/08 11/03/ ,383, FHLMC ,000, ,229, , , /10/07 10/18/ ,937, FHLMC ,000, ,288, , , /10/07 10/18/ ,004,

166 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS FHLMC ,200, ,798, , , /01/08 12/16/ ,409, FHLMC ,000, ,007, , , /06/08 02/06/ ,996, FHLMC ,000, ,032, , , /25/08 02/25/ ,000, FHLMC ,000, ,096, , ,034, /12/07 04/18/ ,061, FHLMC ,000, ,925, , , /12/07 06/15/ ,224, FHLMC ,000, ,548, , , /15/07 10/15/ ,987, FHLMC ,900, ,931, , , /05/07 11/05/ ,870, FHLMC ,000, ,028, ,726, , /05/07 11/05/ ,968, FHLMC ,000, ,015, ,521, , /04/08 02/04/ ,909, FHLMC ,985, ,053, , , /24/08 06/12/ ,436, FHLMC SUBTOTAL 10.94%(M) ,641, ,212, ,549, ,705, ,507, MTN GEN ELEC CAP CRP ,000, ,925, , , /14/06 12/15/ ,692, MTN TOYOTA MTR CRED ,500, ,502, , /19/08 03/15/ ,548, , MTN GEN ELEC CAP CRP ,000, ,009, , /19/08 09/13/ ,094, , MTN GEN ELEC CAP CRP ,000, ,040, , /18/08 12/01/ ,409, , MTN GEN ELEC CAP CRP ,000, ,238, , /19/08 02/15/ ,771, , MTN GEN ELEC CAP CRP ,000, ,609, , /19/08 03/03/ ,086, ,

167 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS MEDIUM TERM NOTE SUBTOTAL 1.44%(M) ,500, ,323, , , Semi-Annual ,602, ,511, MTN BANK OF AMERICA ,000, ,000, , /12/09 02/11/ ,000, MTN BANK OF AMERICA ,000, ,000, , /14/09 02/13/ ,000, MEDIUM TERM NOTE SUBTOTAL 1.86%(M) ,000, ,000, , ACT/ ,000, PTS CCCIT 2006-A5 A ,000, ,097, , , /23/06 05/20/ ,997, PTS SOFT BULLET SEMI SUBTOTAL.47%(M) ,000, ,097, , , ,997, PTS SOFT BULLET AMXCA ,000, ,007, , , /11/06 05/15/ ,955, PTS SOFT BULLET MONTH SUBTOTAL.26%(M) ,000, ,007, , , ,955, FHLMC DISCOUNT NT ,000, ,000, /24/08 02/04/ ,999, FHLMC DISCOUNT NT ,000, ,000, , /24/08 02/09/ ,998, FHLMC DISCOUNT NT ,000, ,995, , /03/08 02/24/ ,925, FHLMC DISCOUNT NT ,131, ,129, , /10/08 03/09/ ,118, FHLMC DISCOUNT NT ,000, ,995, , /03/08 03/09/ ,933, FHLMC DISCOUNT NT ,000, ,990, , /03/08 03/12/ ,856, FHLMC DISCOUNT NT ,000, ,973, ,

168 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS 11/04/08 06/23/ ,878, FHLMC DISCOUNT NT ,000, ,952, , /05/08 06/26/ ,793, FHLMC DISCOUNT NT ,600, ,505, , /05/08 06/29/ ,392, FHLMC DISCOUNT NT ,000, ,945, , /31/08 07/10/ ,723, FHLMC DISCOUNT NT ,000, ,850, , /05/08 08/10/ ,683, FHLMC DISCOUNT NT ,000, ,845, , /31/08 08/17/ ,247, FHLMC DISCOUNT NT ,000, ,845, , /03/08 08/17/ ,343, FHLMC DISC NOTE SUBTOTAL 9.08%(M) ,731, ,026, ,132, ,894, RP MS ,000, ,000, , /30/09 02/02/ ,000, RP DB ,000, ,000, , /30/09 02/02/ ,000, WF SWEEP ACCOUNT ,517, ,517, /30/09 02/02/ ,517, REPURCHASE AGREEMENT SUBTOTAL 4.69%(M) ,517, ,517, , ,517, NCD UNION BANK OF CALIF ,000, ,000, , /31/08 02/02/ ,000, YCD ABN AMRO BK CHIC ,000, ,000, , /02/09 02/02/ ,000, NCD BANK OF THE WEST ,000, ,995, , /12/09 02/12/ ,000, , YCD BANK OF NOVA SC HOU ,000, ,995, , /12/09 02/12/ ,000, , NCD UNION BANK CALIF ,000, ,995, ,

169 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS 01/16/09 02/18/ ,000, , NCD BANK OF THE WEST ,000, ,995, , /16/09 02/19/ ,000, , YCD BANK NOVA SC HOU ,000, ,990, , /29/09 03/02/ ,000, , NCD BANK OF THE WEST ,000, ,985, , /29/09 03/02/ ,000, , NEGOTIABLE C/DS SUBTOTAL 8.35%(M) ,000, ,955, , ,000, , CP BNP PARIBAS FIN ,000, ,000, /30/08 02/02/ ,999, CP JPMORGAN CHASE ,000, ,000, , /30/09 02/02/ ,998, CP SOC GEN N AMER ,605, ,605, /30/09 02/02/ ,604, CP BNP PARIBAS FIN ,000, ,995, /30/08 02/03/ ,999, , CP SOC GEN N AMER ,000, ,960, /27/09 03/04/ ,964, , COMMERCIAL PAPER SUBTOTAL 8.83%(M) ,605, ,560, , ,566, , CALTRUST ,000, ,719, , /02/06 02/01/ ,000, , BOND FUND SUBTOTAL.66%(M) ,000, ,719, , ,000, , MM BLACKROCK TREASURY FUND ,360, ,360, , /24/07 02/01/ ,360, MM MORGAN STANLEY INST LQDTY GO ,300, ,300, , /22/08 02/01/ ,300, MONEY MKT FUNDS SUBTOTAL 5.23%(M) ,660, ,660, , ,660,

170 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS CD BANK OF THE WEST , , /06/08 05/06/ , CD SAN DIEGO PRIVATE BANK , , /10/08 05/08/ , CD HOME BANK OF CALIFORNIA , , /13/08 05/13/ , CD METRO UNITED BANK , , /26/08 08/26/ , CD SAN DIEGO NATIONAL BANK , , /26/08 09/25/ , TIME DEPOSIT SUBTOTAL.01%(M) , , , (360 DAY/BASIS) , CD PACIFIC WESTERN BANK , , /22/08 02/20/ , CDARS NEIGHBORHOOD NATIONAL BAN ,000, ,000, , /04/08 03/04/ ,000, CDARS PACIFIC WESTERN BANK ,000, ,000, , /11/08 03/10/ ,000, CDARS FIRST PACIFIC BANK OF CA ,000, ,000, , /18/08 03/19/ ,000, CD PACIFIC TRUST BANK , , /20/08 03/20/ , CD SECURITY BUSINESS BK OF SD , , /06/08 04/03/ , CD IMPERIAL CAPITAL , , /24/08 04/22/ , CD DISCOVERY BANK , , /02/08 05/01/ , CD CALIFORNIA BANK & TRUST , , /09/08 05/08/ , CD FIRST CENTENNIAL BANK , , /13/08 05/13/ , CD COMERICA BANK , , /16/08 05/15/ ,

171 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS CD FIRST PACIFIC BANK OF CA , , /20/08 05/19/ , CD REGENTS BANK , , /05/08 06/05/ , CDARS REGENTS BANK ,813, ,813, , /11/08 06/11/ ,813, CD NEIGHBORHOOD NATIONAL BANK , , /29/08 07/28/ , CD TORREY PINES BANK , , /12/08 09/11/ , CDARS METRO UNITED BANK ,000, ,000, , /25/08 09/26/ ,000, CDARS CORONADO FIRST BANK ,500, ,500, , /11/08 12/10/ ,500, CD CORONADO FIRST BANK , , /12/08 12/12/ , TIME DEPOSIT SUBTOTAL.46%(M) ,604, ,604, , (365 DAY/BASIS) ,604, COL CD SD NATL BANK ,000, ,000, , /29/09 07/28/ ,000, COL CD BANK OF THE WEST ,000, ,000, , /30/09 07/29/ ,000, COLL CD COMERICA BANK ,000, ,000, /30/09 07/31/ ,000, COLLATERIZED CD SUBTOTAL.65%(M) ,000, ,000, , (360 DAY/BASIS) ,000, COL CD TORREY PINES BANK ,000, ,000, , /22/08 02/19/ ,000, COLL CD CA BK & TRUST ,000, ,000, , /30/08 05/29/ ,000, COLL CD CA BK & TRUST ,000, ,000, , /20/08 11/20/ ,000,

172 Investment Inventory with Market Value DESCRIPTION PERCENT OF CPN RATE PAR/SHARES MARKET VALUE CURR ACCR INT UNREALIZED GAIN PURCHASE MATURITY DATE PORTFOLIO YTM TR BOOK MARKET PRICE PRICE SOURCE UNREALIZED LOSS COLLATERIZED CD SUBTOTAL.56%(M) ,000, ,000, , (365 DAY/BASIS) ,000, GRAND TOTAL ,333,442, ,387,757, ,538, ,379, ,341,226, ,847, Note: Market Value source is Bank of New York Mellon 16

173 Purchases/Sales/Maturities INV # DESCRIPTION COUPON BOOK VALUE COMMENTS MATURITY TRADE YIELD MATURITY/CALL PURCHASE MAT/CALL DATE DATE YCD ABN AMRO BK CHIC ,000, PURC 2/2/ /31/ MM MORGAN STANLEY INST 0.41 (94,000,000.00) PSAL 2/1/2009 1/2/ MM MORGAN STANLEY INST ,400, PURC 1/2/2009 1/2/ FNMA DISCOUNT NOTES 2.71 (75,000,000.00) MAT 1/5/2009 1/5/ CP DRESDNER US FIN ,999, PURC 1/6/2009 1/5/ MM MORGAN STANLEY INST 0.41 (12,000,000.00) PSAL 1/5/2009 1/5/ CP SOC GEN N AMER 0.64 (25,000,000.00) MAT 1/6/2009 1/6/ CP DRESDNER US FIN 0.07 (75,000,000.00) MAT 1/6/2009 1/6/ CP RABOBANK USA FIN ,999, PURC 1/7/2009 1/6/ MM MORGAN STANLEY INST ,700, PURC 1/6/2009 1/6/ CP RABOBANK USA FIN 0.04 (100,000,000.00) MAT 1/7/2009 1/7/ CP DRESDNER US FIN ,999, PURC 1/8/2009 1/7/ MM MORGAN STANLEY INST , PURC 1/7/2009 1/7/ CP DRESDNER US FIN 0.07 (110,000,000.00) MAT 1/8/2009 1/8/ CP DEUTSCHE BK FIN ,000, ,999, PURC 1/9/2009 1/8/ MM MORGAN STANLEY INST ,200, PURC 1/8/2009 1/8/ FNMA DISCOUNT NOTES 2.65 (50,000,000.00) MAT 1/9/2009 1/9/ CP BNP PARIBAS FIN 1.24 (50,000,000.00) MAT 1/9/2009 1/9/ CP DEUTSCHE BK FIN 0.05 (110,000,000.00) MAT 1/9/2009 1/9/ CP DRESDNER US FIN ,999, PURC 1/12/2009 1/9/ MM MORGAN STANLEY INST 0.41 (11,500,000.00) PSAL 1/9/2009 1/9/ MTN BANK OF AMERICA ,000, PURC 2/11/2009 1/12/ NCD BANK OF THE WEST ,000, PURC 2/12/2009 1/12/ YCD BANK OF NOVA SC HO ,000, PURC 2/12/2009 1/12/ CP DRESDNER US FIN 0.07 (150,000,000.00) MAT 1/12/2009 1/12/ MM MORGAN STANLEY INST 0.41 (11,100,000.00) PSAL 1/12/2009 1/12/ CP DRESDNER US FIN ,999, PURC 1/14/2009 1/13/ MM BLACKROCK TREASURY 0.20 (2,000,000.00) PSAL 2/1/2009 1/13/ FHLB 3.25 (50,000,000.00) MAT 1/14/2009 1/14/ FHLMC 3.00 (50,975,000.00) CALL 4/14/2010 1/14/ MTN BANK OF AMERICA ,000, PURC 2/13/2009 1/14/ NCD UNION BANK CALIF 1.77 (50,000,000.00) MAT 1/14/2009 1/14/ CP SOC GEN N AMER 0.65 (50,000,000.00) MAT 1/14/2009 1/14/ CP DRESDNER US FIN 0.06 (25,000,000.00) MAT 1/14/2009 1/14/ MM MORGAN STANLEY INST 0.41 (28,000,000.00) PSAL 2/1/2009 1/14/ FNMA DISCOUNT NOTES 2.66 (50,000,000.00) MAT 1/15/2009 1/15/

174 Purchases/Sales/Maturities INV # DESCRIPTION COUPON BOOK VALUE COMMENTS MATURITY TRADE YIELD MATURITY/CALL PURCHASE MAT/CALL DATE DATE CP DRESDNER US FIN ,999, PURC 1/16/2009 1/15/ MM MORGAN STANLEY INST ,600, PURC 1/15/2009 1/15/ NCD UNION BANK CALIF ,000, PURC 2/18/2009 1/16/ NCD BANK OF THE WEST ,000, PURC 2/19/2009 1/16/ CP DRESDNER US FIN 0.16 (50,000,000.00) MAT 1/16/2009 1/16/ MM RESERVE US GOV 2.53 (95,710,000.00) PSAL 2/1/2009 1/16/ MM MORGAN STANLEY INST ,800, PURC 1/16/2009 1/16/ FNMA DISCOUNT NOTES 2.25 (35,000,000.00) MAT 1/20/2009 1/20/ FHLB DISCOUNT NOTES 0.55 (50,000,000.00) MAT 1/20/2009 1/20/ FHLB 3.50 (25,000,000.00) MAT 1/20/2009 1/20/ CP RABOBANK USA FIN ,999, PURC 1/21/2009 1/20/ MM MORGAN STANLEY INST ,200, PURC 1/20/2009 1/20/ CP RABOBANK USA FIN 0.12 (100,000,000.00) MAT 1/21/2009 1/21/ CP DRESDNER US FIN ,999, PURC 1/22/2009 1/21/ CP JP MORGAN CHASE ,999, PURC 1/22/2009 1/21/ MM MORGAN STANLEY INST ,300, PURC 1/21/2009 1/21/ FHLB DISCOUNT NOTES 0.55 (50,000,000.00) MAT 1/22/2009 1/22/ CP SOC GEN N AMER 0.37 (75,000,000.00) MAT 1/22/2009 1/22/ CP DRESDNER US FIN 0.18 (40,000,000.00) MAT 1/22/2009 1/22/ CP JP MORGAN CHASE 0.18 (40,000,000.00) MAT 1/22/2009 1/22/ CP RABOBANK USA FIN ,999, PURC 1/23/2009 1/22/ MM MORGAN STANLEY INST ,800, PURC 1/22/2009 1/22/ FNMA DISCOUNT NOTES 2.70 (50,000,000.00) MAT 1/23/2009 1/23/ CP RABOBANK USA FIN 0.18 (195,000,000.00) MAT 1/23/2009 1/23/ CP JP MORGAN CHASE ,999, PURC 1/26/2009 1/23/ MM MORGAN STANLEY INST 0.41 (2,700,000.00) PSAL 1/23/2009 1/23/ CP JP MORGAN CHASE 0.18 (50,000,000.00) MAT 1/26/2009 1/26/ CP BANK OF AMER CRP ,999, PURC 1/27/2009 1/26/ MM MORGAN STANLEY INST 0.41 (5,600,000.00) PSAL 1/26/2009 1/26/ CP SOC GEN N AMER 0.36 (100,000,000.00) MAT 1/27/2009 1/27/ CP BANK OF AMER CRP 0.16 (30,000,000.00) MAT 1/27/2009 1/27/ CP BANK OF AMER CRP ,999, PURC 1/28/2009 1/27/ CP SOC GEN N AMER ,959, PURC 3/4/2009 1/27/ MM MORGAN STANLEY INST ,400, PURC 1/27/2009 1/27/ FHLB 4.20 (50,000,000.00) CALL 1/28/2013 1/28/ FHLB 4.20 (100,000,000.00) CALL 1/28/2013 1/28/

175 Purchases/Sales/Maturities INV # DESCRIPTION COUPON BOOK VALUE COMMENTS MATURITY TRADE YIELD MATURITY/CALL PURCHASE MAT/CALL DATE DATE CP BANK OF AMER CRP 0.17 (140,000,000.00) MAT 1/28/2009 1/28/ CP DEXIA DEL LLC ,998, PURC 1/29/2009 1/28/ CP UBS FINANCE DE ,999, PURC 1/29/2009 1/28/ CP SOC GEN N AMER ,999, PURC 1/29/2009 1/28/ MM MORGAN STANLEY INST ,900, PURC 1/28/2009 1/28/ YCD BANK NOVA SC HOU ,000, PURC 3/2/2009 1/29/ NCD BANK OF THE WEST ,000, PURC 3/2/2009 1/29/ CP DEXIA DEL LLC 0.19 (190,000,000.00) MAT 1/29/2009 1/29/ CP UBS FINANCE DE 0.12 (150,000,000.00) MAT 1/29/2009 1/29/ CP SOC GEN N AMER 0.13 (150,000,000.00) MAT 1/29/2009 1/29/ CP JP MORGAN CHASE ,998, PURC 1/30/2009 1/29/ CP RABOBANK USA FIN ,999, PURC 1/30/2009 1/29/ MM MORGAN STANLEY INST ,400, PURC 1/29/2009 1/29/ FHLB DISCOUNT NOTES ,847, PURC 7/2/2009 1/30/ NCD UNION BANK CALIF 1.77 (50,000,000.00) MAT 1/30/2009 1/30/ CP JP MORGAN CHASE 0.25 (250,000,000.00) MAT 1/30/2009 1/30/ CP RABOBANK USA FIN 0.12 (170,000,000.00) MAT 1/30/2009 1/30/ CP JPMORGAN CHASE ,994, PURC 2/2/2009 1/30/ CP SOC GEN N AMER ,604, PURC 2/2/2009 1/30/ MM BLACKROCK TREASURY 0.20 (12,500,000.00) PSAL 1/30/2009 1/30/ MM MORGAN STANLEY INST 0.41 (60,000,000.00) PSAL 1/30/2009 1/30/ US TREASURY N B 4.88 (15,000,000.00) MAT 1/31/2009 1/31/2009 GRAND TOTAL (3,401,085,000.00) 3,183,997,

176 Cash Flow Analysis San Diego Pooled Money Fund as of January 31, 2009 ($000) Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Beginning Pool Book Balance 5,666,574 5,341,226 5,002,683 4,851,586 5,668,121 4,896,376 4,269,190 MAIN CASH FLOW ITEMS INFLOWS: Reverse Repos Interest Income On Pool 12,955 9,263 6,723 6,510 10,055 5,075 6,625 Taxes Collected 120, , ,000 1,473,000 61, ,006 70,400 School Deposits 405, , , , , , ,000 County Deposits 348, , , , , , ,746 Retirement Voluntaries Maturities/Sales Outside Pool , , ,973 2,038, , ,271 1,266,771 OUTFLOWS: Schools 469, , , , , , ,900 County 232, , , , , , ,000 Retirement 7,633 7,000 6,680 6,500 7,000 10,053 8,373 Voluntaries 7,073 5,500 4,850 8,000 5,000 7,500 12,593 Tax Apportionment 413,039 32,900 41, , ,000 28,844 20,434 Reverse Repos Purchases/ Purchases Outside of Pool 22, , ,000 10,000 1,152, , ,070 1,221,475 1,332,250 1,197,457 1,267,300 TOTAL (264,409) (338,543) (151,097) 816,535 (771,745) (627,186) (529) PROJECTED/ACTUAL MONTH END POOL BALANCE 5,341,226 5,002,683 4,851,586 5,668,121 4,896,376 4,269,190 4,268,661 LIQUIDITY PROJECTIONS INCREASE / DECREASE DUE TO INVESTMENT ACTIVITY Maturities 820, ,100 44, , , ,414 Sales/Calls Investments Purchased 55,000 25,000 20,000 49,000 20,000 45, , ,100 64, , , ,512 Net Main Cash Flow (see above) (264,409) (338,543) (151,097) 816,535 (771,745) (627,186) (529) PROJECTED/ACTUAL MONTH END LIQUIDITY 569,200 1,106,062 1,600,065 2,480,850 2,035,705 1,800,864 2,229,847 Note: The above is not meant to be a complete Cash Flow Statement. The data represents a subset of the main cash flow items and does not include accrued interest or other adjustment items. 20

177 Participant Cash Balances San Diego Pooled Money Fund as of January 31, 2009 ($000) PARTICIPANT 11/30/08 12/31/08 01/31/09 JAN% PARTICIPANT 11/30/08 12/31/08 01/31/09 JAN% FMV FMV FMV FMV FMV FMV COUNTY 883,022 1,075, , % MTS % COUNTY - SPECIAL TRUST FUNDS 847,875 1,266,299 1,310, % Majestic Pines CSD % Mission Res Consr % NON-COUNTY INVESTMENT FUNDS 220, , , % North County Cemetery Dist 1,241 1,241 1, % SCHOOLS - (K THRU 12) 2,076,624 2,526,074 2,728, % North County Cemetry Perpetual 977 1,092 1, % North County Cemetery 1,043 1,169 1, % COMMUNITY COLLEGES North County Dispatch 2,104 1,880 1, % San Diego 170, , , % North County Fire 2,178 3,399 3, % Grossmont 106, , , % Otay Water District Inv 10,451 10,463 10, % Mira Costa 12,292 32,354 36, % Palomar Res Consr % Palomar 140, , , % Pine Valley FPD % Southwestern 36,722 41,694 42, % Pomerado Cem Perpetual 1,473 1,479 1, % Total For Community Colleges 467, , , % Pomerado Cemetery Dist 861 1,023 1, % Ramona Cemetery Dist % RETIREMENT 3,055 3, % Ramona Cemtry Perpetual % Rancho Santa Fe FPD 7,251 9,855 10, % SANCAL 19,631 19,653 19, % San Diego Rural Fire % San Dieguito River % MTDB % San Marcos FPD % SANDAG 19,186 2,102 2, % San Miguel FPD 3,338 2,845 2, % San Ysidro Sanitation % CITIES Santa Fe Irrigation District 4,206 4,866 4, % Encinitas % SDC Regional Airport Authority 25,138 25,166 25, % So County OPS Ctr % INDEPENDENT AGENCIES Spring Valley/Casa de Oro (Misc Dep TF) 1,409 1,411 1, % Alpine FPD 271 1,139 1, % USLR Rancho Corrido Arroyo Toad % Bonita Sunnyside FPD 4,012 4,894 4, % Vallecitos Water Dist Inv 1,581 1,582 1, % Borrego Springs FPD % Valley Center FPD 3,675 3,860 4, % Deer Springs FPD 4,560 4,358 5, % Valley Cntr Cemetery % East County FPD , % Valley Ctr Cem Perpetual % Fallbrook Public Utl % Vista FPD % PASIS (Public Agency Self Insurance Sys) % Total for Independent Agencies 126, , , % Julian-Cuyamaca FPD % Lake Cuyamaca Rec & Park % Lakeside Fire 3,090 5,090 5, % Leucadia Water District % Lower Sweetwater FPD % Pooled Money Fund Total 4,622,325 5,726,093 5,387, % 21

178 Pooled Money Fund Participants San Diego Pooled Money Fund as of January 31, 2009 Schools 50.64% Voluntary Depositors 2.23% Non County Funds 6.05% County Funds 31.43% Community Colleges 9.65 % County Funds Non County Funds Voluntary Depositors Schools Community Colleges 22

179 Pooled Money Fund - Asset Allocation San Diego Pooled Money Fund as of January 31, 2009 Federal Agency 60.66% Treasury Notes 5.87% Money Market 5.23% Bond Fund 0.66% Repurchase Agreement 4.69% Negotiable CD's 8.35% Asset Backed Notes 0.73% Medium Term Notes 3.30% Commercial Paper 8.83% Time Deposits 1.68% Commercial Paper Medium Term Notes Negotiable CD's Asset Backed Notes Repurchase Agreement Bond Fund Money Market Treasury Notes Federal Agency Time Deposits 23

180 Pooled Money Fund Assets - Credit Quality San Diego Pooled Money Fund as of January 31, 2009 A % A % AAA 55.41% AA 0.66% AAA AA A-1+ A-1 24

181 Investment Policy Compliance Standards Category Standard Comment Treasury Issues No Limit; 5% per issue Complies - 5.9% Agency Issues 5% per issue, 25% per issuer Complies % Local Agency Obligations 5% per issue, 10% per issuer; 15% max.; SP-1/A or MIG1/A or F1/A minimum rating Complies - 0.0% Banker s Acceptances 2.5% per issue, 5% per issuer; 40% max.; A-1 or P-1 or F1 minimum rating Complies - 0.0% Commercial Paper 2.5% per issue>5 days; 10% per issue <5 days; 5% per issuer>5 days; 10% per issuer <5 days;40% max.; A- Complies - 8.8% 1 or P-1 or F1 minimum rating Medium Term Notes 2.5% per issue, 5% per issuer; 30% max.; A-1/A or P-1/A or F1/ A minimum rating Complies - 3.3% Negotiable Certificates of Deposit 2.5% per issue, 5% per issuer; 30% max.; A-1/A or P-1/A or F1/ A minimum rating Complies - 8.3% Repurchase Agreements 1-year maximum maturity; 10% per issue>5 days; 15% per issue <5 days; 40% maximum Complies - 4.7% Reverse Repurchase Agreements 92-day maximum maturity; 5% per issue; 10% per issuer; 20% maximum combined with Securities Lending N/A Collateralized Certificates of Deposit 1-year maximum maturity;10% max.; 110% collateral required Complies - 1.7% Covered Call Option/ Put Option 90-day maximum maturity;10% maximum N/A Money Market Mutual Funds 10% per fund; 15% maximum; AAAf, or Aaaf, or AAAf minimum rating Complies - 5.8% Local Agency Investment Fund - L.A.I.F. 10% maximum; or $40 million program limitation Complies - 0.0% Investment Trust of California - Cal Trust 2.5% maximum Complies Pass-Through Securities Non-mortgaged backed; 2.5% per issue, 5% per issuer; 20% max.; A-rated issuer; A-1/AA or P-1/Aa or F1/AA Complies - 0.7% minimum issue rating Maximum maturity 5 years Complies Illiquidity Limitations 20% maximum for combined categories for Local Agency Obligations and Collateralized CDs Complies Maximum Issuer Exposure 10% per issuer combined (5%per any asset category, exclusive of Treasury, Agency, and Repurchase Agreements) Complies Maturity Policy - Portfolio Structure minimum 25% =< 90 days, and minimum 25% between 91days and 365 days; maximum 50% between 1 year Complies and 5 years; maximum 1.5 years effective duration for portfolio Prohibited Securities Inverse floaters; Ranges notes, Interest-only strips from mortgaged backed securities; Zero interest accrual Complies securities Credit Rating Policy - Portfolio Structure minimum 67% AAA-rated, no maximum; maximum 33% AA-rated; maximum 13% A-rated Complies Securities Lending 92-day maximum maturity; 5% per loan; 10% per counterparty; 20% maximum combined with Reverse Repurchase Agreements N/A 25

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183 APPENDIX E ACCRETED VALUE TABLES Appendix - E

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185 BOND ACCRETED VALUE TABLE Oceanside USD General Obligation Bonds Election of 2008, Series A Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Capital Capital Capital Capital Capital Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2023 Date 3.83% 4.02% 4.21% 4.42% 4.65% 4.9% 5.15% 5.41% 5.59% 5.75% 03/04/2009 4, , , , , , , , , , /01/2009 4, , , , , , , , , , /01/2010 4, , , , , , , , , , /01/2010 4, , , , , , , , , , /01/2011 4, , , , , , , , , , /01/2011 4, , , , , , , , , , /01/2012 4, , , , , , , , , , /01/2012 4, , , , , , , , , , /01/2013 4, , , , , , , , , , /01/2013 4, , , , , , , , , , /01/2014 4, , , , , , , , , , /01/2014 5, , , , , , , , , , /01/2015 4, , , , , , , , , /01/2015 5, , , , , , , , , /01/2016 4, , , , , , , , /01/2016 5, , , , , , , , /01/2017 4, , , , , , , /01/2017 5, , , , , , , /01/2018 4, , , , , , /01/2018 5, , , , , , /01/2019 4, , , , , /01/2019 5, , , , , /01/2020 4, , , , /01/2020 5, , , , /01/2021 4, , , /01/2021 5, , , /01/2022 4, , /01/2022 5, , /01/2023 4, /01/2023 5, /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2028 E-1

186 BOND ACCRETED VALUE TABLE Oceanside USD General Obligation Bonds Election of 2008, Series A Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Capital Capital Capital Capital Capital Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2023 Date 3.83% 4.02% 4.21% 4.42% 4.65% 4.9% 5.15% 5.41% 5.59% 5.75% 02/01/ /01/ /01/ /01/ /01/ /01/2031 E-2

187 BOND ACCRETED VALUE TABLE Oceanside USD General Obligation Bonds Election of 2008, Series A Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Capital Capital Capital Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2031 Date 5.91% 6.01% 6.12% 6.23% 6.33% 8% 8% 8% 03/04/2009 2, , , , , , /01/2009 2, , , , , , /01/2010 2, , , , , , , /01/2010 2, , , , , , , /01/2011 2, , , , , , , , /01/2011 2, , , , , , , , /01/2012 2, , , , , , , , /01/2012 2, , , , , , , , /01/2013 2, , , , , , , , /01/2013 2, , , , , , , , /01/2014 2, , , , , , , , /01/2014 2, , , , , , , , /01/2015 2, , , , , , , , /01/2015 2, , , , , , , , /01/2016 3, , , , , , , , /01/2016 3, , , , , , , , /01/2017 3, , , , , , , , /01/2017 3, , , , , , , , /01/2018 3, , , , , , , , /01/2018 3, , , , , , , , /01/2019 3, , , , , , , , /01/2019 3, , , , , , , , /01/2020 3, , , , , , , , /01/2020 3, , , , , , , , /01/2021 4, , , , , , , , /01/2021 4, , , , , , , , /01/2022 4, , , , , , , , /01/2022 4, , , , , , , , /01/2023 4, , , , , , , , /01/2023 4, , , , , , , , /01/2024 4, , , , , , , , /01/2024 5, , , , , , , , /01/2025 4, , , , , , , /01/2025 5, , , , , , , /01/2026 4, , , , , , /01/2026 5, , , , , , /01/2027 4, , , , , /01/2027 5, , , , , /01/2028 4, , , , /01/2028 5, , , , E-3

188 BOND ACCRETED VALUE TABLE Oceanside USD General Obligation Bonds Election of 2008, Series A Series A, Series A, Series A, Series A, Series A, Series A, Series A, Series A, Capital Capital Capital Capital Capital Capital Capital Capital Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Appreciation Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2031 Date 5.91% 6.01% 6.12% 6.23% 6.33% 8% 8% 8% 02/01/2029 4, , , /01/2029 5, , , /01/2030 4, , /01/2030 5, , /01/2031 4, /01/2031 5, E-4

189 APPENDIX F SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY Appendix - F

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191 Financial Guaranty Insurance Policy Issuer: Policy No.: Obligations: Premium: Effective Date: Assured Guaranty Corp., a Maryland corporation ( Assured Guaranty ), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the Trustee ) or the paying agent (the Paying Agent ) for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. Assured Guaranty will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the day on which Assured Guaranty shall have Received a completed Notice of Nonpayment. If a Notice of Nonpayment by Assured Guaranty is incomplete or does not in any instance conform to the terms and conditions of this Policy, it shall be deemed not Received, and Assured Guaranty shall promptly give notice to the Trustee or the Paying Agent. Upon receipt of such notice, the Trustee or the Paying Agent may submit an amended Notice of Nonpayment. The Trustee or the Paying Agent will disburse the Insured Payments to the Holders only upon receipt by the Trustee or the Paying Agent, in form reasonably satisfactory to it of (i) evidence of the Holder's right to receive such payments, and (ii) evidence, including without limitation any appropriate instruments of assignment, that all of the Holder's rights to payment of such principal or interest Due for Payment shall thereupon vest in Assured Guaranty. Upon and to the extent of such disbursement, Assured Guaranty shall become the Holder of the Obligations, any appurtenant coupon thereto and right to receipt of payment of principal thereof or interest thereon, and shall be fully subrogated to all of the Holder's right, title and interest thereunder, including without limitation the right to receive payments in respect of the Obligations. Payment by Assured Guaranty to the Trustee or the Paying Agent for the benefit of the Holders shall discharge the obligation of Assured Guaranty under this Policy to the extent of such payment. This Policy is non-cancelable by Assured Guaranty for any reason. The Premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment premium or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Assured Guaranty, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Avoided Payment means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Business Day means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. Due for Payment means (i) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. Holder means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. Insured Payments means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. Nonpayment means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. Receipt or Received means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the person to whom the notice was given. Notices to Assured Guaranty may be mailed by registered mail or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone Number: (212) , Facsimile Number: (212) , Attention: Risk Management Department Public Finance Surveillance, with a copy to the General Counsel, or to such other address as shall be specified by Assured Guaranty to the Trustee Page 1 of 2 Form NY-FG (05/07) F-1