$138,405,000* CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS SERIES 2016A

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1 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. PRELIMINARY OFFICIAL STATEMENT DATED JUNE 7, 2016 NEW ISSUE BOOK-ENTRY-ONLY Ratings: Fitch: AAA Moody s: Aaa S&P: AAA (See RATINGS herein.) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series 2016A Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2016A Bonds. See TAX MATTERS. $138,405,000* CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS SERIES 2016A Dated: Date of Delivery Due: October 1, as shown on the inside front cover The Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Series 2016A Bonds ) are being issued by the California Infrastructure and Economic Development Bank ( IBank ), a public instrumentality of the State of California (the State ), to provide funds, together with other available funds of IBank, to (i) finance and refinance Loans (as defined herein) to eligible borrowers, including local governments, state agencies, and certain non-profit organizations for infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving Fund Program, (ii) make a deposit to the Common Reserve Fund (as defined herein), and (iii) pay costs of issuance of the Series 2016A Bonds. Interest on the Series 2016A Bonds will be payable on each April 1 and October 1, commencing on October 1, The Series 2016A Bonds will be issued in book-entry form only, in the denomination of $5,000 or integral multiples thereof and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository for the Series 2016A Bonds. Individual purchases of the Series 2016A Bonds will be made in book-entry form only. Purchasers of the Series 2016A Bonds will not receive certificates representing their ownership interests in Series 2016A Bonds purchased. Principal and interest payments on the Series 2016A Bonds are payable directly to DTC by the Trustee (as defined below). Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Series 2016A Bonds. See THE SERIES 2016A BONDS and APPENDIX F - BOOK-ENTRY-ONLY SYSTEM. The Series 2016A Bonds will be issued and secured pursuant to (i) an Indenture, dated as of February 1, 2014 (the Master Indenture ), between IBank and U.S. Bank National Association, as trustee (the Trustee ), as supplemented and amended, including as supplemented and amended by a Third Supplemental Indenture, dated as of June 1, 2016, between IBank and the Trustee (the Third Supplemental Indenture ). The Master Indenture as supplemented and amended is referred to herein as the Indenture. The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured by a pledge and assignment of the Collateral as provided in the Indenture. Collateral means all of IBank s right, title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and other property from time to time credited to or on deposit in the Pledged Funds and Accounts and (c) all other Revenues credited to or on deposit in the Pledged Funds and Accounts. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS. The Indenture permits the issuance of additional Bonds and the incurrence of other obligations secured by the Collateral and payable on a parity with the Series 2016A Bonds (the Parity Obligations ). See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Conditions to Issuing Additional Bonds and Parity Obligations. The Indenture also permits the issuance of obligations secured by the Collateral and payable on a subordinate basis to the Series 2016A Bonds. IBank has previously issued its Infrastructure State Revolving Fund Revenue Bonds Series 2014A (the Series 2014A Bonds ) pursuant to the Indenture, currently outstanding in the principal amount of $89,805,000 and its Infrastructure State Revolving Fund Revenue Bonds Series 2015A (the Series 2015A Bonds ), currently outstanding in the principal amount of $87,590,000. The Series 2016A Bonds are secured on a parity with the Series 2014A Bonds and the Series 2015A Bonds and constitute Bonds under the Indenture. For a general description of the terms of the Pledged Loans pledged under the Indenture and provisions permitting the release, substitution, addition, and amendment of Pledged Loans, see THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Basic Terms of the Loans and SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Release, Substitution, Addition and Amendment of Pledged Loans. For a general description of the conditions under which Loans will be made with the proceeds of the Series 2016A Bonds after the issuance of the Series 2016A Bonds, see THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Eligibility Criteria. The Series 2016A Bonds are subject to mandatory sinking account redemption, optional redemption and extraordinary redemption as described herein. See THE SERIES 2016A BONDS Redemption. The Series 2016A Bonds are limited obligations of IBank and are not a lien or charge upon the funds or property of IBank, except to the extent of the pledge and assignment provided for in the Indenture. Neither the State of California nor IBank shall be obligated to pay the principal of the Series 2016A Bonds or the interest thereon, except from the Collateral as provided in the Indenture. Neither the full faith and credit nor the taxing power of the State of California nor any agency thereof is pledged to the payment of the principal of or interest on the Series 2016A Bonds. IBank has no taxing power. This cover page contains information for general reference only. It is not a summary of this issue. Potential purchasers must read the entire Official Statement to obtain information essential to making an informed investment decision. The Series 2016A Bonds are offered when, as and if issued by IBank and received by the Underwriters subject to prior sale and to the approval of their validity by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank, and certain other conditions. Certain legal matters will be passed upon for IBank by its Counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel to IBank. Certain legal matters will be passed upon for the Underwriters by their counsel, Schiff Hardin LLP. It is expected that the Series 2016A Bonds, in book-entry only form, will be available for delivery to DTC, on or about June 28, J.P. Morgan Blaylock Beal Van, LLC Loop Capital Markets LLC Fidelity Capital Markets The Williams Capital Group, L.P. June _, 2016 * Preliminary; subject to change. Stifel Piper Jaffray & Co. BNY Mellon Capital Markets, LLC Mischler Financial Group, Inc. RH Investment Corporation Wells Fargo Securities

2 $138,405,000 * CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS SERIES 2016A Maturity Date (October 1) 2017 $470, ,220, ,290, ,385, ,355, ,590, ,720, ,855, ,000, ,155, ,315, ,485, ,660, ,835, ,955, ,275, ,540, ,810, ,100, ,230, ,390, ,705, ,030, ,385, ,755, ,975, ,325, ,320, ,275,000 Base CUSIP No.: 13034A $ Serial Bonds Principal Amount* Interest Rate Yield CUSIP Suffix $ % Term Bonds due October 1, 20 Priced to Yield: %* -- CUSIP Suffix $ % Term Bonds due October 1, 20 Priced to Yield: %*-- CUSIP Suffix ** Priced to October 1, 20 call date at par. * Preliminary; subject to change. Copyright 2016, American Bankers Association. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor s. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with IBank and are included solely for the convenience of the registered owners of the applicable Series 2016A Bonds. Neither IBank nor the Underwriters are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Series 2016A Bonds or as included herein.

3 This Official Statement, which includes the cover page, inside cover page and the appendices hereto, does not constitute an offer to sell the Series 2016A Bonds in any jurisdiction in which or to any person to whom it is unlawful to make such an offer. No dealer, salesperson, or other person has been authorized by IBank or the Underwriters to give any information or to make any representations, other than those contained herein, in connection with the offering of the Series 2016A Bonds and, if given or made, such information or representations must not be relied upon. The information set forth herein has been obtained from IBank and other sources that are believed to be current and reliable, but the accuracy or completeness of such information is not guaranteed by, and is not to be construed as a representation by, IBank. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of their provisions. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made pursuant hereto shall, under any circumstances, create any implication that there has been no change in the affairs of IBank or the information herein pertaining to the Infrastructure State Revolving Fund Program since the date hereof. 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 responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2016A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Certain statements included or incorporated by reference in this Official Statement constitute projections or forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget, or other similar words. Such statements include, but are not limited to, certain statements contained in the information under the captions INTRODUCTION, THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM, SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS, and PRO FORMA CASH FLOW TABLE. The achievement of certain results or other expectations contained in such projections or forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements described to be materially different from any future results, performance, or achievements expressed or implied by such projections or forward-looking statements. IBank takes no responsibility for, and IBank does not plan to issue, any updates or revisions to those projections or forward-looking statements if or when its expectations, or events, conditions, or circumstances on which such statements are based, change. IBank maintains a website. The information therein is not incorporated by reference and should not be relied upon when making an investment decision.

4 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK BOARD OF DIRECTORS Panorea Avdis Director, Governor s Office of Business & Economic Development, Chair John Chiang Treasurer of the State of California, Member Brian P. Kelly Secretary, California State Transportation Agency, Member Teveia R. Barnes Executive Director William D. Pahland, Jr. Counsel Alice Scott Deputy Director of External Affairs Michael Cohen Director, Department of Finance, Member Peter Luchetti Governor's Appointee, Member ADMINISTRATION Nancee Trombley Chief Deputy Executive Director Diane Cummings Deputy Director of Credit, Chief Credit Officer Fariba Khoie Bond Unit Manager SPECIAL SERVICES BOND COUNSEL Orrick, Herrington & Sutcliffe LLP Diane Nanik Fiscal Unit Manager DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation AGENT FOR SALE Office of the State Treasurer FINANCIAL ADVISOR Lamont Financial Services Corporation TRUSTEE U.S. Bank National Association

5 TABLE OF CONTENTS PAGE INTRODUCTION... 1 THE SERIES 2016A BONDS... 1 OUTSTANDING BONDS... 2 BOOK-ENTRY ONLY SYSTEM... 2 IBANK... 2 THE ISRF PROGRAM... 2 SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS... 3 ADDITIONAL BONDS AND PARITY OBLIGATIONS... 3 COMMON RESERVE FUND... 4 REDEMPTION... 5 CONTINUING DISCLOSURE... 5 MISCELLANEOUS... 5 THE SERIES 2016A BONDS... 5 GENERAL... 5 REDEMPTION... 6 DEBT SERVICE SCHEDULE IBANK THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM OVERVIEW OF THE ISRF PROGRAM SOURCES OF FUNDING FOR LOANS ELIGIBILITY CRITERIA BASIC TERMS OF THE LOANS LOAN MONITORING AND SURVEILLANCE OUTSTANDING LOANS PLEDGED LOANS PLAN OF FINANCE ESTIMATED SOURCES AND USES OF FUNDS SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS LIMITED OBLIGATIONS OF IBANK OVERVIEW OF SOURCES OF REPAYMENT RELEASE, SUBSTITUTION, ADDITION AND AMENDMENT OF PLEDGED LOANS OUTSTANDING BONDS COMMON RESERVE FUND CONDITIONS TO ISSUING ADDITIONAL BONDS AND PARITY OBLIGATIONS SUMMARY OF FLOW OF FUNDS UNDER THE INDENTURE SUPPLEMENTAL REVENUE FUND PRIOR OUTSTANDING BONDS FLOW OF FUNDS DIAGRAM PRO FORMA CASH FLOW TABLE INVESTMENT CONSIDERATIONS LIMITED OBLIGATION; COVENANTS PURSUANT TO INDENTURE DO NOT CONSTITUTE A GUARANTEE CONSIDERATIONS RELATING TO PLEDGED LOANS AND BORROWERS BANKRUPTCY OF A BORROWER RELIANCE ON PROJECTIONS i

6 TAX MATTERS RATINGS UNDERWRITING NO LITIGATION LEGAL MATTERS FINANCIAL STATEMENTS FINANCIAL ADVISOR CONTINUING DISCLOSURE MISCELLANEOUS APPENDIX A PLEDGED LOANS... A-1 APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF IBANK FOR THE FISCAL YEAR ENDED JUNE 30, B-1 APPENDIX C SUMMARY OF THE INDENTURE... C-1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT... D-1 APPENDIX E PROPOSED FORM OF OPINION OF BOND COUNSEL... E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM... F-1 APPENDIX G LETTERS FROM CERTAIN UNDERWRITERS... G-1 ii

7 OFFICIAL STATEMENT $138,405,000 * California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds Series 2016A INTRODUCTION This Official Statement, including the cover page, inside cover page and the appendices hereto, provides certain information concerning $138,405,000* aggregate principal amount of Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Series 2016A Bonds ), issued by the California Infrastructure and Economic Development Bank (the IBank ), a public instrumentality of the State of California (the State ). IBank is organized and existing under Division 1 of Title 6.7 of the California Government Code, as amended (commencing with Section 63000) (the Act ), and is authorized pursuant to the Act and a resolution adopted by the IBank Board of Directors on May 24, 2016 (the Resolution ) to issue the Series 2016A Bonds. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Indenture (as such terms are defined below). See APPENDIX C SUMMARY OF THE INDENTURE Definitions for definitions of certain terms used but not otherwise defined herein. The Series 2016A Bonds The Series 2016A Bonds will be issued and secured pursuant to (i) an Indenture, dated as of February 1, 2014 (the Master Indenture ), between IBank and U.S. Bank National Association, as trustee (the Trustee ), as supplemented and amended, including as supplemented and amended by a Third Supplemental Indenture, dated as of June 1, 2016, between IBank and the Trustee (the Third Supplemental Indenture ). The Master Indenture as supplemented and amended by the First Supplemental Indenture (defined herein), the Second Supplemental Indenture (defined herein), and the Third Supplemental Indenture is referred to herein as the Indenture. The Series 2016A Bonds, the Series 2015A Bonds (defined herein), and the Series 2014A Bonds (defined herein), together with any additional series of bonds secured under the Indenture (each a Series ), are collectively referred to herein as the Bonds. Each Series secured by the Indenture will be issued under a supplemental indenture (a Supplemental Indenture ). For a description of the conditions under the Indenture to issuing additional Series of Bonds and other obligations secured by the Collateral (defined herein) and payable on a parity with the Bonds ( Parity Obligations ), see SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Conditions to Issuing Additional Bonds and Parity Obligations. The Series 2016A Bonds are being issued by IBank to provide funds, together with other available funds of IBank, to (i) finance and refinance Loans (as defined herein) to eligible borrowers, including local governments, state agencies, and certain non-profit organizations ( Borrowers ) for infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving Fund Program, (ii) make a deposit to the Common Reserve Fund (defined herein), and (iii) pay costs of issuance of the Series 2016A Bonds. Interest on the Series 2016A Bonds will be payable on each April 1 and October 1, commencing on October 1, * Preliminary; subject to change. 1

8 Outstanding Bonds IBank has previously issued its Infrastructure State Revolving Fund Revenue Bonds, Series 2014A (the Series 2014A Bonds ), currently outstanding in the principal amount of $89,805,000, and its Infrastructure State Revolving Fund Revenue Bonds, Series 2015A (the Series 2015A Bonds ), currently outstanding in the principal amount of $87,590,000. The Series 2014A Bonds were issued pursuant to the Master Indenture, as supplemented by a First Supplemental Indenture, dated as of February 1, 2014, between IBank and the Trustee (the First Supplemental Indenture ). The Series 2015A Bonds were issued pursuant to the Master Indenture, as supplemented by the Second Supplemental Indenture, dated as of June 1, 2015, between IBank and the Trustee (the Second Supplemental Indenture ). The Series 2014A Bonds and the Series 2015A Bonds are Bonds under the Indenture, payable from Collateral on a parity with the Series 2016A Bonds. Book-Entry Only System The Series 2016A Bonds will be issued in fully registered form only and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( DTC ). DTC will act as the securities depository for the Series 2016A Bonds and all payments due on the Series 2016A Bonds will be made to DTC or its nominee. Ownership interests in the Series 2016A Bonds may be purchased in book-entry form only. See THE SERIES 2016A BONDS and APPENDIX F - BOOK-ENTRY ONLY SYSTEM. IBank IBank is a public instrumentality of the State, organized and existing pursuant to the Act. IBank has broad powers to provide financing for a wide array of infrastructure and economic expansion projects that promote economic growth, revitalize communities, and enhance quality of life for Californians. IBank is authorized to issue the Series 2016A Bonds and to make the proceeds thereof available to Borrowers. In addition to administering the ISRF Program described below, IBank also finances infrastructure and economic development through the issuance of conduit revenue bonds, loans, and commercial paper. Each of these other obligations is a limited obligation of IBank payable solely from the revenues pledged thereto. IBank does not have taxing powers. See IBANK. The ISRF Program The ISRF Program provides financing to Borrowers for a wide range of infrastructure and economic expansion projects permitted under the Act. To evidence such financing, IBank enters into separate financing agreements (collectively, the Loans ) with the Borrowers. (The financing agreements are typically in the form of loan agreements, installment sale agreements or lease agreements.) The Series 2016A Bonds will provide money to finance and refinance certain Loans. Certain Loans will be pledged under the Indenture for the benefit of holders of Bonds and Parity Obligations ( Pledged Loans ). See THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Basic Terms of the Loans for a general description of the terms and conditions of the Loans. See THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Eligibility Criteria for a general description of the conditions under which Loans will be made with proceeds of the Series 2016A Bonds after issuance of the Series 2016A Bonds. The ISRF Program is separate and distinct from other revolving fund programs in the State for which the IBank serves as bond issuer, including the Clean Water State Revolving Fund Program, the Safe Drinking Water State Revolving Fund Program and the California Lending for Energy and 2

9 Environmental Needs Center, and revenues from those programs are not available for payment of Bonds, including the Series 2016A Bonds. Loans made pursuant to the Clean Water State Revolving Fund Program and the Safe Drinking Water State Revolving Fund Program are administered by the California Water Resources Control Board. Security and Source of Payment for the Series 2016A Bonds The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured by a pledge and assignment of the Collateral as provided in the Indenture. Collateral means all of IBank s right, title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and other property from time to time credited to or on deposit in the Pledged Funds and Accounts, and (c) all other Revenues credited to or on deposit in the Pledged Funds and Accounts. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS. As described herein, pursuant to the Indenture IBank may from time to time add, release, substitute, or amend the Pledged Loans. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Release, Substitution, Addition and Amendment of Pledged Loans. For a general description of the terms of the Pledged Loans, see THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Basic Terms of the Loans. The Series 2016A Bonds are limited obligations of IBank and are not a lien or charge upon the funds or property of IBank, except to the extent of the pledge and assignment provided for in the Indenture. Neither the State of California nor IBank shall be obligated to pay the principal of the Series 2016A Bonds or the interest thereon, except from the Collateral as provided in the Indenture. Neither the full faith and credit nor the taxing power of the State of California nor any agency thereof is pledged to the payment of the principal of or interest on the Series 2016A Bonds. IBank has no taxing power. Additional Bonds and Parity Obligations The Indenture provides for the issuance of additional Bonds and the incurrence of Parity Obligations secured by the Collateral and payable on a parity with the Series 2016A Bonds, the Series 2015A Bonds, and the Series 2014A Bonds. In order to issue additional Bonds or incur Parity Obligations under the Indenture, IBank is required to meet certain conditions specified in the Indenture, including delivery of a certificate that demonstrates compliance with the Coverage Test; provided, however, that demonstration of compliance with the Coverage Test is not required if Annual Debt Service will not be increased in any Bond Year after taking into account the issuance or incurrence of such additional Bonds or Parity Obligations. Coverage Test means, as of any date of calculation, that the Revenues (excluding any Subsidy Payments) (assuming that the Pledged Loan Repayments are paid at the times and in the amounts required by the Loan Agreements, unless a payment default has occurred and is continuing under such Loan Agreement) for each Bond Year in which any Bonds are scheduled to be Outstanding, are projected to be at least 1.20 times Annual Debt Service in each such Bond Year. For the purpose of demonstrating compliance with the Coverage Test in accordance with the Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts, and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest 3

10 rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Conditions to Issuing Additional Bonds and Parity Obligations and INVESTMENT CONSIDERATIONS Reliance on Projections. The requirements of the Indenture described above are being met in connection with the issuance of the Series 2016A Bonds. See PRO FORMA CASH FLOW TABLE. The Indenture also permits the issuance of obligations secured by the Collateral and payable on a subordinate basis to Bonds and any Parity Obligations. Common Reserve Fund A common reserve fund (the Common Reserve Fund ) in an amount equal to the Common Reserve Requirement will be held by the Trustee pursuant to the Indenture to secure the payment of principal of and interest on the Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A Bonds and any other Common Reserve Fund Participating Bonds. Common Reserve Fund Participating Bonds means the Bonds of each Series which, pursuant to the terms of the Indenture and the Supplemental Indenture relating to such Series, are secured by amounts in the Common Reserve Fund. The Series 2016A Bonds are Common Reserve Fund Participating Bonds. Common Reserve Requirement means, as of any date of calculation, an amount equal to the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund Participating Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the Common Reserve Fund Participating Bonds in any Bond Year during the period commencing with the Bond Year in which the determination is being made and terminating with the last Bond Year in which any Common Reserve Fund Participating Bond is due, or (c) 125% of the sum of the Debt Service for the Common Reserve Fund Participating Bonds for all Bond Years during the period commencing with the Bond Year in which such calculation is made (or if appropriate, the first full Bond Year following the issuance of any Common Reserve Fund Participating Bonds) and terminating with the last Bond Year in which any Debt Service for the Common Reserve Fund Participating Bonds is due, divided by the number of such Bond Years, all as computed and determined by IBank and specified in writing to the Trustee; provided, that with respect to the issuance of additional Common Reserve Fund Participating Bonds, if the amount on deposit in the Common Reserve Fund would have to be increased by an amount greater than ten percent (10%) of the stated principal amount of such additional Common Reserve Fund Participating Bonds (or, if the issue has more than a de minimus amount of original issue discount or premium, of the issue price of such Common Reserve Fund Participating Bonds) then the Common Reserve Requirement shall be such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition to funding the Common Reserve Fund with the proceeds of Bonds, IBank may fund the Common Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common Bonds Reserve Requirement. The Indenture provides that, in lieu of maintaining and depositing moneys in the Common Reserve Fund, IBank may provide an insurance policy, letter of credit, or surety bond to satisfy all or a portion of the Common Reserve Requirement, subject to the requirements of the Indenture. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Common Reserve Fund. 4

11 Redemption The Series 2016A Bonds are subject to mandatory sinking account redemption, optional redemption, and extraordinary redemption as described herein. See THE SERIES 2016A BONDS Redemption. Continuing Disclosure IBank has agreed to provide or cause to be provided, to the Municipal Securities Rulemaking Board, through its Electronic Municipal Market Access System ( EMMA ) certain annual financial information and operating data and, in a timely manner, notice of certain events. These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission. See CONTINUING DISCLOSURE for a description of the specific nature of the annual report and notices of events and a summary description of the criteria for determining whether any financial information relating to specific Borrowers will be included in such annual report. Miscellaneous The Series 2016A Bonds are offered when, as, and if issued by IBank and received by the Underwriters subject to prior sale and to the approval of their validity by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank and certain other conditions. It is anticipated that the Series 2016A Bonds in definitive form will be available for delivery to DTC on or about June 28, The description herein of the Indenture, the Continuing Disclosure Agreement, and any other agreements relating to the Series 2016A Bonds are qualified in their entirety by reference to such documents, and the descriptions of the Series 2016A Bonds are qualified in their entirety by the form thereof and the information thereon included in the aforementioned documents. See APPENDIX C SUMMARY OF THE INDENTURE and APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT. Copies of the Indenture are available upon request to IBank, 1325 J Street, Suite 1823, Sacramento, California 95814, Attention: Bond Unit Manager. General THE SERIES 2016A BONDS The Series 2016A Bonds will be issued in fully registered form, without coupons, in denominations of $5,000 or any integral multiple thereof (each, an Authorized Denomination ), will be dated their date of delivery, and will bear interest from such date at the rates set forth on the inside cover of this Official Statement, payable on April 1 and October 1 of each year, commencing on October 1, 2016 (each, an Interest Payment Date ). Interest on the Series 2016A Bonds will be computed on the basis of a 360-day year, comprised of twelve 30-day months. The Series 2016A Bonds will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ( DTC, and, together with any successor securities depository, the Depository ). DTC will act as Depository for the Series 2016A Bonds. Individual purchases will be made in book-entry form. Purchasers will not receive a bond certificate representing their beneficial ownership interest in Series 2016A Bonds. So long as Cede & Co. is the registered owner of the Series 2016A Bonds, as nominee of DTC, references herein to Bondholders, Holders, or owners of the Series 2016A Bonds will mean Cede & Co. and will not mean the Beneficial Owners of Series 2016A Bonds. 5

12 So long as Cede & Co. is the registered owner of the Series 2016A Bonds, principal of and interest on the Series 2016A Bonds will be payable by wire transfer of same day funds by the Trustee to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC Participants for subsequent disbursement to Beneficial Owners of the Series 2016A Bonds. See APPENDIX F BOOK-ENTRY ONLY SYSTEM. If the use of the book-entry system is discontinued, then principal of the Series 2016A Bonds will be payable upon surrender thereof at the designated office of the Trustee. If the use of the bookentry system is discontinued, all interest payable on the Series 2016A Bonds will be paid by check mailed by first-class mail on each Interest Payment Date to the person in whose name each 2016A Bond is registered in the registration books maintained by the Trustee as of the close of business on the 15th day of the calendar month immediately preceding the Interest Payment Date (whether or not the 15th day is a business day) (each, a Record Date ), provided that registered owners of $1,000,000 or more in aggregate principal amount of Series 2016A Bonds may request payment by wire transfer to an account within the United States, such request to be submitted in writing and received by the Trustee on or before the applicable Record Date for such Interest Payment Date, in accordance with the provisions set forth in the Indenture. Redemption Optional Redemption. The Series 2016A Bonds maturing on and before October 1, 20 are not subject to optional redemption prior to their respective stated maturities. The Series 2016A Bonds maturing on or after October 1, 20 are subject to redemption prior to their respective stated maturities, at the option of IBank, from any source of available funds, on any date on or after October 1, 20, as a whole or in part, by such maturity or maturities as may be specified by Request of IBank (and by lot within a maturity), at a Redemption Price equal to 100% of the aggregate principal amount thereof called for redemption, plus interest accrued thereon to the date fixed for redemption, without premium. Mandatory Sinking Account Redemption. The Series 2016A Bonds maturing on October 1, 20 and October 1, 20 are subject to mandatory redemption from Mandatory Sinking Account Payments for such Series 2016A Bonds, on each date a Mandatory Sinking Account Payment for such Series 2016A Bonds is due, and in the principal amount equal to the Mandatory Sinking Account Payment due on such date at a Redemption Price equal to the principal amount thereof, plus accrued interest to the redemption date, without premium. Mandatory Sinking Account Payments for the Series 2016A Bonds maturing on October 1, 20 shall be due in such amounts and on such dates as follows (except that if any of such Series 2016A Bonds shall have been redeemed pursuant to an optional redemption, the amounts of the remaining Mandatory Sinking Account Payments for such Series 2016A Bonds shall be revised as directed in writing by IBank): Series 2016A Bonds Maturing October 1, 20 Mandatory Sinking Account Payment Date (October 1) Mandatory Sinking Account Payment Maturity 6

13 Mandatory Sinking Account Payments for the Series 2016A Bonds maturing on October 1, 20 shall be due in such amounts and on such dates as follows (except that if any of such Series 2016A Bonds shall have been redeemed pursuant to an optional redemption, the amounts of the remaining Mandatory Sinking Account Payments for such Series 2016A Bonds shall be revised as directed in writing by IBank): Series 2016A Bonds Maturing October 1, 20 Mandatory Sinking Account Payment Date (October 1) Mandatory Sinking Account Payment Maturity Extraordinary Redemption. The federal Tax Increase Prevention and Reconciliation Act of 2005 ( TIPRA ) imposes additional requirements and conditions for the interest on bonds, such as the Series 2016A Bonds, issued for pooled financing programs to be and remain exempt from federal income taxation. Among those requirements are provisions requiring the redemption of bonds if certain amounts of the bond proceeds are not used for loans within certain prescribed periods. In particular, the Code requires: i. the issuer to reasonably expect to (1) use within the one-year period beginning on the date of issue, at least 30% of the net proceeds of the issue to make loans; and (2) use within the three-year period beginning on the date of issue, at least 95% of the net proceeds of the issue; and ii. the issuer to redeem outstanding bonds within 90 days after the end of such one-year period and three-year period, as applicable, to the extent of, and in an amount equal to the unused proceeds; i.e. the difference between the amount actually used and an amount equal to such applicable percentage. At closing of the Series 2016A Bonds, IBank will use approximately $5.6 million of net bond proceeds to reimburse itself for prior loan disbursements funded with ISRF equity and will deposit such amount in the Equity Fund. In addition to this reimbursement, IBank has approved 5 additional loans totaling approximately $55.4 million, which are in the process of being originated. When the 5 additional loans are completed/originated IBank will have satisfied requirement in i(1) above. IBank expects to use at least 30% of the net proceeds within one year of the date of issuance and at least 95% of the net proceeds within three years of the date of issuance and does not expect that it will be necessary to call any Series 2016A Bonds for redemption. However, such redemption feature has been included because of applicable tax requirements and IBank cannot give any absolute assurance that a change in circumstances will not occur necessitating the exercise of such redemption feature. The Series 2016A Bonds maturing on and after October 1, 20, are subject to extraordinary mandatory redemption prior to their respective stated maturities, on September, 2017 (the One- Year Extraordinary Mandatory Redemption Date ) in part, in an amount equal to the One-Year Computation Amount (as defined below), at the redemption prices set forth below (approximately % of the amortized issue price for the selected maturities of the Series 2016A Bonds), expressed as percentages of the principal amount of each maturity of the Series 2016A Bonds so redeemed, plus accrued interest to the One-Year Extraordinary Mandatory Redemption Date. 7

14 Maturity Date Interest Rate Base CUSIP No A Redemption Price CUSIP Suffix *Term Bonds One-Year Computation Amount means the surplus proceeds (rounded to the next higher integral multiple of $5,000) equal to thirty percent (30%) of the Net Proceeds (defined to mean the amounts received from the sale of the Series 2016A Bonds and deposited into the Series 2016A Bond Proceeds Fund), less the aggregate amount withdrawn from the Series 2016A Bond Proceeds Fund by June _, The Series 2016A Bonds maturing on and after October 1, 20, are subject to extraordinary mandatory redemption prior to their respective stated maturities, on September, 2019 (the Three-Year Extraordinary Mandatory Redemption Date ) in part, in an amount equal to the Three- Year Computation Amount, at the redemption prices set forth below (approximately % of the amortized issue price for the selected maturities of the Series 2016A Bonds), expressed as percentages of the principal amount of each maturity of the Series 2016A Bonds so redeemed, plus accrued interest to the Three Year Extraordinary Mandatory Redemption Date. 8

15 Base CUSIP No A Maturity Date Interest Rate CUSIP Suffix: Redemption Price *Term Bonds Three-Year Computation Amount means the surplus proceeds (rounded to the next higher integral multiple of $5,000) equal to ninety-five percent (95%) of the Net Proceeds (defined to mean the amounts received from the sale of the Series 2016A Bonds and deposited into the Series 2016A Bond Proceeds Fund), less the aggregate amount withdrawn from the Series 2016A Bond Proceeds Fund by June, The foregoing notwithstanding, the Series 2016A Bonds shall not be subject to any such extraordinary mandatory redemption if IBank obtains an Opinion of Bond Counsel to the effect that the failure by IBank to cause any such extraordinary mandatory redemption to occur will not, in and of itself, result in the inclusion of interest on the Series 2016A Bonds in gross income for federal income tax purposes. For purposes of the One Year Extraordinary Mandatory Redemption and the Three-Year Extraordinary Mandatory Redemption of the Series 2016A Bonds, the Series 2016A Bonds subject to such redemption shall be selected by the Trustee as directed in a written direction of IBank in authorized denominations in inverse order of maturity. The Redemption Price with respect to any required extraordinary mandatory redemption of any Series 2016A Bond shall be paid from funds on deposit in the Series 2016A Bond Proceeds Fund, together with other legally available funds, as provided in Indenture. Selection of Series 2016A Bonds for Redemption. IBank shall designate which maturities of any Series 2016A Bonds are to be called for optional redemption. If not all Series 2016A Bonds maturing by their terms on any one date will be redeemed at any one time, the Trustee shall select by lot the Series 2016A Bonds of such maturity date to be redeemed and shall promptly notify IBank in writing of the numbers of the Series 2016A Bonds so selected for redemption. For purposes of such selection, Series 2016A Bonds shall be deemed to be composed of multiples of minimum Authorized Denominations and any such multiple may be separately redeemed. Notice of Redemption. Each notice of redemption shall be mailed by the Trustee, not less than twenty (20) nor more than sixty (60) days prior to the redemption date. Notice of redemption shall be given by first class mail. Each notice of redemption shall state the date of such notice, the date of issue of the Series 2016A Bonds to which such notice relates, the redemption date, the 9

16 Redemption Price, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, in the case of Series 2016A Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Series 2016A Bonds the Redemption Price thereof or of said specified portion of the principal amount thereof in the case of a Series 2016A Bond to be redeemed in part only, together with interest accrued thereon to the date fixed for redemption, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Series 2016A Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Neither IBank nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither IBank nor the Trustee shall be liable for any inaccuracy in such CUSIP numbers. Failure of any Holder to receive notice or any defect in any such notice shall not affect the sufficiency or validity of the proceedings for redemption. With respect to any notice of optional redemption of Series 2016A Bonds, unless, upon the giving of such notice, such Series 2016A Bonds shall be deemed to have been paid within the meaning of the Indenture, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of amounts sufficient to pay the Redemption Price of and interest on such Series 2016A Bonds to be redeemed, and that if such amounts are not so received said notice shall be of no force and effect and IBank shall not be required to redeem such Series 2016A Bonds. IBank may also instruct the Trustee to provide conditional notice of optional redemption, which may be conditioned on the occurrence of any other event if such notice states that if such event does not occur said notice shall be of no force and effect and IBank shall not be required to redeem such Series 2016A Bonds. If such notice of optional redemption contains such a condition and such amounts are not so received or such event does not occur, the optional redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice to the Holders to the effect that such amounts were not so received or such event did not occur and such redemption was not made, such notice to be given by the Trustee in the manner in which the notice of redemption was given. Such failure to optionally redeem such Series 2016A Bonds shall not constitute an Event of Default under the Indenture. Any notice of optional redemption may be rescinded by written notice given to the Trustee by IBank no later than five (5) Business Days prior to the date specified for redemption. The Trustee shall give notice of such rescission as soon thereafter as practicable in the same manner, and to the same Persons, as notice of such redemption was given. Partial Redemption of Bonds. Upon surrender of any Series 2016A Bond redeemed in part only, IBank shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of IBank, a new Series 2016A Bond or Series 2016A Bonds of authorized denominations of the same maturity equal in aggregate principal amount to the unredeemed portion of the Series 2016A Bond surrendered. Effect of Redemption. Notice of redemption having been duly given as provided in the Indenture, and moneys for payment of the Redemption Price of, together with interest accrued to the redemption date on, the Series 2016A Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Series 2016A Bonds (or portions thereof) so called for redemption shall become due and payable at the Redemption Price 10

17 specified in such notice together with interest accrued thereon to the redemption date, interest on the Series 2016A Bonds so called for redemption shall cease to accrue, said Series 2016A Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture and the Holders of said Series 2016A Bonds shall have no rights in respect thereof except to receive payment of said Redemption Price and accrued interest to the date fixed for redemption from funds held by the Trustee for such payment and such funds are hereby pledged to such payment. 11

18 DEBT SERVICE SCHEDULE The following table shows scheduled debt service on the Series 2014A Bonds, the Series 2015A Bonds, and the Series 2016A Bonds, and total debt service without regard to any optional redemption. Series 2014A Bonds Series 2015A Bonds Series 2016A Bonds Period Ending October 1 Principal Interest Principal Interest Principal Interest 2016 $3,630,000 $4,399, $3,810,000 $4,137, ,705,000 4,254, ,095,000 4,022, ,860,000 4,106, ,245,000 3,858, ,065,000 3,913, ,425,000 3,689, ,275,000 3,709, ,655,000 3,467, ,470,000 3,496, ,750,000 3,235, ,480,000 3,272, ,835,000 2,997, ,165,000 3,048, ,830,000 2,755, ,365,000 2,840, ,705,000 2,514, ,605,000 2,622, ,790,000 2,279, ,845,000 2,391, ,870,000 2,089, ,075,000 2,149, ,710,000 1,896, ,310,000 1,895, ,750,000 1,710, ,490,000 1,630, ,930,000 1,523, ,735,000 1,355, ,880,000 1,326, ,330,000 1,069, ,825,000 1,132, ,720, , ,415, , ,785, , ,195, , ,250, , ,105, , ,080, , ,290, , ,810, , ,915, , ,410, , ,835, , ,420, , ,370, , ,000 85, , , ,000 58, , , ,000 36, ,000 95, ,000 16, ,000 62, ,000 4, ,000 30, Total $89,805,000 $49,518, $87,590,000 $46,927, Total Debt Service 12

19 IBANK IBank is a public instrumentality of the State, organized and existing pursuant to the Act. IBank has broad powers to provide financing for a wide array of public infrastructure and economic development projects. IBank is authorized to issue the Series 2016A Bonds and to make the proceeds thereof available to eligible Borrowers. The general mission of IBank is to finance infrastructure and economic development projects that promote economic growth, revitalize communities and enhance the quality of life throughout the State. IBank provides financing to eligible borrowers for a variety of infrastructure and economic expansion projects through the ISRF Program. In addition to administering the ISRF Program, IBank serves as a conduit issuer of revenue bonds, industrial development bonds, loans and commercial paper. Each of these obligations is a limited obligation of IBank payable solely from the revenues pledged thereto. Further, IBank administers the State s Small Business Loan Guarantee Program which guarantees certain business loans made by commercial lenders to small businesses that experience capital access barriers. IBank has no taxing power. In 2015, IBank established the California Lending for Energy and Environmental Needs Center ( CLEEN ), which IBank will administer and pursuant to which it expects to issue loans to municipalities, and public universities, schools and hospitals for energy efficiency and other projects with environmental benefits. Loans made through the CLEEN Center will not constitute Loans pursuant to the Indenture. Pursuant to the Act, IBank is governed by a five-member board of directors consisting of (1) the Director of the Governor s Office of Business and Economic Development or his or her designee, who shall serve as chair of the board, (2) the Director of Finance or his or her designee, (3) the Treasurer or his or her designee, (4) the Secretary of Transportation or his or her designee, (5) an appointee of the Governor. The directors serve without compensation; provided, however, that the directors may be reimbursed for actual and necessary expenses incurred in the performance of their duties. The Act provides that an Executive Director manages and conducts the business and affairs of IBank. The Act further authorizes the Board of Directors to delegate certain duties to the Executive Director. The Executive Director is appointed by the Governor subject to confirmation by the State Senate. Currently, IBank has an authorized staff of 41. The office of IBank is located at 1325 J Street, Suite 1823, Sacramento, California Its telephone number is (916) THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Overview of the ISRF Program Effective as of February 23, 2016 the Board approved Resolution No amending the Criteria, Priorities and Guidelines for the Selection of Projects for Financing Under the ISRF Program (the Criteria ). (The Criteria were initially adopted in 1999 and were amended several times before the most recent amendments.) The Criteria provides general guidance as to the types of projects for which Loans may be made and general eligibility standards for Borrowers. The Criteria also includes standards for evaluation of creditworthiness. The February 23 amendment incorporated statutory changes resulting from Assembly Bill 1533 ( AB 1533 ), which was approved and signed by the Governor on September 30, AB 1533 added goods movement-related infrastructure as an eligible project category, clarified the definitions of certain other eligible projects, and updated 13

20 the definition of Military infrastructure projects that require the endorsement of the Office of Planning and Research. IBank may amend the Criteria from time to time and there can be no assurance that the Criteria will not be substantially amended in the future. Sources of Funding for Loans Prior to the issuance of the Series 2014 Bonds, IBank utilized the proceeds of prior issues of bonds ( Prior Bonds ) to fund loans made under the ISRF Program, fund reserves, and pay costs of issuance of the respective bonds. IBank expects to fund future Loans from Loan repayments, investment earnings, income from fees charged by IBank on Loans and the proceeds of Bonds (including the Series 2016A Bonds) and from any other moneys available to IBank for such purpose, including repayments from Pledged Loans not required to be applied to the payment of debt service on Bonds or Parity Obligations or held as security therefor, and repayments of Loans which are not Pledged Loans. Eligibility Criteria Eligible Borrowers. Cities, counties, State agencies, special districts, assessment districts, joint powers authorities, and Non-Profit Entities are eligible to receive Loans for Infrastructure Projects (defined below) under the ISRF Program. In addition, Non-Profit Entities that apply in conjunction with a city, county, State agency, special district, assessment districts, or joint powers authority are eligible to receive Loans for Economic Expansion Projects (defined below). However, such city, county, State agency, special district, assessment districts, or joint powers authority is not obligated under the Criteria to guarantee or otherwise assume any responsibility for a Loan to the Non-Profit Entity. Eligible Projects. The ISRF Program provides financing for a wide range of infrastructure projects: city streets; county highways; state highways; drainage, water supply and flood control; educational facilities; environmental mitigation measures; parks and recreational facilities; port facilities; public transit; sewage collection and treatment; solid waste collection and disposal; water treatment and distribution; defense conversion; public safety facilities; power and communications facilities; military infrastructure; and goods movement-related infrastructure (collectively, Infrastructure Projects ). Additionally, as amended in October 2013, the Criteria authorizes financings for facilities that are used for industrial, utility, commercial, cultural, recreational, research, community, or educational purposes as well as facilities which service enterprise facilities and social welfare facilities ( Economic Expansion Projects and, together with Infrastructure Projects, Eligible Projects ). Other Selection Criteria. The Criteria also addresses other ISRF Program parameters, including coordination with the State s promulgated environmental goals and policies and growth management strategies; Eligible Project costs; and findings to be made by Borrowers in their authorizing resolutions. The Criteria currently provides that, if the immediate financing needs of projects applying for ISRF Program financing exceed the lending capacity of the ISRF Program, IBank will give priority to Infrastructure Projects over Economic Expansion Projects. Further, at such times, IBank will give priority to Infrastructure Projects located in, or adjacent to or directly affecting, areas with high unemployment rates, low median household income, declining or slow growth in labor force employment, or high poverty rates. 14

21 Basic Terms of the Loans Each Loan is negotiated between IBank and the particular Borrower. While many of the provisions of the Loans are similar, certain terms under specific Loan Agreements may differ to reflect the basic structure of the particular Loan, specific financial requirements, and other matters. Basic Terms of Loans. The term of any Loan may not exceed the lesser of the Eligible Project s useful life or 30 years. Interest rates on Loans are established through a rate-setting methodology for determining interest rate subsidies that takes various factors into account, including the strength of the pledge securing Loan repayment, published ratings (if any) for the potential Borrower, the median household income for the community where the project is located, the unemployment rate for the community where the project is located and tax law limitations. The Criteria generally provides for loans in amounts from $50,000 to $25,000,000, but larger loans may be authorized with the approval of IBank s Board of Directors. (Between September 2001 and October 2013, Loans were capped at $10 million per Borrower, with an aggregate annual maximum financing amount of $20 million for all eligible Borrowers within the applicable city or county. The majority of the existing Pledged Loans as of the date of issuance of the Series 2016A Bonds were made in accordance with these prior limits.) Loans generally are amortized on a level repayment basis. IBank disburses the proceeds of Loans to the Borrowers periodically upon the submittal of appropriate documentation of the payment or incurrence of eligible costs. IBank charges interest to Borrowers based on the full authorized amount of their respective Loans (regardless of the amount actually disbursed). Borrowers receive a credit against their interest payments for investment earnings received by IBank on the investment of undisbursed Loan proceeds, calculated at the rate earned by IBank on the undisbursed funds or at the Loan interest rate, whichever is less. Additional Terms of Loans. Several terms of a particular Loan depend on the repayment sources which dictate whether such Loan is structured as a lease, loan, or installment sale, and on various credit factors. All Loans, regardless of structure, include, among other things, provisions concerning: (i) the principal amount; (ii) the interest rate; (iii) the financing repayment schedule; (iv) the right of IBank to assign, grant a security interest in, or otherwise encumber the Loan including any payments thereunder; and (v) the right of IBank to terminate and (except for leases) accelerate the unpaid balance of the Loan upon material breach by the Borrower. Loan agreements generally provide that the Borrower must maintain the project in good condition and maintain casualty and other insurance at specified levels. Loans payable from the general funds of a Borrower are generally structured as leases, and provide that in the event there is substantial interference with the Borrower s use and occupancy of any portion of the leased facility, rental payments due under the Loan agreement shall be abated to the extent that the annual fair rental value of the portion of the leased asset to which there is no substantial interference is less than the scheduled annual rental payments. Agreements for Loans subject to such abatement risk provide that the Borrower is obligated to obtain and maintain rental interruption insurance in an amount typically equal to a period of at least six months beyond the estimated period required to rebuild the leased facility. Loans structured as lease agreements generally prohibit the acceleration of amounts due thereunder upon default of the Borrower. Loans payable from particular enterprise or special fund revenues of the Borrower (as opposed to its general funds) are structured as installment sales. These types of Loan agreements generally include a covenant by the Borrower to maintain enterprise rates and charges or to comply with specific requirements associated with special funds so as to provide sufficient revenues to meet 15

22 all payment requirements pursuant to the Loan. Agreements for Loans payable from particular enterprise revenues of the Borrower typically require that rates and charges imposed by the Borrower be maintained such that net revenues exceed debt service by a specified percentage (i.e., a coverage requirement). Loans secured by tax increments or other duly approved taxes or assessments are generally structured as true loans. Loans payable from enterprise revenues or from tax increments also place conditions on the ability of Borrowers to incur additional debt secured by the revenues or taxes which secure the Loan. Prepayment Provisions of Loans. The Loan agreements generally prohibit prepayment for the first ten years following the initial date of the Loan, and generally require that Borrowers pay a prepayment premium for prepayments between the tenth and twelfth anniversary of the initial date of the Loan. The ability of the Borrowers to make timely payments due on their respective Pledged Loans depends on various economic and financial circumstances and legal requirements and restrictions applicable to individual Borrowers, and could be adversely affected by a variety of factors, including but not limited to natural disasters (such as earthquakes or floods) and general economic conditions in the particular jurisdiction or service areas of the Borrowers or in the State generally. See INVESTMENT CONSIDERATIONS Considerations Relating to Pledged Loans and Borrowers. Loan Monitoring and Surveillance IBank regularly monitors the status of Loans and undertakes annual Loan portfolio surveillance. The surveillance includes a review of project status, annual Borrower budgets, and confirmation of Borrower compliance with reserve, coverage and insurance requirements. Pledged Loans OUTSTANDING LOANS Generally. As of the date of issuance of the Series 2016A Bonds, there will be 88 Pledged Loans with an outstanding aggregate principal amount of approximately $281.2 million. For certain information concerning the Pledged Loans, see APPENDIX A PLEDGED LOANS. Under the Indenture, IBank may release Pledged Loans, subject to satisfaction of the conditions set forth in the Indenture. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Release, Substitution, Addition and Amendment of Pledged Loans. As of June 1, 2016, Borrowers under all Loans that will be Pledged Loans have made all payments as required (other than a very small number of brief delinquencies due to delayed mail delivery or incorrect wiring instructions, which were immediately corrected by the particular Borrowers, after notification by IBank). The maturity dates and payment amounts of each of the Pledged Loans vary. Most of the Pledged Loans mature prior to the maturity of the Series 2016A Bonds. In addition, individual Pledged Loans may be prepaid from time to time in accordance with their terms. Any such prepayments will constitute Revenues pursuant to the Indenture and will be applied in accordance with the flow of funds set forth therein. Pledged Loan prepayments are not required to be used to prepay Series 2016A Bonds, and subject to the requirements of the Indenture, including those 16

23 relating to required deposits to the Supplemental Revenue Fund, may ultimately be deposited in the Unrestricted Assets Account or the Restricted Assets Account and used by IBank for the authorized purposes of moneys on deposit in those accounts. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS - Summary of Flow of Funds under the Indenture. Therefore, the portfolio of Pledged Loans will change over the term of the Series 2016A Bonds, including but not limited to: the number of Pledged Loans then currently outstanding; the Borrowers responsible for payment of the then current Pledged Loans and the credit quality of such Borrowers; the source of payment of the Pledged Loans (i.e., general fund, enterprise funds or other sources); and the geographic diversity of the Borrowers. See PRO FORMA CASH FLOW TABLE for certain assumptions concerning the expected prepayment of certain loans to the City of San Bernardino. A significant portion of the proceeds of the Series 2016A Bonds will be used to make Loans after the issuance of the Series 2016A Bonds. See PRO FORMA CASH FLOW TABLE for certain assumptions concerning the amount and timing of these Loans (referred to as New Loans in the Pro Forma Cash Flow Table). Particular Pledged Loans. The following is a description of certain aspects of particular Pledged Loans: Pledged Loans Secured by Water Enterprise Revenues. As of the date of issuance of the Series 2016A Bonds, the Borrowers with respect to 32 Pledged Loans (with an aggregate outstanding principal amount of approximately $135.9 million) are payable in whole or in part from revenues of the water enterprise of the respective Borrowers. The State is currently experiencing a severe drought. Due to these record-dry conditions, in 2014 and 2015 Governor Edmund G. Brown took a variety of conservation actions generally requiring reductions of 25% or more in water consumption throughout the state. Depending on the particular circumstances of a Borrower with a Loan payable from water enterprise revenues, reduced consumption could result in decreased revenues and potentially, financial stress with respect to its respective water enterprise. As described herein, Loans secured by revenues of enterprises (including water enterprises) generally include a covenant by the Borrower to maintain enterprise rates and charges or to comply with specific requirements associated with special funds so as to provide sufficient revenues to meet all payment requirements pursuant to its respective Loan. Pledged Loans to Redevelopment Successor Agencies. As of the date of issuance of the Series 2016A Bonds, the Borrowers with respect to 14 Pledged Loans (with an aggregate outstanding principal amount of approximately $32.5 million) are successor agencies to redevelopment agencies. Pursuant to Assembly Bill No. 1x 26 ( AB 26 ), which was enacted in June 2011, most redevelopment agency activities in California were suspended and redevelopment agencies were prohibited from incurring additional indebtedness, making loans or grants, or entering into contracts after June 29, AB 26 also dissolved all existing redevelopment agencies (effective February 1, 2012) and specified procedures for establishment of successor agencies and oversight boards to ensure that payments be made for indebtedness determined to be enforceable obligations of the dissolved redevelopment agencies, and to administer the dissolution and wind down of the dissolved redevelopment agencies. The determination of enforceable obligations is made by the State Department of Finance ( DOF ) in accordance with procedures and standards established in AB 26. IBank has confirmed with the Borrowers that are successor agencies that all of the Pledged Loans with such Borrowers have been recognized as enforceable obligations under AB 26. Further, payments due to IBank have appeared on each recognized obligation payment schedule ( ROPS ) approved by DOF to date. (The ROPS is the mechanism that enables each successor agency to make payments out of tax increment revenues allocated to it pursuant to AB 26.) However, there can be no assurance that DOF will continue to approve the inclusion of payments due to IBank on each 17

24 future ROPS through to the maturity date of each Pledged Loan to a successor agency Borrower. As of June 1, 2016, all of the Borrowers which constitute successor agencies have made all payments due on their Loans in a timely manner. Pledged Loans to the City of San Bernardino. IBank previously made six Pledged Loans to the City of San Bernardino, which made a bankruptcy filing under Chapter 9 of the U.S. Bankruptcy Code in August, Two of these Pledged Loans were paid in full. Four Pledged Loans remain outstanding. One of the outstanding Pledged Loans (with an outstanding principal amount of approximately $0.8 million) was structured as a lease payable from the City of San Bernardino s general fund. The other three outstanding Pledged Loans (with an outstanding principal amount of approximately $19.4 million) were made to the City of San Bernardino Municipal Water Department and structured as installment sale arrangements payable from the City s water enterprise fund. To date, the City of San Bernardino and the City of San Bernardino Municipal Water Department have made all payments in a timely manner. The City of San Bernardino filed its Plan for the Adjustment of Debts of the City of San Bernardino, California (the Plan of Adjustment ) on May 29, 2015, with the United States Bankruptcy Court for the Central District of California (the Bankruptcy Court ). The Plan of Adjustment provides for the treatment of the IBank obligations as secured claims that are unimpaired and are expected to be paid in full. The Plan of Adjustment is currently under consideration before the Bankruptcy Court. There can be no assurances that the Plan of Adjustment or the final resolution of the City of San Bernardino s bankruptcy filing in the future will not ultimately result in nonpayment of all or a portion of the amount owed by the City of San Bernardino and the City of San Bernardino Municipal Water Department pursuant to the Loans. In particular, there can be no assurances that the City of San Bernardino will not reject the leases between the City and IBank which are payable from the City s general fund. While IBank may have certain remedies available to it in such circumstances, including the ability to relet the properties which are the subjects of the leases, there can be no assurances that the exercise of such remedies will result in the recovery of principal and interest with respect to the outstanding Loans. Projected payments relating to the Pledged Loans to the City of San Bernardino are separately set forth in the Pro Forma Cash Flow Table in the column titled Watch List Loan Payments. The City of San Bernardino has notified IBank that it intends to prepay all of the remaining outstanding Pledged Loans made to the City of San Bernardino Municipal Water Department in the next few months. Prepayment of those Pledged Loans to the City of San Bernardino therefore are reflected in the Pro Forma Cash Flow Table as prepayments. The outstanding Pledged Loan payable from the City of San Bernardino s general fund is expected to remain outstanding. See PRO FORMA CASH FLOW TABLE. Although the City of San Bernardino has notified IBank of its intent to prepay the Loans described above, as of the date of issuance of the Series 2016A Bonds, the City of San Bernardino is not obligated to make such prepayment, and there can be no assurances that the Pledged Loans will be prepaid. Approved Loans. In addition to the Pledged Loans set forth in Appendix A, as of June 1, 2016, IBank has approved five loan applications with an aggregate principal amount of approximately $55.4 million, and, completed preliminary review of an additional application with an aggregate principal amount of approximately $25.5 million. There can be no assurances that any loan applicants will ultimately execute additional Pledged Loans. PLAN OF FINANCE As described in ESTIMATED SOURCES AND USES OF FUNDS, the proceeds of the sale of the Series 2016A Bonds will be used to (i) finance and refinance Loans (as defined herein) to 18

25 eligible borrowers, including local governments, state agencies and certain non-profit organizations for infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving Fund Program, (ii) make a deposit to the Common Reserve Fund and (iii) pay costs of issuance of the Series 2016A Bonds. Financing of Loans. Approximately $ million of the proceeds of the Series 2016A Bonds will be deposited by IBank in the Series 2016A Bond Proceeds Fund and will be used by IBank to make new loans pursuant to the ISRF Program. The Pro Forma Cash Flow Table includes payments which IBank expects to receive with respect to new Loans that IBank expects to make after the issuance of the Series 2016A Bonds. See the column titled New Loans in the Pro Forma Cash Flow Table. See also THE SERIES 2016A BONDS Redemption Extraordinary Redemption. Refinancing of Loans. Approximately $ million of the proceeds of the Bonds will be used to refinance Loans which IBank has previously made from the Equity Fund. The amounts of the proceeds of the Series 2016A Bonds that are used to refinance Loans are expected to be deposited into the Series 2016A Bond Proceeds Fund and then transferred into the Restricted Assets Account or the Unrestricted Assets Account established pursuant to the Indenture. Payments with respect to these refinanced Loans are reflected in the Pro Forma Cash Flow Table in the column titled Existing Pledged Loan Repayments. All of the Loans which are being refinanced, and all of the Loans to be funded from the proceeds of the Series 2016A Bonds will be to governmental borrowers for projects which qualify for tax-exempt financing pursuant to the Internal Revenue Code. 19

26 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Series 2016A Bonds are as follows: Sources: Series 2016A Bonds Principal Amount Net Original Issue Premium Other Available Moneys (1) Total: $ Uses: Common Reserve Fund (2) Series 2016A Bond Proceeds Fund (3) Costs of Issuance (4) Total: $ (1) Consists of amounts to be provided by IBank from the Equity Fund. (2) Consists of amount necessary to be added to the Common Reserve Fund upon the issuance of the 2016A Bonds to cause the amount on deposit to be at least equal to the Common Reserve Requirement. (3) Consists of $ which will be used to make new Loans and $ which will be immediately transferred to Restricted Assets Account or Unrestricted Assets Account of the Equity Fund as reimbursement for Loans previously funded from the Equity Fund. (4) Includes legal, financial advisory, and rating agency fees, Underwriters discount, and other miscellaneous costs of issuance. SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Limited Obligations of IBank The Bonds, including the Series 2016A Bonds, are limited obligations of IBank and are not a lien or charge upon the funds or property of IBank, except to the extent of the pledge and assignment provided for in the Indenture. Neither the State of California nor IBank shall be obligated to pay the principal of the Bonds or the interest thereon, except from the Collateral as provided in the Indenture. Neither the full faith and credit nor the taxing power of the State of California nor any agency thereof is pledged to the payment of the principal of or interest on the Bonds. IBank has no taxing power. Payment of debt service on the Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A Bonds and any other Series of Bonds or Parity Obligations payable on a parity from Collateral when due depends on the availability of the Collateral for such purpose. As described herein, the Collateral consists primarily of payments made by Borrowers pursuant to Pledged Loans, and available amounts in certain funds and accounts established pursuant to the Indenture, subject to the application thereof on the terms and conditions set forth in the Indenture. In the event that a significant amount of payments required to be paid by Borrowers pursuant to Pledged Loans are not paid, there can be no assurance that such circumstances will not have a material adverse impact on IBank s ability to pay debt service on the Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A Bonds and other Bonds and Parity Obligations when due. 20

27 Overview of Sources of Repayment The Bonds are limited obligations of IBank, payable solely from and secured by a pledge and assignment of the Collateral as provided in the Indenture. Collateral means all of IBank s right, title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and other property from time to time credited to or on deposit in the Pledged Funds and Accounts and (c) all other Revenues credited to or on deposit in the Pledged Funds and Accounts. Pledged Loans are Loans that are pledged pursuant to the Indenture. The Pledged Loans as of the date of issuance of the Series 2016A Bonds are described herein in THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM and in Appendix A. Pledged Loan Repayments means all payments of principal, interest or premiums on a Pledged Loan, whether as a result of scheduled payments or prepayments or remedial proceedings taken in the event of a default thereon. See PLAN OF FINANCE. A significant portion of the proceeds of the Series 2016A Bonds will be used to make Loans after the issuance of the Series 2016A Bonds. See PRO FORMA CASH FLOW TABLE for certain assumptions concerning the amount and timing of these Loans (referred to as New Loans in the Pro Forma Cash Flow Table). As described herein, IBank may from time to time add, release, substitute or amend the Pledged Loans, subject to the requirements of the Indenture. See Release, Substitution, Addition and Amendment of Pledged Loans. For a general description of the general terms of the Loans, see THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM Basic Terms of the Loans. Borrowers are entities that receive financial assistance under the ISRF Program, and generally consist of cities, counties, special districts, assessment districts, joint powers authorities, non-profit public benefit corporations formed by local government entities and certain other nonprofit entities. Borrowers also include successor agencies to redevelopment agencies, which were dissolved pursuant to State law in Issuer Retained Rights means (a) the right to receive Pledged Loan Fees and Expenses; (b) any right of IBank to indemnification; (c) the right of IBank to receive notices, certificates, opinions or similar documentation; and (d) the right of IBank to enforce the obligations of any Borrower contained in the Pledged Loans, including, but not limited to, default remedies. Pledged Funds and Accounts means the Revenue Fund, the Interest Fund, the Principal Fund (including all Sinking Accounts therein), the Reserve Funds, the Subordinate Obligations Fund, the Fees and Expenses Fund, the Supplemental Revenue Fund, the Equity Fund, and any accounts or subaccounts therein (excluding the Unrestricted Assets Account and excluding any Borrower s Loan Subaccount) and any other funds or accounts established pursuant to this Indenture and designated as such by IBank. Pledged Funds and Accounts includes the Series 2016A Bond Proceeds Fund established pursuant to the Third Supplemental Indenture but does not include any Borrower s Loan Subaccount established within the Series 2016A Bond Proceeds Fund. Revenues means: (i) all Pledged Loan Repayments; (ii) all investment earnings on amounts held by the Trustee in the Pledged Funds and Accounts; (iii) all Swap Revenues; and (iv) all Subsidy Payments. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Summary of Flow of Funds under the Indenture. 21

28 The Indenture provides that any Bonds secured under the Indenture, including the Series 2016A Bonds, are not subject to acceleration upon the occurrence of an event of default except that any Liquidity Facility Bonds may be subject to acceleration as set forth in the related Liquidity Facility. There currently are no Liquidity Facility Bonds or Liquidity Facilities outstanding. The Indenture provides that moneys held by the Trustee in each of the funds and accounts under the Indenture shall be invested in Permitted Investments, as defined in the Indenture. See APPENDIX C SUMMARY OF THE INDENTURE Investment of Funds and Accounts. Release, Substitution, Addition and Amendment of Pledged Loans IBank may release any Pledged Loan from the lien of the Indenture, substitute Loans for existing Pledged Loans or add additional Pledged Loans, in each case, by delivering to the Trustee the following: (i) a revised Exhibit A to the Indenture identifying the Pledged Loans following such release, substitution, or addition; (ii) a certificate of IBank identifying the Loans that are to become Pledged Loans and/or the Pledged Loans that are to be released; and (iii) a certificate of IBank that demonstrates compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund and after taking into effect such release, substitution or addition. Upon delivery of such certificates to the Trustee, (1) the Loans substituted for existing Pledged Loans or added in such certificate shall become Pledged Loans and be subject to the lien of the Indenture, and (2) the Loans released or for which other Pledge Loans are substituted in such certificate shall no longer be Pledged Loans and shall be released from the lien of the Indenture. For the purpose of demonstrating compliance with the Coverage Test in connection with the release or addition of Pledged Loans, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) IBank may amend the Pledged Loan Repayment provisions of any Pledged Loan if, prior to such amendment, IBank delivers to the Trustee and each Rating Agency a certificate of IBank that demonstrates compliance with the Coverage Test, without taking into account the amount then on deposit in the Supplemental Revenue Fund, after taking into effect the amendment. IBank may amend any of the other provisions of any Loan Agreement related to a Pledged Loan in its discretion without delivery of a certificate of IBank pursuant to the Indenture. Outstanding Bonds IBank has previously issued the Series 2014A Bonds, currently outstanding in the principal amount of $89,805,000 and the Series 2015A Bonds, currently outstanding in the principal amount of $87,590,000. The Series 2014A Bonds and the Series 2015A Bonds are Bonds under the Indenture, payable from Collateral on a parity with the Series 2016A Bonds. Common Reserve Fund The Common Reserve Fund in an amount equal to the Common Reserve Requirement will be held by the Trustee pursuant to the Indenture to secure the payment of principal of and interest on the 22

29 Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A Bonds and any other Common Reserve Fund Participating Bonds. Common Reserve Fund Participating Bonds means the Bonds of each Series which, pursuant to the terms of the Indenture and the Supplemental Indenture relating to such Series, are secured by amounts in the Common Reserve Fund. The Series 2016A Bonds are Common Reserve Fund Participating Bonds. Common Reserve Requirement means, as of any date of calculation, an amount equal to the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund Participating Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the Common Reserve Fund Participating Bonds in any Bond Year during the period commencing with the Bond Year in which the determination is being made and terminating with the last Bond Year in which any Common Reserve Fund Participating Bond is due, or (c) 125% of the sum of the Debt Service for the Common Reserve Fund Participating Bonds for all Bond Years during the period commencing with the Bond Year in which such calculation is made (or if appropriate, the first full Bond Year following the issuance of any Common Reserve Fund Participating Bonds) and terminating with the last Bond Year in which any Debt Service for the Common Reserve Fund Participating Bonds is due, divided by the number of such Bond Years, all as computed and determined by IBank and specified in writing to the Trustee; provided, that with respect to the issuance of additional Common Reserve Fund Participating Bonds, if the amount on deposit in the Common Reserve Fund would have to be increased by an amount greater than ten percent (10%) of the stated principal amount of such additional Common Reserve Fund Participating Bonds (or, if the issue has more than a de minimus amount of original issue discount or premium, of the issue price of such Common Reserve Fund Participating Bonds) then the Common Reserve Requirement shall be such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition to funding the Common Reserve Fund with the proceeds of Bonds, IBank may fund the Common Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common Bonds Reserve Requirement. Amounts in the Common Reserve Fund (including all amounts which may be obtained from a Reserve Facility on deposit in the Common Reserve Fund) shall be used and withdrawn by the Trustee, for the following purposes: (i) after the application of any amounts held in the Supplemental Revenue Fund as provided in the Indenture, for the purpose of making up any deficiency in the Interest Fund or the Principal Fund relating to the Common Reserve Fund Participating Bonds; or (ii) together with any other moneys available therefor, (x) for the payment or redemption of all Common Reserve Fund Participating Bonds then Outstanding, (y) for the defeasance or redemption of all or a portion of the Common Reserve Fund Participating Bonds then Outstanding, provided, however, that if funds on deposit in the Common Reserve Fund are applied to the defeasance or redemption of a portion of the Common Reserve Fund Participating Bonds, the amount on deposit in the Common Reserve Fund immediately subsequent to such partial defeasance or redemption shall equal the Common Reserve Requirement applicable to all Common Reserve Fund Participating Bonds Outstanding immediately subsequent to such partial defeasance or redemption, or (z) for the payment of the final principal and interest payment of the Common Reserve Fund Participating Bonds. Amounts on deposit in the Common Reserve Fund in excess of the Common Reserve Requirement many also be transferred out of the Common Reserve Fund for purposes other than those described in the preceding paragraph. See SUMMARY OF THE INDENTURE Establishment, Funding and Application of Common Reserve Fund. The Indenture provides that, in lieu of maintaining and depositing moneys in the Common Reserve Fund, IBank may provide an insurance policy, letter of credit or surety bond to satisfy the 23

30 Common Reserve Requirement, subject to the requirements of the Indenture. See SUMMARY OF THE INDENTURE Establishment, Funding and Application of Common Reserve Fund. Conditions to Issuing Additional Bonds and Parity Obligations Additional Series of Bonds, secured by the Collateral and payable on a parity with the Series 2014A Bonds, the Series 2015A Bonds and the Series 2016A Bonds, may be issued by IBank upon delivery of the following to the Trustee: (A) a Supplemental Indenture authorizing such Series executed by IBank; (B) a certificate of IBank certifying that no Event of Default has occurred and is then continuing (or the issuance of such additional Series of Bonds will cure any such Event of Default); (C) a certificate of IBank demonstrating either (i) compliance with the Coverage Test after taking into account the issuance of such additional Series of Bonds but without taking into account amounts on deposit or expected to be on deposit in the Supplemental Revenue Fund or (ii) that Annual Debt Service will not be increased in any Bond Year after taking into account the issuance of such additional Series of Bonds; (D) an Opinion of Bond Counsel to the effect that the Supplemental Indenture is being entered into in accordance with the Indenture and that such Series of Bonds, when duly executed by IBank and authenticated and delivered by the Trustee, will be valid and binding obligations of IBank. For the purpose of demonstrating compliance with the Coverage Test in connection with the issuance of additional Bonds, IBank shall not take into account amounts on deposit or expected to be on deposit in the Supplemental Revenue Fund but IBank may use and rely on any other assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) The requirements of the Indenture described above are required to be met in connection with the issuance of the Series 2016A Bonds. See PRO FORMA CASH FLOW TABLE. If a Supplemental Indenture providing for the issuance of such Series requires either (i) the establishment of a Reserve Fund to provide additional security for such Series of Bonds, or (ii) that the balance on deposit in an existing Reserve Fund be increased, forthwith upon the receipt of the proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement with respect to such Series of Bonds and all other Bonds secured by such Reserve Fund to be considered Outstanding upon the issuance of such additional Series of Bonds, then the Supplemental Indenture providing for the issuance of such additional Series of Bonds shall require deposit of the amount necessary. Said deposit may be made from the proceeds of the sale of such Series of Bonds or from other funds of IBank or from both such sources or, subject to the terms of the Indenture and any Supplemental Indenture governing such Reserve Fund, may be made in the form of a Reserve Facility. As described above, the Series 2016A Bonds are secured by an existing Reserve Fund referred to herein as the Common Reserve Fund. 24

31 In addition, the Indenture permits the issuance or incurrence of additional obligations, other than Bonds, secured by the Collateral and payable on a parity with Bonds ( Parity Obligations ), upon satisfaction of certain requirements set forth in the Indenture, including the following: (A) Such Parity Obligations have been duly and legally authorized by IBank for any lawful purpose; (B) No Event of Default shall have occurred and then be continuing (or the issuance of such Parity Obligations will cure any such Event of Default), as evidenced by the delivery to the Trustee of a certificate of IBank to that effect; (C) IBank shall have delivered to the Trustee a certificate of IBank demonstrating either (i) compliance with the Coverage Test after taking into account the issuance or incurrence of such Parity Obligations or (ii) that Annual Debt Service will not be increased in any Bond Year after taking into account the issuance or incurrence of such Parity Obligations; provided, however that if the Parity Obligation being issued or incurred consists of an Interest Rate Swap Agreement (excluding fees and expenses and termination payments on such Interest Rate Swap Agreement), IBank shall be deemed to have complied with the requirements of this paragraph to the extent that the Series of Bonds to which the Interest Rate Swap Agreement relates (x) satisfies the requirements of the Indenture for the issuance of additional Bonds described above after taking into account the adjustment of Debt Service on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements entered into concurrently with, or subsequent to, the issuance of such Bonds), or (y) is expected to satisfy the requirements of the Indenture for the issuance of additional Bonds described above after taking into account the adjustment of Debt Service on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements entered into in advance of the issuance of such Bonds), each as evidenced by a certificate of IBank delivered to the Trustee; and (D) As and to the extent applicable, the Trustee is designated as paying agent or trustee for such Parity Obligations and IBank delivers to the Trustee a transcript of the proceedings providing for the issuance of such Parity Obligations (but the Trustee shall not be responsible for the validity or sufficiency of such proceedings or such Parity Obligations). For the purpose of demonstrating compliance with the Coverage Test in connection with the issuance or incurrence of Parity Obligations, IBank may use and rely on any other assumptions the IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) In addition, the Indenture permits the issuance or incurrence of Subordinate Obligations and Fee and Expense Obligations without demonstrating compliance with the Coverage Test. There are no Parity Obligations, Subordinate Obligations or Fee and Expense Obligations currently outstanding. 25

32 Summary of Flow of Funds under the Indenture The following summary descriptions of the provisions of the Indenture concerning the Revenue Fund and the deposit of moneys to various funds thereunder are only brief summaries of those provisions and are not intended to be a complete or definitive description of the flow of funds. For a more complete description, see APPENDIX C SUMMARY OF THE INDENTURE. So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and Expense Obligations or any other amounts payable under the Indenture remain unpaid, IBank covenants and agrees to: (a) direct the Borrower for each Pledged Loan to transfer Pledged Loan Repayments directly to the Trustee and (b) promptly transfer Pledged Loan Repayments received by it from any Borrower to the Trustee. The Trustee will deposit in a trust fund, designated as the Revenue Fund, all Pledged Loan Repayments transferred to the Trustee, when and as received by the Trustee. Subject to the terms of the Indenture, all other Revenues will also be deposited in the Revenue Fund. Notwithstanding anything to the contrary contained in the Indenture, amounts transferred to or received by the Trustee that constitute Pledged Loan Fees and Expenses will not be deposited in the Revenue Fund by the Trustee but will be transferred by the Trustee directly to the Pledged Loan Fees and Expenses Subaccount of the Unrestricted Assets Account when and as received. Revenue Fund. So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and Expense Obligations or any other amounts payable under the Indenture remain unpaid, the Trustee shall set aside the moneys in the Revenue Fund in the following respective funds (each of which the Trustee shall establish, maintain and hold in trust for the benefit of the Holders of the Bonds and, as and to the extent applicable, the holders of Parity Obligations, Subordinate Obligations and Fee and Expense Obligations), on the following respective dates, in the following amounts, in the following order of priority, the requirements of each such fund (including the making up of any deficiencies in any such fund resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any deposit is made to any fund subsequent in priority; provided that (i) on a parity with such deposits the Trustee may set aside or transfer amounts with respect to any outstanding Parity Obligations as provided in the proceedings for such Parity Obligations delivered to the Trustee pursuant to the Indenture (which shall be proportionate if such amounts are insufficient to provide for all deposits required as of any date to be made with respect to the Bonds and such Parity Obligations), (ii) payments on Interest Rate Swap Agreements that constitute Parity Obligations shall be payable from the Interest Fund and the required deposits below shall be adjusted to include payments on such Interest Rate Swap Agreements during the applicable Transfer Calculation Period (which shall be proportionate in the event such amounts are insufficient to provide for all deposits required as of any date to be made with respect to the Bonds and such Parity Obligations) and (iii) if any of the deposits or transfers requires more than one such deposit or transfer and there are not then on deposit in the Revenue Fund sufficient moneys to make all such deposits and transfers, then such deposits and transfers shall be made pro rata (based on the total amount of such deposits and payments then due) to the extent of available moneys. Transfer Calculation Period means (i) with respect to each Transfer Date during the period commencing on, and including, each day that is two (2) Business Days prior to any April 1 and ending on, but excluding, the day that is two (2) Business Days prior to the next succeeding October 1, the period commencing on, and including, such April 1 and ending on, and including, the next succeeding October 1 and (ii) with respect to each Transfer Date during the period commencing on, and including, each day that is two (2) Business Days prior to any October 1 and ending on, but excluding, the day that is two (2) Business Days prior to the next succeeding April 1, the period 26

33 commencing on, but excluding, such October 1 and ending on, but excluding, the next succeeding April 1. Transfer Date means, initially, each day that is two (2) Business Days prior to each April 1 and October 1, commencing with October 1, 2016 and, upon delivery of a certificate of IBank to the Trustee specifying additional dates, each additional date specified in the certificate of IBank. (1) Interest Fund. On each Transfer Date, the Trustee shall set aside in the Interest Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Interest Fund is equal to the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date; provided that with respect to a newly issued Series of Bonds having one or more Interest Payment Dates scheduled to occur during the Transfer Calculation Period in which such Series of Bonds is issued and prior to the next Transfer Date for such Transfer Calculation Period, the Trustee shall, no later than the first Interest Payment Date for such Series of Bonds, set aside in the Interest Fund the amount of interest becoming due on said Series of Bonds on said Interest Payment Dates. The Trustee need not make any deposit into the Interest Fund with respect to any Bonds on any Transfer Date if the amount contained therein on such Transfer Date is at least equal to the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. On October 1 of each year, any excess amounts in the Interest Fund not needed to pay interest on such date (and not held to pay interest on Bonds during the immediately following Transfer Calculation Period) shall be transferred to the Revenue Fund (but excluding, in each case, any moneys on deposit in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment Dates). Interest Fund Requirement means, for any Transfer Calculation Period, (i) the aggregate amount of interest becoming due and payable on the Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness which shall be governed by clause (ii) below) during such Transfer Calculation Period (excluding any interest for which there are moneys deposited in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay such interest during said Transfer Calculation Period) plus (ii) the aggregate amount of interest becoming due and payable on Outstanding Current Interest Bonds constituting Variable Rate Indebtedness during the such Transfer Calculation Period, calculated, if the actual rate of interest is not known, at the interest rate specified in writing by IBank, or if IBank has not specified an interest rate in writing, calculated at the maximum interest rate borne by such Variable Rate Indebtedness during the month prior to the month of deposit plus one hundred (100) basis points. If there are Liquidity Facility Bonds outstanding during any Transfer Calculation Period, the Interest Fund Requirement shall take into account and include the Liquidity Facility Rate on Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds. All amounts in the Interest Fund shall be used and withdrawn by the Trustee solely for the purposes of: (a) paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture), or for reimbursing the Credit Enhancement Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay letter of credit, and (b) making periodic payments on Interest Rate Swap Agreements, as provided in the Indenture. If amounts on deposit in the Interest Fund are not sufficient to pay 27

34 in full all amounts payable from the Interest Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Interest Fund and payments then due). (2) Principal Fund; Sinking Accounts. On each Transfer Date, the Trustee shall set aside in the Principal Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Principal Fund is equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date; provided that with respect to a newly issued Series of Bonds having Bond Obligation or Mandatory Sinking Account Payments scheduled to be due and payable during the Transfer Calculation Period in which such Series of Bonds is issued and prior to the next Transfer Date for such Transfer Calculation Period, the Trustee shall, no later than the first such payment date for such Series of Bonds, set aside in the Principal Fund the amount of Bond Obligation or Mandatory Sinking Account Payments due and payable on said Series of Bonds on said payment dates. All of the aforesaid deposits made in connection with future Mandatory Sinking Account Payments shall be made without priority of any payment over any other such payment. The Trustee need not make a deposit into the Principal Fund with respect to any Bonds on any Transfer Date if the amount contained therein on such Transfer Date is at least equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. On October 1 of each year, any excess amounts in the Principal Fund not needed to pay principal on such date (and not held to pay principal on Bonds during the immediately following Transfer Calculation Period) shall be transferred to the Revenue Fund. Principal Fund Requirement means, with respect to any Transfer Calculation Period, (i) the aggregate amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series during such Transfer Calculation Period, plus (ii) the aggregate of the Mandatory Sinking Account Payments to be paid during such Transfer Calculation Period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts have been created and for which mandatory redemption is required from said Sinking Accounts; provided that if IBank certifies to the Trustee that any principal payments during such Transfer Calculation Period are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, the Principal Fund Requirement for such Transfer Calculation Period need not include such principal to be so refunded or paid. Not later than the Transfer Date immediately preceding the beginning of each Bond Year, the Trustee shall request from IBank a certificate of IBank setting forth the principal payments that will not be included in the Principal Fund Requirement pursuant to the preceding sentence and the reason therefor. If there are any Liquidity Facility Bonds outstanding during a Transfer Calculation Period then the Principal Fund Requirement shall take into account and include any amortizations or redemptions of any Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds. For purposes of the Principal Fund Requirement, Liquidity Facility Bonds shall be treated as Serial Bonds with maturity dates on the payment dates of any amortization or redemptions. All amounts in the Principal Fund shall be used and withdrawn by the Trustee solely for the purposes of paying the Bond Obligation of the Bonds when due and payable, except that all amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to purchase or redeem or pay at maturity Term Bonds, as provided in the Indenture, or for reimbursing the Credit Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay letter of credit. If amounts on deposit in the Principal Fund are not sufficient to pay in full all amounts payable from the 28

35 Principal Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Principal Fund and payments then due). (3) Reserve Funds. On each Transfer Date, after the transfers described in (1) and (2) above have been made, the Trustee shall deposit to any Reserve Fund the amounts, if any, required make up any deficiency therein. (4) Rebate Fund. On each Transfer Date, after the transfers described in (1), (2) and (3) above have been made, the Trustee shall deposit in the Rebate Fund any amounts required to be deposited therein pursuant to any tax certificate executed by IBank in connection with the issuance of Bonds or otherwise. (5) Subordinate Obligations Fund. On each Transfer Date, after the transfers described in (1), (2), (3) and (4) above have been made, the Trustee shall deposit in the Subordinate Obligations Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Subordinate Obligations Fund is equal to the amount necessary to make payments due and payable with respect to Subordinate Obligations during the Transfer Calculation Period applicable to such Transfer Date. (6) Fees and Expenses Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4) and (5) above have been made, the Trustee shall deposit in the Fees and Expenses Fund such amount as IBank shall specify in writing is necessary for the payment of Fee and Expense Obligations then owing by IBank. (7) Administrative Expense Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5) and (6) above have been made, the Trustee shall deposit in the Administrative Expense Account, the amount of Administrative Expenses budgeted for such period, as specified in writing to the Trustee by IBank. (8) Supplemental Revenue Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6) and (7) above have been made, the Trustee shall deposit in the Supplemental Revenue Fund, the amount, if any, required pursuant to the Indenture. (9) Other Funds. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6), (7) and (8) above have been made, the Trustee shall deposit in any other fund or account established with respect to Parity Obligations, Subordinate Obligations or Fee and Expense Obligations such amount as may be specified in or determined under the provisions of the Supplemental Indenture or other instrument providing for the issuance or incurrence of such Parity Obligations, Subordinate Obligations or Fee and Expense Obligations to be transferred to such fund or account pursuant to the provisions of the Indenture described in this paragraph. (10) Equity Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6), (7), (8) and (9) above have been made, the Trustee shall deposit in the Equity Fund, all amounts remaining in the Revenue Fund on such Transfer Date. Unless otherwise specified by IBank, all amounts transferred to the Equity Fund shall first be deposited by the Trustee in the Unrestricted Assets Account until the amount so transferred to the Unrestricted Assets Account in such Fiscal Year is equal to IBank s projected operating expenses for such Fiscal Year plus for one-half of the following Fiscal Year (or such lesser amount as may be determined in the sole discretion of IBank). After making the transfers to the Unrestricted Assets Account described in the preceding sentence, all amounts transferred to the Equity Fund in the Fiscal Year shall be deposited by the Trustee in the Restricted 29

36 Assets Account. Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Restricted Assets Account shall be used and withdrawn by the Trustee as directed by IBank for any lawful purpose of the Program. If, on any date, IBank delivers to the Trustee a certificate of IBank demonstrating compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund and requesting that the amount on deposit in the Restricted Assets Account (or portion thereof) be released from the Restricted Assets Account, then the amount (or such portion thereof) on deposit in the Restricted Assets Account shall be withdrawn by the Trustee and deposited, transferred, or utilized pursuant to the instructions of IBank (which may include an instruction to deposit amounts in the Unrestricted Assets Account). For the purpose of demonstrating compliance with the Coverage Test in accordance with the Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) The Unrestricted Assets Account shall be maintained by the Trustee for the benefit of IBank, shall be controlled by IBank, is not part of the Collateral and shall not be subject to the lien of the Indenture. Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Unrestricted Assets Account may be used, transferred or withdrawn by IBank at any time for any lawful purpose of IBank and without demonstrating compliance with the Coverage Test. Amounts in the Restricted Assets Account or the Unrestricted Assets Account, may also be transferred to separate subaccounts for the funding of Loans. Moneys on deposit in each Borrower s Loan Subaccount within the Restricted Assets Account and the Unrestricted Assets Account will be disbursed to the particular Borrower (or to IBank to reimburse IBank for any disbursements made to such Borrower on its Loan prior to the date the Trustee created such Borrower s Loan Subaccount); provided, however, that interest, profits and other income received from the investment of moneys in such Borrower s Loan Subaccount shall be transferred by the Trustee at the direction of IBank. IBank may direct the Trustee to transfer the amount of funds then held in a Borrower s Loan Subaccount that IBank has decided will not be disbursed to the Borrower to the Restricted Assets Account or the Unrestricted Assets Account, as applicable. Supplemental Revenue Fund The Indenture provides that the Trustee shall not transfer amounts on deposit in the Revenue Fund to any fund or account subordinate in priority to the Supplemental Revenue Fund until IBank has delivered to the Trustee a certificate of IBank calculating the Coverage Test (taking into account amounts already on deposit in the Supplemental Revenue Fund). If, based on such calculation, the Coverage Test will not be satisfied as of the date of calculation, then IBank shall also specify, in the certificate of IBank delivered to the Trustee, the amount required to be deposited in the Supplemental 30

37 Revenue Fund to pay any projected shortfalls in the scheduled payment of Bonds or Parity Obligations and to satisfy the Coverage Test as of the date of calculation. Pursuant to the certificate of IBank and with the priority set forth in the Indenture, the Trustee shall transfer funds from the Revenue Fund to the Supplemental Revenue Fund. The Trustee shall also deposit in the Supplemental Revenue Fund any other amounts transferred to it by IBank and designated by IBank in writing for such purpose. All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by the Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any deficiency in the payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for such purpose. If, on any date, IBank delivers to the Trustee a certificate of IBank demonstrating compliance with the Coverage Test without taking into account the amount (or a portion thereof) then on deposit in the Supplemental Revenue Fund and requesting that such amount (or portion thereof) be released from the Supplemental Revenue Fund, then the amount (or such portion thereof) on deposit in the Supplemental Revenue Fund shall be withdrawn by the Trustee and deposited, transferred or utilized pursuant to written instructions of IBank, which instructions may direct the Trustee to deposit such amount (or portion thereof) in the Unrestricted Assets Account free and clear of the lien of the Indenture. For the purpose of demonstrating compliance with the Coverage Test in accordance with the Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) Prior Outstanding Bonds Pursuant to the Indenture, IBank previously issued its 2014A Bonds, which are currently outstanding in the principal amount of $89,805,000 and its 2015A Bonds, which are currently outstanding in the principal amount of $87,590,000. Flow of Funds Diagram The following diagram illustrates in a summary fashion the flow of funds pursuant to the Indenture and is not intended to be a complete or definitive description of the flow of funds. For a more complete description of the flow of funds, see APPENDIX C SUMMARY OF THE INDENTURE. 31

38 32

39 * This chart reflects a simplified version of the flow of funds. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Summary of Flow of Funds under the Indenture for a more complete discussion. (1) Revenues are continuously deposited into the Revenue Fund. (2) On each Transfer Date the Trustee will transfer amounts from the Revenue Fund to the Interest Fund until the amount on deposit in the Interest Fund is equal to the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. (3) On each Transfer Date, the Trustee will transfer amounts from the Revenue Fund to the Principal Fund until the amount on deposit in the Principal Fund is equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. (4) On each Transfer Date, the Trustee will transfer amounts from the Revenue Fund to the Reserve Fund required to make up any deficiency in the Reserve Fund. As described in SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS, the Series 2016A Bonds are secured by the Common Reserve Fund. (5) On each Transfer Date, the Trustee will transfer from the Revenue Fund to the Rebate Fund any amounts required to be deposited in the Rebate Fund pursuant to any tax certificate executed by IBank in connection with the issuance of Bonds or otherwise. (6) On each Transfer Date the Trustee will transfer amounts from the Revenue Fund to the Subordinate Obligations Fund until the amount on deposit in the Subordinate Obligations Fund is equal to the amount necessary to make payments due and payable with respect to Subordinate Obligations during the Transfer Calculation Period applicable to such Transfer Date. (7) On each Transfer Date, the Trustee shall transfer from the Revenue Fund to the Fees and Expenses Fund the amount necessary for the payment of Fee and Expense Obligations then owing by IBank. (8) On each Transfer Date, the Trustee shall transfer from the Revenue Fund to the Administrative Expense Account the amount of Administrative Expenses budgeted for such period specified by IBank. (9) Before any amounts on deposit in the Revenue Fund can be transferred to the Equity Fund (or any fund or account subordinate in priority to the Supplemental Revenue Fund), IBank must calculate the Coverage Test. If, based on such calculation, the Coverage Test will not be satisfied as of the date of calculation, then the amount of money that IBank determines to be necessary in order for the Coverage Test to be satisfied as of the date of calculation shall be transferred to the Supplemental Revenue Fund. (10) Unless otherwise specified by IBank, all amounts transferred to the Equity Fund shall first be deposited by the Trustee in the Unrestricted Assets Account until the amount so transferred to the Unrestricted Assets Account in such Fiscal Year is equal to IBank s projected operating expenses for such Fiscal Year plus for one-half of the following Fiscal Year (or such lesser amount as may be determined in the sole discretion of IBank). After making the transfers to the Unrestricted Assets Account described in the preceding sentence, all amounts transferred to the Equity Fund in the Fiscal Year shall be deposited by the Trustee in the Restricted Assets Account. (10)(a) Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Restricted Assets Account shall be used and withdrawn by the Trustee as directed by IBank for any lawful purpose of the Program. If, on any date, IBank delivers to the Trustee a certificate of IBank demonstrating compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund and requesting that the amount on deposit in the Restricted Assets Account (or portion thereof) be released from the Restricted Assets Account, then the amount (or such portion thereof) on deposit in the Restricted Assets Account shall be withdrawn by the Trustee and deposited, transferred, or utilized pursuant to the instructions of IBank (which may include an instruction to deposit amounts in the Unrestricted Assets Account). (10)(b) Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Unrestricted Assets Account may be used, transferred or withdrawn by IBank at any time for any lawful purpose of IBank. (11) All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by the Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any deficiency in the payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for such purpose. 33

40 (12) Amounts on deposit in the Reserve Fund shall be used to make up any deficiency in the Interest Fund or the Principal Fund relating to the Bonds of the Series to which the Reserve Fund relate. Note: For the purpose of demonstrating compliance with the Coverage Test in accordance with the Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.) 34

41 PRO FORMA CASH FLOW TABLE The following Pro Forma Cash Flow Table sets forth the pro forma annual Revenues, existing debt service on the Series 2014A Bonds and the Series 2015A Bonds, debt service on the Series 2016A Bonds, and pro forma debt service coverage (as determined in accordance with the Indenture). The amounts set forth in the Pro Forma Cash Flow Table are based upon a variety of assumptions, including that debt service on all Pledged Loans is paid when due in accordance with scheduled repayment amounts and that there are no prepayments of such amounts. In addition, the Pro Forma Cash Flow Table assumes that there is no substitution, addition, amendment or release of Pledged Loans. Any release, substitution or amendment of a Pledged Loan must satisfy the conditions set forth in the Indenture. Any release, substitution or amendment of a Pledged Loan could result in a reduction in the projected debt service coverage set forth in the tables. See SECURITY AND SOURCE OF PAYMENT FOR BONDS Release, Substitution, Addition and Amendment of Pledged Loans. The Pro Forma Cash Flow Table also assumes that new Pledged Loans will be made in the times and amounts set forth in the footnotes to the table. The Pro Forma Cash Flow Table does not reflect the issuance of any Additional Bonds, although the Indenture permits the issuance of such Additional Bonds. The IBank intends to continue to solicit applications for Loans and to issue additional Bonds in the future to fund Loans as necessary or desirable to achieve the goals of the Infrastructure State Revolving Fund Program. As a result, actual conditions with respect to the payment of Existing Loans, the execution of New Pledged Loans, the issuance of Additional Bonds and other matters may differ from those assumed in the Pro Forma Cash Flow Table, and therefore actual cash flow and debt service coverage may differ from the cash flow and debt service coverage set forth in the Pro Forma Cash Flow Table. 35

42 Pro Forma Cash Flow Table Pledged Existing Watch List New Pledged 2016A Supplemental Excess after Bond Loan Estimated Debt Coverage Loan Coverage Loan Debt Coverage Reserve Revenue Debt Year Payments Earnings Service 1 Payments 2 Payments Service 3 Releases Fund Service (Oct 1) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 2016 $35,734,462 $474,856 $15,976, $22,406, $1,760, $40,878, ,066, ,620 16,077, , $7,098,307 7,285, ,605, ,096, ,282 16,070, , ,516,237 9,025, ,164, ,114, ,808 16,092, , ,516,237 9,029, $364,620-8,538, ,132, ,323 16,107, , ,516,237 9,032, ,842-8,566, ,096, ,918 15,951, , ,516,237 8,907, ,014-8,510, ,893, ,182 15,585, ,516,237 9,024, ,852-8,451, ,836, ,619 14,799, ,516,237 9,024, ,724-8,220, ,329, ,767 14,424, ,516,237 9,023, ,988-8,102, ,819, ,879 13,296, ,516,237 9,026, ,734-7,756, ,678, ,423 13,196, ,516,237 9,031, ,225-7,700, ,182, ,691 12,830, ,516,237 9,033, ,123-7,628, ,959, ,441 12,666, ,516,237 9,037, ,760-7,614, ,825, ,223 12,573, ,516,237 9,038, ,125-7,644, ,432, ,949 12,297, ,516,237 9,030, ,949-7,625, ,076, ,331 10,356, ,516,237 9,958, ,053-7,371, ,269, ,514 8,929, ,516,237 10,030, ,672-6,926, ,254, ,844 7,418, ,516,237 10,032, ,202-6,405, ,056, ,432 6,525, ,516,237 10,025, ,290-6,065, ,387, ,249 5,274, ,516,237 10,024, ,179-5,670, ,045, ,190 4,440, ,516,237 9,849, ,913-5,306, ,983, ,022 3,798, ,516,237 9,698, ,656-5,037, ,154, ,761 3,182, ,516,237 9,693, ,303-4,865, ,079, ,412 1,628, ,516,237 9,683, ,990-4,426, ,701, ,937 1,345, ,516,237 9,686, ,956-4,134, ,572, ,165 1,251, ,516,237 9,687, ,225-4,192, ,238, ,422 1,003, ,966,719 8,519, ,976-3,951, ,891, , , ,966,719 8,521, ,706-3,861, ,740, ,187 7,966,719 9,149, ,983, ,120, ,498 7,966,719 8,688, ,514,297-10,343,225 36

43 (1) Assumes all Pledged Loans existing as of date of the issuance of the Series 2016A Bonds are paid in a timely manner through maturity of such Pledged Loans. Bond Year 2016 includes actual and expected prepayments totaling $14,412,794. Excludes scheduled payments and prepayments with respect to Watch List Loans. (2) Assumes (i) investment earnings of 1.85% on the Series 2014A and Series 2015A contributions to the Common Reserve Fund through October 1, 2020, (ii) investment earnings of 0.25% on amounts on the remainder on deposit in the Common Reserve Fund through October 1, 2020, (iii) investment earnings of 0.25% on amounts on deposit in the Common Reserve Fund from October 1, 2020, (iv) investment earnings of 0.25% on amounts on deposit in the Revenue Fund and the Restricted Assets Account of the Equity Fund (assuming repayment of all currently Pledged Loans), (v) the first $1.5 million in excess amounts after payment of debt service will be transferred to the Unrestricted Assets Account of the Equity Fund and the remainder will be retained in the Restricted Assets Account of the Equity Fund, and (vi) no new Pledged Loans are made. (3) Includes debt service on the Series 2014A and Series 2015A Bonds. (4) Calculated in accordance with Indenture using Existing Pledged Loan Repayments (excluding payments on Watch List Loans) plus Estimated Earnings. (5) Watch List Loans include four loans with the City of San Bernardino, three of which are expected to be prepaid by October 1, (6) Calculated in accordance with Indenture using Existing Pledged Loan and Watch List Loan Repayments plus Estimated Earnings. (7) Assumes that $154,078,267 additional Loans will be made and designated as Pledged Loans by August 1, (8) Reflects scheduled debt service on the Series 2016A Bonds, assuming no prepayments. (9) Calculated in accordance with Indenture using Existing Pledged Loans, Watch List Loan, and New Pledged Loan Repayments plus Estimated Earnings. (10) Represents amounts released from Common Reserve Fund as the Common Reserve Requirement is reduced following principal payments on maturing Series 2014A Bonds, Series 2015A Bonds, and Series 2016A Bonds. (11) Assumes that excess revenue will not need to be retained within the Supplemental Revenue Account. (12) Excess amounts are subject to application in accordance with the flow of funds established in the Indenture. See SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS Summary of Flow of Funds under the Indenture. 37

44 INVESTMENT CONSIDERATIONS The following information should be considered by prospective investors, in addition to the other matters set forth in this Official Statement in evaluating the Series 2016A Bonds. However, it does not purport to be a comprehensive or exhaustive discussion of risks or other considerations which may be relevant to an investment in the Series 2016A Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. There can be no assurance that other considerations not discussed herein will not become material in the future. Limited Obligation; Covenants Pursuant to Indenture Do Not Constitute a Guarantee The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured by a pledge and assignment of the Collateral as provided in the Indenture. Although the Indenture contains provisions intended to result in the availability of sufficient Collateral to pay debt service on the Series 2016A Bonds when due, the covenants and agreements of IBank pursuant to the Indenture do not constitute a guarantee that sufficient Collateral will be available to make debt service payments on the Series 2016A Bonds when due. Considerations Relating to Pledged Loans and Borrowers The largest source of Collateral is expected to consist of Pledged Loan Repayments from Borrowers. See PRO FORMA CASH FLOW TABLE. Failure of one or more Borrowers to pay debt service on Pledged Loans when due could materially adversely affect payment of debt service on the Series 2016A Bonds. Borrowers are not obligated to pay any amounts in excess of the amounts originally agreed to pursuant to their Pledged Loan agreements to make up shortfalls by other Borrowers under their respective Loan Agreements. As shown in Appendix A, Borrowers for the Pledged Loans generally consist of cities, counties, successor agencies to redevelopment agencies, special districts, assessment districts and joint powers authorities. (As described herein, Loans to Non-Profit Entities are authorized, but none have been approved as of the date hereof.) The Criteria utilized by IBank to select Borrowers and establish amounts available for borrowing under Pledged Loans generally does not specify particular financial requirements or minimum credit standards. In addition, a number of specific and general legal restraints may adversely affect the ability of Borrowers to repay their Pledged Loans, including but not limited to, the ability of Borrowers to raise new or additional taxes, utility rates and charges, or other revenues necessary to pay debt service on Pledged Loans. As described herein in THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM - Basic Terms of the Loans, the structure of a particular Loan generally depends on its repayment source, and the circumstances which could adversely affect the ability of particular Borrowers to make timely payments with respect to their Loans may vary. For instance, Borrowers with Loans payable from their general funds generally have limited ability to raise general fund revenues, and their ability to repay the Loans may be adversely affected by increases in other amounts payable from their general fund (including but not limited to employee salaries and benefits and retirement related payments). As another example, with respect to Borrowers with Loans payable from the revenues of an enterprise fund (such as a water or wastewater enterprise), increasing regulatory requirements may significantly increase their operating costs, resulting in financial stress. Loans to Borrowers which are successor agencies to redevelopment agencies are payable solely from specific real estate tax increments and are subject to further review and approval by the State Department of Finance as enforceable obligations under State law. See OUTSTANDING LOANS Pledged Loans. Loans to successor agencies are also subject to the 38

45 risks generally incident to loans secured by real estate, including potential declines in the market value of real property within and in the vicinity of the respective project areas. The ability of the Borrowers to make timely payments due on their respective Pledged Loans depends on various economic and financial circumstances and legal requirements and restrictions applicable to individual Borrowers, and could be adversely affected by a variety of factors and circumstances, including but not limited to the factors and circumstances described in the preceding paragraph, natural disasters (such as earthquakes or floods) and general economic conditions in the particular jurisdictions or service areas of the Borrowers or in the State generally. Four of the Pledged Loans are with the City of San Bernardino, which is currently in bankruptcy proceedings. See OUTSTANDING LOANS - Pledged Loans - Particular Pledged Loans - Pledged Loans to the City of San Bernardino. (Three of the Pledged Loans with the City of San Bernardino are payable solely from revenues of the City s water system, and are expected to be prepaid in the next few months.) Projected payments relating to the Pledged Loans to the City of San Bernardino are set forth in the Pro Forma Cash Flow Table in the column titled Projected Payments on Watch List Loans. Bankruptcy of a Borrower Borrowers generally are authorized to file for bankruptcy under certain circumstances. (Future Borrowers which are Non-Profit Entities, if any, may also be subject to involuntary bankruptcy petitions.) Borrowers under Loans previously made by IBank under the ISRF Program have filed for bankruptcy in the past. The City of San Bernardino, which is the Borrower with respect to four Pledged Loans, is currently in bankruptcy proceedings. See OUTSTANDING LOANS - Pledged Loans - Particular Pledged Loans - Pledged Loans to the City of San Bernardino for a description of the Loans to the City of San Bernardino.) If a Borrower is in bankruptcy, IBank may be prohibited from taking any action to collect any amount from the Borrower or to enforce any obligation of the Borrower, unless the permission of the bankruptcy court is obtained. Further, the Borrower may be able, without the consent and over the objection of IBank, to alter the priority, interest rate, payment terms, maturity dates, payment sources, covenants, and other terms or provisions of Loans (which may include Pledged Loans), as long as the bankruptcy court determines that the alterations are fair and equitable. With respect to Pledged Loans that are payable from revenues of enterprise funds of the Borrowers (such as water or wastewater system revenues), such revenues may be deemed to be special revenues under the Bankruptcy Code, and thus may be protected by the provisions of the Bankruptcy Code providing that such special revenues continue to be subject to the lien granted to IBank by the Borrower pursuant to the Pledged Loan agreement (subject to potential reduction for the necessary operating expenses of such system). However, no assurance can be given that a court would not hold that such revenues are not special revenues and are thus not subject to the lien granted pursuant to the Pledged Loan agreement. There may be other possible effects of a bankruptcy of one or more Borrowers that could result in delays or reductions in payments of principal of and interest on the Series 2016A Bonds, or result in losses to the Holders or Beneficial Owners of the Series 2016A Bonds. Regardless of any specific adverse determinations in a Borrower bankruptcy proceeding, the fact of a Borrower bankruptcy proceeding could have an adverse effect on the liquidity and value of the Series 2016A Bonds. Although the City of San Bernardino has continued to pay amounts owed to IBank with respect to Pledged Loans on a timely basis, there can be no assurances that it will not seek to delay, 39

46 reduce or discontinue payments, or otherwise avail itself of the provisions of the Bankruptcy Code described above, in the future. In addition, the enforceability of the rights and remedies of the Holders of the Series 2016A Bonds under the Indenture are subject to a number of limitations, including bankruptcy, moratorium, insolvency or other laws affecting creditor s rights or remedies and is subject to general principles of equity (regardless of whether such enforceability is considered in equity or at law), to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State. Reliance on Projections In order to issue additional Series of Bonds (such as the Series 2016A Bonds) or Parity Obligations secured by the Indenture, to release Pledged Loans from the lien of the Indenture and to take certain other actions under the Indenture (including the release of funds from the Supplemental Revenue Fund or the Restricted Assets Account), IBank is required to meet certain conditions specified in the Indenture, including delivery of a certificate that demonstrates compliance with the Coverage Test. For the purpose of demonstrating compliance with the Coverage Test IBank may use and rely on any other assumptions the IBank deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. There can be no assurances that actual results will not differ from assumptions made by IBank. In addition, although the making of additional Pledged Loans may be included in the assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be added as Collateral. If actual conditions differ materially from assumptions, such circumstances could have a material adverse impact on the availability of Collateral in amounts sufficient to pay debt service on all outstanding Bonds and Parity Obligations, including the Series 2016A Bonds. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2016A Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto. To the extent the issue price of any maturity of the Series 2016A Bonds is less than the amount to be paid at maturity of such Series 2016A Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2016A Bonds), the difference constitutes original issue discount, the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2016A Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the 40

47 issue price of a particular maturity of the Series 2016A Bonds is the first price at which a substantial amount of such maturity of the Series 2016A Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2016A Bonds accrues daily over the term to maturity of such Series 2016A Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series 2016A Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2016A Bonds. Beneficial Owners of the Series 2016A Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2016A Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2016A Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2016A Bonds is sold to the public. Series 2016A Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Series 2016A Bonds ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Series 2016A Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner s basis in a Premium Series 2016A Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Series 2016A Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2016A Bonds. IBank has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2016A Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2016A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2016A Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel s attention after the date of issuance of the Series 2016A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2016A Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2016A Bonds may otherwise affect a Beneficial Owner s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2016A Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or 41

48 otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest on the Series 2016A Bonds to some extent for high income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2016A Bonds. Prospective purchasers of the Series 2016A Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel s judgment as to the proper treatment of the Series 2016A Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ( IRS ) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of IBank or the Borrowers under any Loans funded with proceeds of the Series 2016A Bonds, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. IBank has covenanted, however, to comply with the requirements of the Code. Bond Counsel s engagement with respect to the Series 2016A Bonds ends with the issuance of the Series 2016A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend IBank or the Beneficial Owners regarding the tax-exempt status of the Series 2016A Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than IBank and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which IBank legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2016A Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2016A Bonds, and may cause IBank or the Beneficial Owners to incur significant expense. RATINGS Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business, ( S&P ), Fitch Ratings ( Fitch ), and Moody s Investors Service, Inc. ( Moody s, and together with S&P and Fitch, the Rating Agencies ) have assigned the Series 2016A Bonds ratings of AAA, AAA and Aaa, respectively. Such ratings reflect only the views of the Rating Agencies, and an explanation of the significance of such ratings may be obtained from the respective Rating Agencies. The Rating Agencies are independent of any investment banking firm, bank or similar institution. Generally, rating agencies base their ratings on materials and information furnished to the rating agencies and on investigations, studies and assumptions by the Rating Agencies. The debt ratings are not a recommendation to purchase, sell or hold a security, inasmuch as they do not comment as to market price or suitability for a particular investor. There can be no assurance that such ratings will continue for any given period of time or that they will not be lowered, suspended or withdrawn entirely by the Rating Agencies. Any such downward changes in or suspension or withdrawal of such ratings may have an adverse effect on the marketability of and secondary market price for the Series 2016A Bonds. 42

49 UNDERWRITING The Series 2016A Bonds offered hereby are being purchased from IBank by the Underwriters named on the cover page of this Official Statement (collectively, the Underwriters ) at a purchase price of $ (being the principal amount of the Bonds of $, less an Underwriters discount of $, and plus a net original issue premium of $ ). The bond purchase agreement for the Series 2016A Bonds provides that the Underwriters shall purchase all of the Series 2016A Bonds offered hereby if any are purchased, and that the obligation to make such purchase is subject to the approval of certain legal matters by Bond Counsel and certain other conditions. The initial public offering price may be changed from time to time by the Underwriters. Several of the Underwriters have provided letters to the State Treasurer relating to their distribution practices or other affiliations for inclusion in this Official Statement, which are set forth in Appendix G. IBank and the State Treasurer do not guarantee the accuracy or completeness of the information contained in such letters and the information therein is not to be construed as a representation of IBank, the State Treasurer or of any Underwriter other than the Underwriter providing such representation. NO LITIGATION No litigation or other proceedings are pending or, to the knowledge of IBank, threatened in any agency, court or tribunal restraining or enjoining or seeking to restrain or enjoin the issuance, sale, execution or delivery of any of the Series 2016A Bonds, in any way questioning or affecting the validity of any provision of the Series 2016A Bonds, the Indenture, in any way questioning or affecting the validity of any of the proceedings or authority for the authorization, sale, execution or delivery of the Series 2016A Bonds, or of any provision made or authorized for their payment, or questioning or affecting the organization or existence of IBank or the title of any of its officers to their respective offices. LEGAL MATTERS The validity of the Series 2016A Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank. A complete copy of the proposed form of Bond Counsel opinion is contained in Appendix E. Certain legal matters will be passed upon for IBank by its Counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel to IBank. Certain legal matters will be passed upon for the Underwriters by their counsel, Schiff Hardin LLP, Underwriters Counsel. Bond Counsel, Disclosure Counsel and Underwriters Counsel undertake no responsibility for the accuracy, completeness or fairness of this Official Statement. FINANCIAL STATEMENTS IBank s Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015, included in Appendix B hereto, have been audited by Macias, Gini & O Connell LLP, as stated in their report appearing in Appendix B hereto. No opinion is expressed by Macias, Gini & O Connell LLP with respect to any event subsequent to its report dated October 5, Macias, Gini & O Connell LLP was not required to provide its consent to the inclusion of IBank s financial report in the Official Statement and has not undertaken any review of the Official Statement. IBank s Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 includes other activities and funds of IBank separate from the ISRF Program and the Collateral. Such other funds are not available for payments of the Series 2016A Bonds. The Series 2016A Bonds are secured 43

50 solely by the Collateral, and the inclusion of the audited financial statements of IBank should not create any implication that any other assets of IBank are available for payment of the Series 2016A Bonds. FINANCIAL ADVISOR IBank has utilized the services of Lamont Financial Services Corporation, Walnut Creek, California, as independent financial advisor in connection with the issuance of the Series 2016A Bonds. The Financial Advisor is a financial advisory firm and is not engaged in the business of underwriting or distributing municipal securities or other public securities. The Financial Advisor assumes no responsibility for the accuracy, completeness or fairness of this Official Statement. CONTINUING DISCLOSURE IBank has covenanted for the benefit of the holders and Beneficial Owners of the Series 2016A Bonds to provide certain financial information and operating data relating to IBank by not later than 240 days following the end of the IBank s fiscal year commencing with fiscal year (which fiscal year as of the date hereof ends June 30) (the Annual Report ), and to provide notices of the occurrence of certain enumerated events ( Listed Events ). The Annual Report will be filed by IBank with the Municipal Securities Rulemaking Board, through its Electronic Municipal Market ( EMMA ) website. Any notices of Listed Events will be filed by IBank with EMMA. The specific information to be contained in the Annual Report or the notices of Listed Events is set forth in APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT. Failure of IBank to comply with its obligations under the Continuing Disclosure Agreement will not be considered an event of default under the Indenture. However, the Trustee or any holder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause IBank to comply with its obligations under the Continuing Disclosure Agreement. The Continuing Disclosure Agreement requires certain financial and operating information relating to Significant Borrowers to be included in the Annual Report filing. Significant Borrower means a Borrower under a Pledged Loan that has an aggregate unpaid principal amount equal to or greater than twenty percent (20%) of the aggregate unpaid principal amount of all Pledged Loans. Borrowers which meet this threshold may vary over time. As of the date of issuance, no Borrowers with respect to Pledged Loans are Significant Borrowers pursuant to the Continuing Disclosure Agreement. While each Borrower has covenanted in the respective Loan Agreement for the Pledged Loan to provide certain information, there can be no assurances that IBank will be successful in obtaining such information from any Significant Borrower. For the last 5 years, IBank has regularly filed annual reports and notices of specified events in accordance with its continuing disclosure undertakings. With respect to a continuing disclosure undertaking of IBank relating to IBank s State School Fund Apportionment Lease Revenue Bonds, notices of certain rating upgrades relating to such bonds (which generally correspond to ratings on obligations payable from the State s General Fund) were not filed in a timely manner. Notices of contemporaneous upgrades to the ratings on other obligations payable from the State s General Fund (not issued by IBank) were posted on EMMA in a timely manner. In addition, with respect to the IBank s annual report relating to an issue of Prior Bonds for the fiscal year ended June 30, 2014, neither audited nor unaudited financial statements for such fiscal year for a Significant Borrower were made available to IBank, and therefore were not included in the report. 44

51 MISCELLANEOUS This Official Statement speaks only as of its date, and the information contained herein is subject to change. This Official Statement contains descriptions of, and information regarding IBank, the ISRF Program and the security and sources of payment for the Series 2016A Bonds. Certain information in this Official Statement involves projections and assumptions which are not represented as fact and such projections and assumptions may not prove to be accurate. Such descriptions and information do not purport to be comprehensive and the descriptions of documents contained herein are qualified in their entirety by reference to such documents. This Official Statement has been approved by IBank. CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK By: Teveia R. Barnes Executive Director 45

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53 APPENDIX A PLEDGED LOANS Except as noted below, the following table sets forth the Pledged Loans and certain other information related thereto as of June 1, Outstanding Balance reflects Loan amount outstanding as of June 1, 2016; all or a portion of such amount may not have been disbursed. IBank Loan Outstanding Interest Maturity # Borrower Source of Repayment Loan Structure Leased Asset Balance Rate Date City of Monterey Park Water Revenues Installment Sale $1,234, % 8/1/ Fresno Metropolitan Flood Voter Approved Tax Levy Loan $13,180, % 8/1/2030 Control District City of Clovis General Fund Lease Civic Center Building B $240, % 8/1/ City of Kingsburg (RDA Tax Increment Loan $109, % 9/15/2016 Successor) City of San Luis Obispo Parking Revenues Installment Sale $5,101, % 8/1/ City of Brawley Wastewater Revenues Installment Sale $1,066, % 8/1/ Stockton Port District Port Revenues Installment Sale $6,914, % 7/1/ City of Tehachapi General Fund Lease City Hall & Public Works $731, % 8/1/ Moulton Niguel Water District Water/Wastewater/Recycled Water Installment Sale $633, % 3/1/2022 Revenue City of Westminster Water Revenues Installment Sale $1,342, % 8/1/ County of Sacramento (RDA Tax Increment Loan $6,851, % 12/1/2031 Successor) Moulton Niguel Water District Water/Wastewater/Recycled Installment Sale $424, % 3/1/2022 Water Revenue City of Lawndale (RDA Tax Increment Loan $1,378, % 8/1/2031 Successor) City of Hanford Wastewater Revenues Installment Sale $6,845, % 8/1/ County of Siskiyou General Fund Lease The Old Hospital Building $1,341, % 2/1/ Phelan Piñon Hills Community Water Revenues Installment Sale $2,312, % 2/1/2032 Services District Hidden Valley Lake Community Water Revenues Installment Sale $2,009, % 2/1/2032 Services District City of Perris Wastewater Revenues Installment Sale $931, % 2/1/ County of Tulare (RDA Tax Increment Loan $1,253, % 8/1/2032 Successor) Southwest Transportation Agency General Fund Lease & Sub- Transportation Center $1,830, % 2/1/2022 Lease Trinity Public Utilities District Electric Revenues Installment Sale $5,688, % 8/1/ City of El Centro Wastewater Revenues Installment Sale $1,754, % 8/1/ City of El Centro Water Revenues Installment Sale $559, % 6/1/2022 A-1

54 IBank Loan Outstanding Interest Maturity # Borrower Source of Repayment Loan Structure Leased Asset Balance Rate Date City of Novato (RDA Successor) Tax Increment Loan $2,520, % 2/1/ City of Merced Water/Wastewater Facility Installment Sale $6,752, % 8/1/2033 Fees Bear Valley Community Services Water Revenues Installment Sale $2,095, % 8/1/2032 District Bear Valley Community Services Wastewater Revenues Installment Sale $438, % 8/1/2032 District City of Yuba City (RDA Tax Increment Loan Agreement $1,418, % 9/1/2034 Successor) City of Fresno General Fund Lease City Hall Annex $1,787, % 8/1/ City of Fresno (RDA Successor) Tax Increment Loan $1,550, % 8/1/ County of San Bernardino, Area Water Revenues Installment Sale $1,510, % 8/1/ , Zone J B Squaw Valley Public Service General Fund Lease Fire Station #1 $1,273, % 8/1/2028 District B City of Laguna Beach Wastewater Revenues Installment Sale $3,531, % 8/1/2023 B City of Porterville Wastewater Revenues Installment Sale $3,922, % 3/16/2034 B City of Kingsburg Water Revenues Installment Sale $2,257, % 8/1/ Del Norte County General Fund Lease Solid Waste Transfer $2,597, % 8/1/2033 Station B County of Siskiyou General Fund Lease The Old Hospital Building $1,474, % 8/1/2034 B Mendocino City Community Wastewater Revenues Installment Sale $486, % 8/1/2034 Services District B Placer County (RDA Successor) Tax Increment Loan $233, % 8/1/2034 B Los Osos Community Services Water Revenues Installment Sale $3,823, % 8/1/2034 District B City of Shasta Lake Water Revenues Installment Sale $3,820, % 8/1/2034 B City of El Segundo General Fund Lease City Hall $7,719, % 8/1/2035 B City of Sacramento (RDA Tax Increment Loan $3,273, % 12/1/2035 Successor) B City of Sacramento (RDA Tax Increment Loan $2,735, % 12/1/2035 Successor) B City of Madera Wastewater Revenues Installment Sale $7,931, % 8/1/2035 B Placer County (RDA Successor) Tax Increment Loan $1,187, % 8/1/2035 B City of Monterey Park Water Revenues Installment Sale $851, % 8/1/2020 BC City of Anderson General Fund Lease City Hall $788, % 8/1/2036 B City of Redlands General Fund Lease Community Center $1,568, % 8/1/2036 B City of Greenfield Water Revenues Installment Sale $2,755, % 8/1/2036 B City of Greenfield Wastewater Revenues Installment Sale $1,904, % 8/1/2036 A-2

55 IBank Loan Outstanding Interest Maturity # Borrower Source of Repayment Loan Structure Leased Asset Balance Rate Date B County of Kern General Fund Lease County Fire Department $4,568, % 8/1/2026 Maintenance and Admin. Building BC Paradise Irrigation District Water Revenues Installment Sale $1,328, % 8/1/2027 C Placer County (RDA Successor) Tax Increment Loan $397, % 8/1/2037 BC County of Shasta General Fund Lease County Departments of $1,036, % 8/1/2022 Resource Management and Public Works Facility B City of Eureka (RDA Successor) Tax Increment Loan $1,233, % 11/1/2024 B Montara Water and Sanitary Wastewater Revenues Installment Sale $839, % 8/1/2037 District B County of Marin Assessments Loan $473, % 8/1/2027 B City of Bakersfield (RDA Tax Increment Loan $8,328, % 8/1/2037 Successor) B City of Sacramento Storm Drainage Revenues Installment $2,449, % 8/1/2037 Payment B Valley of the Moon Water Water Revenues Installment Sale $565, % 8/1/2027 District TC City of Mt. Shasta Wastewater Revenues Installment Sale $1,098, % 8/1/2037 B City of San Luis Obispo Wastewater Revenues Installment Sale $8,358, % 12/1/2037 BC Fieldbrook Glendale Community Water Revenues Installment Sale $211, % 8/1/2033 Services District BC City of Lawndale General Fund Lease Maintenance Office $635, % 8/1/2029 BC City of Porterville Water Revenues Installment Sale $6,009, % 8/1/2038 B City of Davis Water Revenues Installment Sale $8,747, % 8/1/2038 BC City of Porterville Water Revenues Installment Sale $1,331, % 8/1/2039 BC City of Paramount Water Revenues Installment Sale $4,881, % 8/1/2039 BC North Tahoe Fire Protection General Fund Lease Four Fire Stations $9,007, % 8/1/2038 District BC El Dorado County Fire Protection General Fund Lease Four Fire Stations $2,230, % 8/1/2040 District B McKinleyville Community Water Revenues Installment Sale $801, % 8/1/2030 Services District BC Coastside County Water District Water Revenues Installment Sale $6,143, % 8/1/2041 BC Phelan Piñon Hills Community Water Revenues Installment Sale $6,957, % 8/1/2042 Services District B City of Ione Wastewater Revenues Installment Sale $3,095, % 8/1/2043 BC City of Capitola General Fund Lease Public Works $1,261, % 8/1/2033 BC Capitol Area Development Tax Increment Tax Allocation $553, % 10/1/2033 Authority B City of Redlands Solid Waste Revenues Installment Sale $2,936, % 8/1/2034 A-3

56 IBank Loan Outstanding Interest Maturity # Borrower Source of Repayment Loan Structure Leased Asset Balance Rate Date B City of Pittsburg Water Revenues Installment Sale $11,167, % 8/1/2044 B City of Santa Cruz General Fund Lease Civic Auditorium $12,823, % 8/1/2024 B City of San Gabriel Measure R Installment Sale $3,800, % 8/1/2029 B City of Alameda Financing Auth General Fund Lease Fire Station $3,000, % 8/1/2034 B City of Del Mar Sewer Revenues Installment Sale $3,535, % 8/1/ Coastside County Water District* Water Revenues Installment Sale $5,628, % 8/1/2045 Watch Loans Loan Outstanding Interest Maturity # Borrower Source of Repayment Loan Structure Leased Asset Balance Rate Date City of San Bernardino General Fund Lease Community Center $780, % 8/1/ City of San Bernardino, Water** Water Revenues Installment Sale $4,007, % 2/1/2022 BC City of San Bernardino, Water** Water Revenues Installment Sale $6,386, % 8/1/2026 C City of San Bernardino, Water** Water Revenues Installment Sale $8,727, % 8/1/2031 * Loan will be designated as a Pledged Loan on the date of issuance of the Series 2016A Bonds. ** Assumed to be prepaid prior to October 1, See PRO FORMA CASH FLOW TABLE and OUTSTANDING LOANS Pledged Loans - Particular Pledged Loans - Pledged Loans to the City of San Bernardino. A-4

57 APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF IBANK FOR THE FISCAL YEAR ENDED JUNE 30, 2015

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59 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THECALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (A Component Unit of the State of California)

60 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (A Component Unit of the State of California) COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Diane J. Nanik, Manager Fiscal Unit California Infrastructure and Economic Development Bank

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62 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FOR THE FISCAL YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS PAGE INTRODUCTORY SECTION Letter of Transmittal 3 Organization Chart 6 Principal Officials 7 GFOA Certificate of Achievement 8 FINANCIAL SECTION Independent Auditor s Report 9 Management s Discussion and Analysis 12 Fund Financial Statements Statement of Net Position 20 Statement of Revenues, Expenses, and Changes in Fund Net Position 21 Statement of Cash Flows 22 Notes to the Financial Statements 23 Required Supplementary Information Schedule of the Funds Proportionate Share of the Net Pension Liability 43 Schedule of Funds Contributions 44 STATISTICAL SECTION Financial Trends Schedule of Net Position 46 Schedule of Revenues, Expenses, and Changes in Fund Net Position 48 Infrastructure State Revolving Fund (ISRF) Program Ten Largest Borrowers 50 Revenue Capacity Schedule of ISRF Program Loans Receivable and Interest Rates 51 Debt Capacity Schedule of Statutory Debt Limit Capacity 53 Schedule of Outstanding ISRF Program Bonds and Related Debt Ratio 55 Schedule of Aggregate Pledged Resources Coverage for ISRF Program Bonds 57 Demographics and Economic Information California Demographic and Economic Indicators 58 California Employment by Industry 60 Operating Information Number of Employees by Identifiable Activity 61 Major Program Activity 62

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64 INTRODUCTORY SECTION

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66 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK October 5, 2015 To the Board of Directors: I am pleased to submit for the fiscal year ended June 30, 2015 the Comprehensive Annual Financial Report (CAFR) of the California Infrastructure and Economic Development Bank Fund and the California Infrastructure Guarantee Trust Fund, enterprise funds of the California Infrastructure and Economic Development Bank (IBank), a component unit of the State of California. The CAFR includes the financial activities of IBank s Infrastructure State Revolving Fund (ISRF) Program and Conduit Bond Program included in the California Infrastructure and Economic Development Bank Fund (CIEDB Fund) and the California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund) (collectively, the CIEDB Fund and the Guarantee Trust Fund are the Funds). The continuing disclosure agreements related to IBank s revenue bonds that provided funding for the ISRF Program (ISRF Program Bonds) require annual audited financial statements and this CAFR fulfills that requirement. The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted. Net position increased by $2,161,889 over the previous fiscal year directly as a result of positive earnings from operating and nonoperating activities, but decreased by $3,565,810 for the cumulative effect of change in accounting principles for the implementation of Government Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. This year IBank has experienced renewed demand for its current programs and is near completion of its new clean energy and environmental programs and financing instruments to confront the infrastructure, economic development, clean energy and environmental funding requirements of a wider spectrum of State and local governments and communities within the State. IBank has taken notice that the State and local governments continue to delay much-needed infrastructure, economic development, clean energy and environmental projects vital to fueling the State s economic engine. The limits on available funds and financings continue to restrict the infrastructure, economic development, clean energy and environmental projects that are needed to improve the quality of life throughout the State and are vital to the continued preservation of California s infrastructure and environment. IBank is uniquely positioned to be a major contributor to the success of the State s economic revitalization. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that is established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. Macias Gini & O Connell LLP has issued an unmodified ( clean ) opinion on the Funds financial statements for the fiscal year ended June 30, The independent auditor s report is located at the front of the financial section of this report. Management s discussion and analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview and analysis of the financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. 3

67 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK Profile of IBank IBank was established in 1994 to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California. IBank operates pursuant to the Bergeson-Peace Infrastructure and Economic Development Bank Act contained in the California Government Code section et seq. IBank is a component unit of the State of California located within the Governor s Office of Business and Economic Development (GO-Biz) and is governed by a five-member Board of Directors. IBank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing to public agencies and certain tax-exempt non-profit organizations that are sponsored by public agencies, provide credit enhancements, including guarantees, acquire or lease facilities, and leverage State and Federal funds. IBank's current programs include the ISRF Program, 501(c)(3) Revenue Bond Program, Industrial Development Revenue Bond Program, Exempt Facility Revenue Bond Program, Public Agency Revenue Bond Program and the newly formed California Lending for Energy and Environmental Needs (CLEEN) Center programs. No financial activity occurred in the CLEEN Center programs during the fiscal year ended June 30, The Small Business Loan Guarantee Program (SBLGP) became a program of IBANK during the fiscal year; however, the SBLGP s financial activities are not included in this report. With the exception of funds for program support and the SBLGP administration, which must be annually appropriated by the State Legislature, all IBank funds are continuously appropriated without regard to fiscal year. Continuous appropriation authority means that no further appropriations are necessary to expend funds held in either the CIEDB Fund or the Guarantee Trust Fund. Economic Condition California s economy has rebounded well adding over 1.8 million jobs to recover all of the jobs lost during the recession. In 2014, California s job growth has outpaced the national average and the unemployment rate declined to the lowest point in over 5 years. Job growth has been led by strong gains in construction, trade and transport, retail, agriculture and high tech. Industries that have traditionally struggled in California are seeing gains. The manufacturing industry has added jobs for the fourth year in a row. Governor Brown this month signed a balanced, on-time budget that saves billions of dollars and pays down debt. California s gross state product is over $2.3 trillion and the State is the 8th largest economy in the world, having surpassed Russia and Italy. Interest in the ISRF Program continues to grow with stronger borrowers and more diverse projects. All required repayments were made by the borrowers on ISRF Program Loans during the fiscal year and continued timely repayment is expected. We anticipate continued demand for IBank s programs as the economy continues to grow and prospective borrowers are better positioned to finance public infrastructure and private development projects. I am pleased to report that both Fitch Ratings and Standard & Poor s assigned their respective AAA longterm rating to the California Infrastructure and Economic Development Bank ISRF Program Bonds and noted that the outlook is stable. Moody s Investors Service assigned a rating of Aa1 to the ISRF 2015A Bonds and noted that the outlook is positive. These strong ratings reflect the ISRF Program s extremely strong financial risk score and very strong enterprise risk score. 4

68 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK Long-term Financial Planning IBank s priorities for the upcoming years include but are not limited to the following: providing funding priority to infrastructure, clean energy, environmental and economic development projects, creating sector-specific financing instruments and funds, developing public-private investment opportunities, and facilitating state-wide outreach to potential customers for all of IBank s programs. These priorities will provide access to more affordable funds for California infrastructure, clean energy, environmental and economic development projects, while maintaining the Funds positive net position. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the California Infrastructure and Economic Development Bank for its comprehensive annual financial report for the fiscal year ended June 30, This was the fourth consecutive year that the California Infrastructure and Economic Development Bank has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a governmental entity must publish an easily readable and efficiently organized comprehensive annual financial report. This year s CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. I wish to acknowledge the staff of the California Infrastructure and Economic Development Bank for their consistent dedication and contribution to the success of the organization. In particular, I wish to acknowledge the Fiscal Unit staff for the preparation of this Comprehensive Annual Financial Report. Respectfully submitted, Teveia R. Barnes Executive Director 5

69 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FOR THE FISCAL YEAR ENDED JUNE 30, 2015 ORGANIZATION CHART Board of Directors Executive Office Administrative Unit Bond Unit Compliance Unit External Affairs Unit Fiscal Unit Legal / Legislation Unit Loan Unit Small Business Finance Center 6

70 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FOR THE FISCAL YEAR ENDED JUNE 30, 2015 PRINCIPAL OFFICIALS IBank Board of Directors Michael E. Rossi, Chair, Senior Advisor for Jobs and Business to the Governor of California, Delegate of the Director, Governor s Office of Business and Economic Development John Chiang, State Treasurer Brian P. Kelly, Secretary of the California State Transportation Agency Michael Cohen, Director of the Department of Finance Peter Luchetti, Governor s Appointee IBank Executive Office and Management Staff Teveia R. Barnes, Executive Director Ruben R. Rojas, Deputy Executive Director Diane J. Nanik, Fiscal Unit Manager Diane Cummings, Deputy Director of Credit and Chief Credit Officer Marilyn Muñoz, Deputy Director of Legislative Affairs and General Counsel Nancee Trombley, Deputy Director of Compliance and Chief Compliance Officer Alice Scott, Deputy Director of External Affairs Tad Thomas, Loan Unit Manager Fariba Khoie, Bond Unit Manager 7

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72 FINANCIAL SECTION

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74 A new breed of professional services firm Sacramento Walnut Creek Independent Auditor s Report Oakland Los Angeles To the Board of Directors of the California Infrastructure and Economic Development Bank Sacramento, California Report on the Financial Statements Century City Newport Beach San Diego We have audited the accompanying financial statements of the California Infrastructure and Economic Development Bank Fund and California Infrastructure Guarantee Trust Fund (collectively, the Funds), enterprise funds of the California Infrastructure and Economic Development Bank (IBank), a component unit of the State of California, as of and for the fiscal year ended June 30, 2015, and the related notes to the financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Funds of IBank, as of June 30, 2015, and the changes in their financial position and their cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Macias Gini & O Connell LLP 3000 S Street, Suite 300 Sacramento, CA

75 Emphasis of Matters Basis of Presentation As discussed in Note 2.A, the financial statements present only the Funds and do not purport to, and do not, present fairly the financial position of IBank as of June 30, 2015, the changes in its financial position, or, where applicable, its cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. IBank s California Small Business Expansion Fund, its only other fund, is included in and subject to the audit of the State of California s financial statements. Our opinion is not modified with respect to this matter. Change in Accounting Principles As discussed in Note 2.B, for the fiscal year ended June 30, 2015, IBank implemented Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, schedule of the Funds proportionate share of the net pension liability, and the schedule of Funds contributions, as listed in the table of contents, be presented to supplement the fund financial statements. Such information, although not a part of the fund financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the fund financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the fund financial statements, and other knowledge we obtained during our audit of the fund financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the fund financial statements. The introductory and statistical sections are presented for purposes of additional analysis and are not required parts of the fund financial statements. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the fund financial statements, and accordingly, we do not express an opinion or provide any assurance on them. 10

76 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 5, 2015, on our consideration of IBank s internal control over financial reporting as it relates to the Funds and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering IBank s internal control over financial reporting and compliance as it relates to the Funds. Sacramento, California October 5,

77 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Introduction The following Management s Discussion and Analysis (MD&A) provides an overview to the financial statements of the California Infrastructure and Economic Development Bank Fund (CIEDB Fund)and California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund), enterprise funds of the California Infrastructure and Economic Development Bank (IBank), a component unit of the State of California (State), a description of its activities, and an analysis of the financial position of the CIEDB Fund and the Guarantee Trust Fund for the fiscal year ended June 30, 2015 (collectively, the CIEDB Fund and the Guarantee Trust Fund are the Funds). The Funds do not receive any State General Fund support. The Funds programs continue to provide revenues sufficient to support all operating expenses. The information presented in this section should be read in conjunction with the information in our letter of transmittal on pages 3-5 of this report and the financial statements and notes that follow this section. IBank and Current Programs IBank is a State of California financing authority whose mission is to finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong California economy, and improve the quality of life in California communities. IBank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing to public agencies, provide credit enhancements, including guarantees, acquire or lease facilities, and leverage State and Federal funds. The Funds current operations are funded solely from fees, interest earnings, and Infrastructure State Revolving Fund Program loan 1 repayments. IBank is a component unit of the State of California (State) and the Funds financial statements are included in the State s Comprehensive Annual Financial Report. IBank s major programs include the Infrastructure State Revolving Fund (ISRF) Program, which is a revolving loan program that provides financing to local government entities for eighteen categories of public infrastructure and economic expansion projects, and a variety of conduit revenue bond financing programs, including the Industrial Development Bond Program for manufacturing and processing companies, the 501(c)(3) Revenue Bond Program for nonprofit public benefit corporations, State School Fund Bond Program and the Public Agency Revenue Bond Program for governmental entities. Conduit bonds issued by IBank are a limited obligation of IBank payable solely from the revenues generated by the underlying borrower. The Small Business Loan Guarantee Program (SBLGP), which issues guarantees to lenders of loans to small businesses having difficulty securing financing on their own, was established as a program of IBank in October However, the SBLGP program s financial activities and position are not included in this report. 1 Loan is generically used to refer to a loan, a lease or an installment sale agreement. 12

78 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Financial Highlights The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted. Net position increased by $2,161,889 over the previous fiscal year directly as a result of positive earnings from operating and nonoperating activities, but decreased by $3,565,810 for the cumulative effect of change in accounting principles for the implementation of Government Accounting Standards Board Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 and GASB Statement No. 71 (GASB 71), Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (collectively, the Statements). The primary objective of the Statements is to improve accounting and financial reporting by state and local governments for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. It requires employers to report a net pension liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. The Statements identify the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Total cash, cash equivalents, and investments increased during the fiscal year by $71,264,218 or 50% primarily as a result of proceeds received from the issuance of the 2015A ISRF Program Bonds and loan repayments exceeding loan disbursements and bond debt service payments. Total pledged and non-pledged loans receivable increased during the fiscal year by $18,645,006 because new loans closed exceeded loan repayments during the fiscal year. The revenue bonds payable increased by $61,783,091 or 42% primarily due to the issuance of $90,070,000 in ISRF Program Bonds on June 17, A portion of the proceeds, $39,285,137, was used to advance refund $35,435,000 of outstanding 2008 ISRF Program Bonds. The net pension liability as of June 30, 2015 was $3,200,240 as a result of the implementation of GASB 68. Deferred outflows of resources increased by $3,853,971 primarily as a result of the reacquisition price (amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeding the net carrying amount of those bonds by $3,587,747. Undisbursed loan commitments increased by $31,103,488 due to an increased amount of undisbursed amounts of pledged loans receivable available to be drawn by the borrowers and draws submitted for payment but unpaid at year-end. Total operating revenues were $10,759,416 for the fiscal year, a decrease of $1,388,328 or 11% over the previous fiscal year due to a decrease in the interest on loans receivables as loans were repaid and a decrease in bond issuance fees due to a reduction in the par amounts of the total conduit bonds issued. 13

79 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Overview of the Financial Statements The financial section of this annual financial report consists of this MD&A, the financial statements, and the notes to the financial statements. This MD&A is a discussion of many aspects of the Funds operations and financial status and its information was compiled from the Funds financial statements and accompanying notes. The financial statements have been prepared using the economic resources measurement focus and accrual basis of accounting in accordance with generally accepted accounting principles and include the following three statements: The Statement of Net Position presents information on the assets, liabilities and deferred inflows/outflows of resources of the Funds, with the difference reported as net position. Over time, increases or decreases in net position are expected to serve as a useful indicator of whether the financial position of the Funds are improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Position presents information reflecting how the net position of the Funds changed during the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the cash flows. Thus, revenues and expenses are reported in the statement for some items that will only result in cash flows in future fiscal periods. The Statement of Cash Flows reports the cash flows from operating activities, noncapital financing activities and investing activities, and the resulting impacts to cash and cash equivalents for the fiscal year. The financial statements included in this annual financial report are those of IBank s CIEDB Fund and Guarantee Trust Fund. As discussed in Note 1, The Financial Reporting Entity, the financial statements herein are intended to present the financial position, change in financial position and cash flows of only IBank s ISRF Program and Conduit Bond Program. The financial statements do not purport to present the financial position of the Small Business Loan Guarantee Program or any other reporting entity. The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the financial statements. These notes can be found immediately following the financial statements. Statement of Net Position The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted. Net position increased by $2,161,889 over the previous fiscal year directly as a result of positive earnings from operating and nonoperating activities, but decreased by $3,565,810 for the cumulative effect of change in accounting principles for the implementation of the Statements. 14

80 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The following table presents a condensed, combined Statement of Net Position as of June 30, 2015 and 2014, and the dollar and percentage change from the prior year. Assets Total assets increased by $89.9 million over the prior year. Cash, cash equivalents, and investments-- restricted increased as a result of cash received from the issuance of the 2015A ISRF Program Bonds whose proceeds were used to refund previously outstanding 2008 ISRF Program Bonds and to refinance existing bond anticipation loans. ISRF Program loans receivable (both pledged and non-pledged) totaled $310.5 million as of June 30, 2015, increase of $18.6 million because new loans closed exceeded loan repayments during the fiscal year. Deferred Outflows of Resources $ Change Deferred outflows of resources increased by $3.9 million primarily as a result of the reacquisition price (amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeding the net carrying amount of those bonds by $3.6 million. This amount will be amortized over the remaining life of the refunded bonds. % Change Cash, cash equivalents, and investments--restricted $ 214,344,782 $ 143,080,564 $ 71,264, % Program loans receivable 310,513, ,868,218 18,645, % Other assets 3,765,003 3,747,020 17, % Total Assets 528,623, ,695,802 89,927, % Total Deferred Outflows of Resources 4,718, ,910 3,853, % Total Assets and Deferred Outflows of Resources $ 533,341,890 $ 439,560,712 $ 93,781, % Revenue bonds payable $ 208,290,797 $ 146,507,706 $ 61,783, % Net pension liability 3,200,240-3,200, % Other liabilities 3,296,412 4,794,542 (1,498,130) % Undisbursed loan commitments 37,666,191 6,562,703 31,103, % Total Liabilities 252,453, ,864,951 94,588, % Total Deferred Inflows of Resources 596, , % Net Position - Restricted - Expendable by Statute 280,291, ,695,761 (1,403,921) -0.50% Total Liabilities, Deferred Inflows of Resources and Net Position $ 533,341,890 $ 439,560,712 $ 93,781, % 15

81 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Liabilities Total liabilities were $252.5 million as of June 30, 2015, an increase of 60% over the prior fiscal year. The largest liability is revenue bonds payable, which consists of two series of ISRF Program Bonds, one issued in February 2014 and one issued in June Revenue bonds payable increased by $61.8 million primarily due to the issuance of $90.1 million in 2015A ISRF Program Bonds on June 17, A portion of the proceeds, $39.3 million, was used to advance refund $35.4 million of outstanding 2008 ISRF Program Bonds. The net pension liability as of June 30, 2015 was $3.2 million as a result of the implementation of GASB 68. Deferred Inflows of Resources Deferred inflows of resources were $0.6 million as of June 30, 2015 as result of the implementation of GASB 68. Statement of Revenues, Expenses, and Changes in Net Position Operating income was $1,920,654 for the fiscal year ended June 30, The following table presents the condensed, combined Statement of Revenues, Expenses, and Changes in Net Position for the and fiscal years $ Change % Change Interest on loans receivable $ 9,206,557 $ 10,421,447 $ (1,214,890) % Administration fees 1,552,859 1,726,297 (173,438) % Total operating revenues 10,759,416 12,147,744 (1,388,328) % Total operating expenses 8,838,762 9,189,187 (350,425) -3.81% Operating income 1,920,654 2,958,557 (1,037,903) % Nonoperating revenue 241, ,580 22, % Changes in net position 2,161,889 3,177,137 (1,015,248) % Net Position, Beginning of year * 278,129, ,518,624 (388,673) -0.14% Net Position, End of year $ 280,291,840 $ 281,695,761 $ (1,403,921) -0.50% * Restated for implementation of GASB 68 16

82 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Revenues The following chart presents operating and nonoperating revenues by source: Revenues Revenue by Source Fiscal Year $10,421,447 $241,235, 2% $1,552,859, 14% 84% $1,726,297 14% $9,206,557, 84% Interest on loans receivable $218,580 Administrative fees 2% Investment income Interest on loans receivable Administration fees Investment Income Total operating revenues were $10.8 million for the fiscal year, a decrease of $1.4 million over the previous fiscal year due to a decrease in the interest on loans receivables as loans were repaid and a decrease in bond issuance fees due to a reduction in the par amounts of the total conduit bonds issued. 17

83 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Operating Expenses The following chart presents operating expenses by category: Operating Expenses by Category Fiscal Year $4,206,661, 48% $4,632,101, 52% Interest on revenue bond debt Program support Total operating expenses were $8.8 million during the fiscal year compared to $9.2 million for the prior fiscal year, a decrease of 4%. Budgetary Information With the exception of funds for program support, which must be annually appropriated by the State Legislature, all other IBank funds in the Funds are continuously appropriated without regard to fiscal year. Continuous appropriation authority means that no further appropriations are necessary to expend funds held in either the CIEDB Fund or the Guarantee Trust Fund. Debt Administration IBank administers the ISRF Program, a leveraged revolving loan program. Initial ISRF Program Loans were funded with previous State General Fund appropriations. IBank issued $51.37 million in ISRF Program Revenue Bonds in March 2004, $52.80 million in December 2005, $48.37 million in September 2008, $95.96 million in February 2014 and $90.1 million in June 2015 (collectively, ISRF Program Bonds) to provide additional funding for ISRF Program Loans. The 2014A ISRF Program Bonds were issued to refund the 2004 and 2005 ISRF Program Bonds and to refinance existing bond anticipation 18

84 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 loans. The 2015A ISRF Program Bonds were issued to refund the 2008 ISRF Program Bonds and to refinance existing bond anticipation loans. The ISRF Program Bonds were sold without a credit enhancement, and in 2004 and 2005, were initially rated AA, Aa2, and AA by Standard & Poor s, Moody s Investors Service, and Fitch Ratings, respectively. Upon the issuance of the 2008 ISRF Program Bonds, Standard & Poor s and Fitch Ratings raised the ratings on the ISRF Program Bonds to AA+, citing proactive and strong program oversight and management, and thorough ongoing surveillance of existing Loans as key factors to the high credit ratings on the bonds. The 2014A and 2015A ISRF Program Bonds were assigned a rating of AAA, Aa1, and AAA by Standard & Poor s (S&P), Moody s Investors Service (Moody s), and Fitch Ratings (Fitch), respectively. S&P and Fitch assigned a stable outlook to the 2014A and 2015A ISRF Program Bonds. Moody s assigned a stable outlook to the 2014A ISRF Program Bonds and a positive outlook to the 2015A ISRF Program Bonds. These strong ratings reflect the ISRF Program s extremely strong financial risk score and very strong enterprise risk score. In addition, these strong ratings reflect the ISRF Program s ability to withstand defaults by the ISRF Program s borrowers while the ISRF Program could continue to pay the ISRF Program s bondholders. Existing ISRF Program Loans are either funded from previous State General Fund appropriations, interest earned on the ISRF Program Loans, the repayment of principal on ISRF Program loans receivable, investment earnings, administration fee revenue, or the proceeds of ISRF Program Bonds. The 2014A and 2015A ISRF Program Bonds are structured under an open-indenture model. Both are limited obligations of IBank payable solely from and secured solely by pledged ISRF Program Loan repayments, reserves, and reserve account interest earnings. Note 4 of the Notes to the Financial Statements contains additional information about the outstanding ISRF Program Bonds. IBank also issues conduit revenue bonds including Industrial Development Bonds for certain privatelyowned manufacturing and processing businesses, 501(c)(3) Revenue Bonds for nonprofit entities, State School Fund Bonds for financially troubled public school districts, and Public Agency Revenue Bonds for other state and local governmental entities. During the fiscal year, IBank served as the issuer for $270,300,000 of conduit revenue bonds. Conduit bonds are a limited obligation of IBank payable solely from the pledged revenues of the conduit borrower. As such, except for administration fee revenue related to the conduit bond programs, conduit bond financial information is not reflected in the Funds financial statements. Requests for Information This financial report is designed to provide interested parties with a general overview of the finances of the Funds. Questions concerning the information provided in this report or requests for additional information should be addressed to Teveia Barnes, Executive Director, California Infrastructure and Economic Development Bank, P.O. Box 2830, Sacramento, California

85 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK STATEMENT OF NET POSITION JUNE 30, 2015 California Infrastructure and California Economic Infrastructure Development Bank Guarantee Trust Fund Fund Total ASSETS AND DEFERRED OUTFLOWS OF RESOURCES CURRENT ASSETS Cash and equivalents - restricted $ 189,644,894 $ 24,699,888 $ 214,344,782 Pledged loans receivable - disbursed 15,271,138-15,271,138 Non-pledged loans receivable - disbursed 250, ,198 Interest and other receivables 3,747,608 17,395 3,765,003 Total current assets 208,913,838 24,717, ,631,121 NON-CURRENT ASSETS Pledged loans receivable - disbursed 252,625, ,625,423 Pledged loans receivable - undisbursed 37,666,191-37,666,191 Non-pledged loans receivable - disbursed 4,700,274-4,700,274 Total non-current assets 294,991, ,991,888 Total assets 503,905,726 24,717, ,623,009 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 356, ,434 Loss on refunding debt 4,362,447-4,362,447 Total deferred outflows of resources 4,718,881-4,718,881 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 508,624,607 $ 24,717,283 $ 533,341,890 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION CURRENT LIABILITIES Accounts payable $ 563,558 $ - $ 563,558 Other liabilities 4,653-4,653 Revenue bond interest payable 1,126,261-1,126,261 Revenue bonds payable 5,995,000-5,995,000 Undisbursed loan commitments 20,407,220-20,407,220 Total current liabilities 28,096,692-28,096,692 NON-CURRENT LIABILITIES Compensated absences payable 314, ,940 Net other postemployment benefit obligation 1,287,000-1,287,000 Net pension liability 3,200,240-3,200,240 Undisbursed loan commitments 17,258,971-17,258,971 Revenue bonds payable 202,295, ,295,797 Total non-current liabilities 224,356, ,356,948 Total liabilities 252,453, ,453,640 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 596, ,410 Total deferred inflows of resources 596, ,410 NET POSITION Restricted - Expendable: Statute 255,574,557 24,717, ,291,840 Total net position 255,574,557 24,717, ,291,840 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 508,624,607 $ 24,717,283 $ 533,341, The accompanying notes are an integral part of these financial statements.

86 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2015 OPERATING REVENUES Interest on loans receivable Administration fees Total operating revenues California Infrastructure and California Economic Infrastructure Development Bank Guarantee Trust Fund Fund Total $ 9,206,557 $ - $ 9,206,557 1,552,859-1,552,859 10,759,416-10,759,416 OPERATING EXPENSES Interest on revenue bond debt Program support Total operating expenses 4,632,101-4,632,101 4,206,661-4,206,661 8,838,762-8,838,762 OPERATING INCOME 1,920,654-1,920,654 NONOPERATING REVENUE Investment earnings Total nonoperating revenue Changes in net position 178,619 62, , ,619 62, ,235 2,099,273 62,616 2,161,889 NET POSITION, Beginning of year - as previously reported 257,041,094 24,654, ,695,761 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES (3,565,810) - (3,565,810) NET POSITION, Beginning of year - as restated 253,475,284 24,654, ,129,951 NET POSITION, End of year $ 255,574,557 $ 24,717,283 $ 280,291,840 The accompanying notes are an integral part of these financial statements. 21

87 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 California Infrastructure and California Economic Infrastructure Development Bank Guarantee Trust Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipt of interest on loans receivable $ 9,206,557 $ - $ 9,206,557 Receipt of administration fees 1,541,552-1,541,552 Receipt of principal on loans receivable 16,722,390-16,722,390 Payment of outstanding loan commitments (4,263,908) - (4,263,908) Payment of program support (4,391,978) - (4,391,978) Net cash provided by operating activities 18,814,613-18,814,613 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipt of revenue bond proceeds 68,978,608-68,978,608 Payment to advance refund escrow agent (4,910,468) - (4,910,468) Payment of principal on revenue bond debt (5,000,000) - (5,000,000) Payment of interest on revenue bond debt (6,841,787) - (6,841,787) Net cash provided by noncapital financing activities 52,226,353-52,226,353 CASH FLOWS FROM INVESTING ACTIVITIES Sale of investments 9,415,000-9,415,000 Receipt of interest on investments 334,924 59, ,134 Net cash provided by investing activities 9,749,924 59,210 9,809,134 CHANGE IN CASH AND EQUIVALENTS 80,790,890 59,210 80,850,100 CASH AND EQUIVALENTS, Beginning of year 108,854,004 24,640, ,494,682 CASH AND EQUIVALENTS, End of year $ 189,644,894 $ 24,699,888 $ 214,344,782 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 1,920,654 $ - $ 1,920,654 Adjustments to reconcile operating income to net cash provided by operating activities: Interest on revenue bond debt 4,632,101-4,632,101 Underwriter's discount paid directly from bond proceeds 302, ,262 Changes in assets and liabilities: Loans receivable (18,645,006) - (18,645,006) Accounts payable (569,243) - (569,243) Other liabilities (11,307) - (11,307) Compensated absences payable 138, ,258 Net other postemployment benefit obligation 69,000-69,000 Net pension liability and related deferred inflows/outflows (125,594) - (125,594) Undisbursed loan commitments 31,103,488-31,103,488 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 18,814,613 $ - $ 18,814,613 NONCASH FINANCING AND INVESTING ACTIVITIES Amortization of revenue bond premiums $ 1,502,712 $ - $ 1,502,712 Amortization of deferred outflow of resources 90,211-90,211 Bond proceeds paid directly to advance refund escrow agent 34,374,669-34,374,669 Accrued interest on refunded revenue bonds 327, , The accompanying notes are an integral part of these financial statements.

88 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, THE FINANCIAL REPORTING ENTITY The California Infrastructure and Economic Development Bank, a component unit of the State of California (State), is a public instrumentality of the State, organized and existing pursuant to the Bergeson-Peace Infrastructure and Economic Development Bank Act, constituting Division 1 of Title 6.7 of the California Government Code commencing with Section (Act). The California Infrastructure and Economic Development Bank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing to public agencies, provide credit enhancements, including guarantees, acquire or lease facilities, and leverage State and Federal funds. The mission of the California Infrastructure and Economic Development Bank is to finance public infrastructure, clean energy, environmental and economic development projects that promote a healthy climate for job creation and retention, contribute to a strong California economy, and a healthy environment, and improve the quality of life in California communities. The California Infrastructure and Economic Development Bank is governed by a five-member Board of Directors (Board) consisting of a delegate of the Director of the Governor s Office of Business and Economic Development, who serves as the chair, the Director of the Department of Finance, the State Treasurer, the Secretary of the State Transportation Agency, and an appointee of the Governor. The California Infrastructure and Economic Development Bank (IBank) issues loans to municipal entities pursuant to the Infrastructure State Revolving Fund (ISRF) Program, the activities of which are accounted for in the California Infrastructure and Economic Development Bank Fund (CIEDB Fund) and the California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund) (collectively, the CIEDB Fund and the Guarantee Trust Fund are the Funds), enterprise funds of IBank. The ISRF Program provides financing to local government entities for a wide variety of infrastructure projects throughout the State. Eligible ISRF Program borrowers include cities, counties, special districts, assessment districts, joint power authorities, non-profit corporations formed by local government entities, and nonprofit organizations sponsored by a governmental entity. IBank issues revenue bonds (ISRF Program Bonds) to provide additional funding for the ISRF Program. The ISRF Program Bond indentures require an independent audit of the ISRF Programs. IBank also serves as a conduit issuer of revenue bonds, loans, and commercial paper for private, nonprofit and other governmental entities (Conduit Bond Programs), the activities of which are also accounted for in the Funds. Legislation requires an audit of IBank s activities under the Conduit Bond Program. Effective October 4, 2013, the Small Business Financial Assistance Act of 2013 transferred the California Small Business Expansion Fund, which accounts for the activities of the California Small Business Loan Guarantee Program (SBLGP), to the California Infrastructure and Economic Development Bank. The SBLGP provides repayment guarantees to lenders of loans to small businesses having difficulty securing financing on their own. The guarantees are issued by nonprofit financial development corporations, on behalf of the California Infrastructure and Economic Development Bank, to banks and other lenders to help small business owners finance their business plans, including expanding operations, purchasing new equipment and infusing small businesses with working capital. Guarantees may also be issued on loans for start-up costs. The California Small Business Expansion Fund is not included in these financial statements. 23

89 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 24 A. BASIS OF PRESENTATION / FUND FINANCIAL STATEMENTS The financial statements presented in this report include only the financial activities of the Funds and do not purport to, and do not present fairly the financial position of IBank as of June 30, 2015, the changes in its financial position, or, where applicable, its cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. IBank s California Small Business Expansion Fund, its only other fund, is included in and subject to the audit of the State of California s financial statements. Monies in the Funds are held within the California State Treasury or by the bond trustees for the ISRF Program Bonds (Trustees). CIEDB Fund With the exception of amounts spent for program support that require an annual appropriation by the State Legislature, the CIEDB Fund is continuously appropriated without regard to fiscal year and is available for expenditure for the program related purposes stated in the Act. The CIEDB Fund is an enterprise fund. Guarantee Trust Fund The Guarantee Trust Fund is continuously appropriated to IBank without regard to fiscal year for the purpose of insuring all or a portion of the accounts and subaccounts within the CIEDB Fund, any contracts or obligations of IBank or a sponsor, as that term is defined in the Act, and all or a part of any series of bonds issued by IBank, by a special purpose trust or by a sponsor. Uncommitted monies may be transferred between the CIEDB Fund and the Guarantee Trust Fund when appropriate to accomplish the financing objectives of IBank. The Guarantee Trust Fund is an enterprise fund. B. ACCOUNTING PRINCIPLES The accompanying financial statements have been prepared using the economic resources measurement focus and accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. For the fiscal year ended June 30, 2015, IBank implemented GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 and GASB Statement No. 71 (GASB 71), Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (collectively, the Statements). The primary objective of the Statements is to improve accounting and financial reporting by state and local governments for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. It requires employers to report a net pension liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. The

90 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Statements identify the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Since the Statements require retroactive application, the net pension liability offset by the related deferred outflow of resources as of June 30, 2014 reduces the beginning net position for the fiscal year ended June 30, As a result, for the fiscal year ended June 30, 2015, the beginning net position decreased by $3,565,810 as the cumulative effect of the change in accounting principles. The Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing financial services in connection with principal ongoing operations. The primary operating revenue reported in the Funds is financing income, representing interest on loans provided to ISRF Program borrowers. Also recognized in the Funds as operating revenue are the fees charged to ISRF Program borrowers and Conduit Bond Programs borrowers. Operating expenses primarily include interest expense on the ISRF Program Bonds and program support expenses. Investment income is reported as nonoperating revenue. C. CASH AND EQUIVALENTS IBank considers all short-term investments with an original maturity of three months or less to be cash equivalents. Cash and investments held in either the State s Surplus Money Investment Fund (SMIF), an internal investment pool, money market deposit accounts or funds held by the Trustees are considered to be highly liquid and cash equivalents. All investments are stated at fair value in the Statement of Net Position. All investment income, including changes in the fair value of investments, is recognized as revenue in the Statement of Revenues, Expenses, and Changes in Net Position. In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures (Amendment of GASB No. 3), certain disclosure requirements, if applicable, for deposits and investment risks are specified relating to the following risks: interest rate, credit, custodial credit, concentrations of credit and foreign currency. In addition, other disclosures are specified including, but not limited to, the use of certain methods to present deposits and investments, highly sensitive investments and credit quality at year-end. D. LOANS RECEIVABLE IBank enters into loan agreements, installment sale agreements and lease agreements (Loans) to finance public infrastructure projects and projects for non-profit organizations sponsored by governmental entities pursuant to the ISRF Program. A majority of the Loans are pledged to the 2014A ISRF Program Bonds and the 2015A ISRF Program Bonds (Series Pledged Loans). Loans receivable includes pledged and non-pledged Loans. Pledged and non-pledged Loans receivable consists of two components the disbursed and the undisbursed amount of Loans. The disbursed amount of pledged Loans receivable includes amounts drawn by the borrower for 25

91 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 reimbursement or payment of project costs. The undisbursed amount of pledged Loans receivable includes the balance available to be drawn by the borrowers and draws submitted for payment but unpaid at year-end, and is offset by a liability for outstanding undisbursed loan commitments. The current portion of undisbursed pledged and non-pledged Loan commitments is an estimate and is generally based upon projections provided by borrowers. These estimates are subject to change due to unforeseen weather conditions, construction delays related to change orders, delayed material shipment, subcontractor performance problems and other factors that cannot be reasonably predicted. Prior to the issuance of the ISRF Program Bonds, Loans were funded solely by General Fund appropriations received from the State, Loan repayments, fee revenue, and investment income. Since the issuance of the ISRF Program Bonds, Loans have been funded from the proceeds of the ISRF Program Bonds and/or from proceeds of Loan repayments, fee revenue and investment income. There is no provision for uncollectible accounts as all Loans are current and expected at this time to be repaid according to the scheduled terms. E. ISSUANCE COSTS Costs associated with the issuance of each series of the ISRF Program Bonds included bond counsel fees, trustee fees, rating agency fees, underwriting costs, financial advisor fees and other miscellaneous expenses. The ISRF Program bond issuance costs are recognized as an expense when incurred. F. REVENUE BONDS PAYABLE Revenue bonds payable are stated at their unpaid balance plus any remaining unamortized premiums. Bond premiums are amortized using the effective-interest method over the terms of the respective ISRF Program Bonds. The ISRF Program Bonds are subject to mandatory and optional redemption prior to their stated maturity. The ISRF Program Bonds are not obligations of the State, and the taxing power of the State is not pledged for their payments. The obligation of IBank to make such payments is a limited obligation, payable solely from the ISRF Program Bonds collateral pledged by IBank. G. LOAN AND CONDUIT BOND FEES IBank charges an origination fee and an annual servicing fee to ISRF Program borrowers. The origination fee is due upon execution of the Loan agreement and is collected no later than the date of the borrower s first disbursement. Loan origination fees are recognized as revenue when due. The annual servicing fee is recognized as revenue when earned. IBank also charges application, bond issuance and annual fees to Conduit Bond Programs borrowers. Conduit bond fees are recognized as revenue when earned. 26

92 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 H. COMPENSATED ABSENCES PAYABLE Compensated absences payable represents employees earned but unused vacation, annual leave, and other similar leave program balances which are eligible for payment upon separation from state service. Unused sick-leave balances are not included as they are converted to additional service credit used in the calculation of postemployment benefits. Compensated absences payable is a long-term obligation because leave earned in the current period is considered to be used before any unused leave from prior years (LIFO) and it is anticipated that employees will not generally use more leave than the amount earned in the current period. I. PENSIONS For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Funds portion of the California Public Employees Retirement System (CalPERS) Miscellaneous Plan (Plan) and additions to/deductions from the Plan s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. J. CLASSIFICATION OF NET POSITION Restricted net position represents amounts restricted due to external restrictions imposed by creditors, laws or regulations of the government, and restrictions imposed by law through constitutional provisions or enabling legislation. The net position reported in the Funds is restricted by statute for programs established by IBank and for programs administered pursuant to the Act. K. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. CASH AND EQUIVALENTS IBank follows GASB Statement No. 40, Deposit and Investment Risk Disclosures. This statement requires the disclosure of the interest rate, credit, custodial credit, concentration of credit and foreign currency risks to the extent that they exist at the date of the Statement of Net Position. Additional disclosure detail required by GASB Statement No. 40 for cash deposits, investments, and derivatives within the State s centralized treasury system can be found in the State s Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014, which is the latest available. 27

93 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Due to the specified nature of the activities reported in the Funds as established in the Act, all cash, cash equivalents, and investments are considered restricted at June 30, 2015, since these funds cannot be spent for any purpose other than as established in the Act. Investments are made pursuant to an investment policy initially adopted by the Board in March 2006 and as amended by the Board on April 27, The Investment Policy was reviewed by the Board in May 2013 with minor changes and again on February 24, The Investment Policy provides guidelines for the prudent investment while maximizing efficiency and financial return in conformance with all applicable State statutes governing the investment of public funds, with the foremost objectives being safety and liquidity. Pursuant to the Investment Policy, IBank may, from time to time, direct the State Treasurer (Treasurer) to invest monies in the CIEDB Fund and Guarantee Trust Fund held within the State s centralized treasury system that are not required for its current needs, in any eligible securities specified in Government Code Section as IBank shall designate. IBank may direct the Treasurer to invest monies in the Guarantee Trust Fund in certain repurchase agreements, investment agreements and subordinated securities as specified in Government Code Section 63062(a). IBank may direct the Treasurer to deposit monies in the Funds in interest-bearing accounts in qualified public depositories as established by State law, including any bank in the State or in any savings and loan association in the State. IBank may alternatively require the transfer of monies in the Funds to the SMIF for investment. Government Code Sections 63052(e), 63062(b) and 5922(d) provide that bond proceeds and monies set aside and pledged to the repayment of bonds may be invested in securities or obligations described in the indenture for those bonds. Monies held by the Trustees in each of the accounts under the 2014A ISRF Program Bonds and 2015A ISRF Program Bonds Indenture shall be invested and reinvested by the respective Trustees in permitted investments, as that term is defined in the respective indentures, which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. Investments Authorized by the California Government Code and the Investment Policy The following table identifies the investment types that are authorized by Government Code sections 16430, 5922(d), 63052(d) and (e), and 63062(a) and (b) or the Investment Policy, where more restrictive. The table below also identifies certain provisions of the California Government Code, or the Investment Policy, where more restrictive, that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds and other monies held by the Trustees that are governed by the provisions of the 2014A ISRF Program Bonds Indenture or the 2015A ISRF Program Bonds Indenture, but rather the general provisions of the California Government Code or the Investment Policy. 28

94 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Authorized Investments Authorized Investment Type Maximum Maturity 1 Maximum Percentage of Portfolio Maximum Investment in One Issuer Credit Rating 3 U.S. Treasury Securities 5 Years N/A 2 N/A N/A Federal Agency Securities 5 Years N/A 40% N/A State of California Securities 5 Years 30% 30% N/A Local Agency Securities 5 Years 30% 5% N/A Commercial Paper 180 Days 30% 5% A1/P1/F1 Bankers Acceptances 180 Days 40% 5% N/A Negotiable Certificates of Deposit 5 Years 30% 5% N/A U.S. SBA or U.S. FHA Securities 5 Years N/A 40% N/A Export-Import Bank Securities 5 Years 10% N/A N/A Guaranteed Student Loan Program Securities 5 Years 10% N/A N/A Development Bank Securities 5 Years 30% 5% N/A Corporate Debt Securities 5 Years 30% 5% A Where the Investment Policy does not specify a maximum remaining maturity at the time of the investment, no investment shall be made in any security, other than a collateral security underlying a repurchase agreement or collateral for an investment agreement, which at the time of the investment has a term remaining to maturity in excess of five years. N/A means neither the Government Code nor the Investment Policy sets a limit. A rating by any nationally recognized rating agency will meet this requirement. The nationally recognized rating agencies include Standard & Poor s (S&P), Moody s Investors Services (Moody s), and Fitch Ratings (Fitch) (collectively, Rating Agencies). 29

95 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Investments Authorized by the ISRF Program Bond Series Indentures or the Master Indenture Investment of debt proceeds and Loan repayments that are held by the Trustees are governed by the provisions of the 2014A and 2015A ISRF Program Bonds Indenture. Such investments are referenced in the Investment Policy, which references Government Code sections 63052(e) and 5922(d). Authorized Investments Authorized Investment Type Maximum Maturity 1 Maximum Percentage of Portfolio Maximum Investment in One Issuer Credit Rating 3 U.S. Treasury Securities 5 Years N/A 2 N/A N/A Federal Agency Securities 5 Years N/A 30% N/A Commercial Paper 180 Days 30% 10% A-2/P-2/F2 Bankers Acceptances 180 Days N/A N/A A-3/P-3/F3 Negotiable Certificates of Deposit 5 Years N/A N/A A U.S. SBA or U.S. FHA Securities 5 Years N/A N/A N/A Export-Import Bank Securities 5 Years N/A N/A N/A Guaranteed Student Loan Program Securities 5 Years N/A N/A N/A Development Bank Securities 5 Years N/A N/A N/A Corporate Debt Securities 5 Years N/A N/A A Surplus Money Investment Fund N/A N/A N/A N/A Repurchase Agreements 5 Years N/A N/A A Guaranteed Investment Contract 5 Years N/A N/A AA Collateralized Forward Purchase Agreements 5 Years N/A N/A A Money Market Funds N/A N/A N/A Am The Investment Policy authorizes investing bond reserve funds and bond revenue funds beyond five years if prudent in the opinion of the Executive Director. N/A means neither the Government Code nor the Investment Policy sets a limit. As rated by each of S&P, Moody s and Fitch. IBank has invested excess cash reported in the Funds held within the State s centralized treasury system in SMIF. All of the resources in SMIF are invested through the Pooled Money Investment Account (PMIA). The PMIA investment program is overseen by the Pooled Money Investment Board and is administered by the Treasurer. Cash and equivalents at June 30, 2015 were as follows: SMIF $ 52,380,398 Money Market Deposit Accounts 161,964, Total Cash and Equivalents $ 214,344,782

96 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Deposit and Investment Risk Disclosures Interest Rate Risk. Interest rate risk is the risk that the value of fixed income securities will decline because of rising interest rates. The prices of fixed income securities with a longer time to maturity, measured by weighted average to maturity, tend to be more sensitive to changes in interest rates and, therefore, more volatile than those with a shorter duration. As of June 30, 2015, the weighted average maturity of the investments contained in SMIF is approximately 239 days. Credit Risk. Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. SMIF does not have a rating provided by a nationally recognized statistical rating organization. Custodial Credit Risk. Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, IBank will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. As of June 30, 2015, the Funds reported $161,964,384 in money market deposit accounts with U.S. Bank, a national depository financial institution, $250,000 of which was covered by federal deposit insurance. The remainder was uncollateralized. The custodial risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, IBank will not be able to recover the value of its investment or collateral securities that are in the possession of another party. As of June 30, 2015, SMIF was not subject to custodial credit risk. 4. REVENUE BONDS PAYABLE On February 6, 2014, IBank issued $95,960,000 in ISRF Program Bonds. A portion of the proceeds, $82,184,703, was used to advance refund $78,440,000 of outstanding 2004 and 2005 ISRF Program Bonds. These proceeds were deposited in an irrevocable trust with an escrow agent to pay the future debt service on the refunded bonds. As a result, the 2004 and 2005 ISRF Program Bonds are considered defeased and the liability for those bonds has been removed from the Statement of Net Position. The remaining proceeds were used to fund ISRF Program Loans that were made in anticipation of the issuance of the 2014 ISRF Program Bonds. The reacquisition price (amount placed in escrow to repay the 2004 and 2005 ISRF Program Bonds) exceeded the net carrying amount of those bonds by $896,045. This loss on the bond refunding is reported as a deferred outflow of resources on the Statement of Net Position and will be amortized over the remaining life of the refunded bonds. As of June 30, 2015 the balance of the loss on bond refunding was $774,699. On June 17, 2015, IBank issued $90,070,000 in ISRF Program Bonds. A portion of the proceeds, $39,285,137, was used to advance refund $35,435,000 of outstanding 2008 ISRF Program Bonds. These proceeds were deposited in an irrevocable trust with an escrow agent to pay the future debt 31

97 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 service on the refunded bonds. As a result, the 2008 ISRF Program Bonds are considered defeased and the liability for those bonds has been removed from the Statement of Net Position. The remaining proceeds were used to fund ISRF Program Loans that were made in anticipation of the issuance of the 2015 ISRF Program Bonds. The reacquisition price (amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeded the net carrying amount of those bonds by $3,587,748. This loss on the bond refunding is reported as a deferred outflow of resources on the Statement of Net Position and will be amortized over the remaining life of the refunded bonds. As of June 30, 2015 the balance of the loss on bond refunding was $3,587,748. IBank refunded the 2008 ISRF Program Bonds to reduce its debt service payments by $8,246,654 over the next 22 years and to obtain an economic gain of $1,372,007 or 3.88% of the refunded par outstanding. The economic gain is the difference between the present values of the debt service payments on the old and new debt, discounted at 2.70%. At June 30, 2015, the outstanding balance of the defeased 2008 ISRF Program Bonds was $35,435,000. The bonds will be redeemed on their October 1, 2018 call date. The principal and interest payments received during the fiscal year from the Series-Pledged Loans are paid to the respective Trustees in amounts and at times sufficient to make the semi-annual debt service payments on the ISRF Program Bonds as they become due. For the year ended June 30, 2015, Series Pledged Loan repayments and reserve account earnings were $25,508,443. The debt service payments on ISRF Program Bonds for the fiscal year was $11,841,797, resulting in a bond debt coverage ratio for the fiscal year of 2.15 times. The following is a summary of bonds payable at June 30, 2015: Infrastructure State Revolving Fund Revenue Bonds, Series 2014A, issued $95,960,000 bearing 2.00% to 5.00% interest payable semi-annually, final maturity October 1, 2043 (2014 ISRF Program Bonds) $ 93,320,000 Infrastructure State Revolving Fund Revenue Bonds, Series 2015A, issued $90,070,000 bearing 1.00% to 5.00% interest payable semi-annually, final maturity October 1, 2043 (2015A ISRF Program Bonds) 90,070,000 Plus: Unamortized Net Premium 24,900,797 Net ISRF Program Bonds Payable $ 208,290,797 32

98 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The following is a schedule of the debt service requirements for the 2014 ISRF Program Bonds as of June 30, 2015: Year Ending June 30 Principal Interest Total Debt Service 2016 $ 3,515,000 $ 4,452,319 $ 7,967, ,630,000 4,326,994 7,956, ,705,000 4,180,294 7,885, ,860,000 4,009,693 7,869, ,065,000 3,811,569 7,876, ,755,000 15,824,094 37,579, ,325,000 10,057,094 35,382, ,820,000 4,004,481 22,824, ,270, ,018,859 8,288, ,375, ,531 1,460,531 Total $ 93,320,000 $ 51,770,928 $ 145,090, Principal payments in the amount of $4,739,000 will be made from sinking fund payments for the 2039 term bonds. Principal payments in the amount of $1,375,000 will be made from sinking fund payments for the 2043 term bonds. The following is a schedule of the debt service requirements for the 2015A ISRF Program Bonds as of June 30, 2015: Year Ending June 30 Principal Interest Total Debt Service 2016 $ 2,480,000 $ 3,270,862 $ 5,750, ,810,000 4,079,931 7,889, ,095,000 3,940,881 8,035, ,245,000 3,774,081 8,019, ,425,000 3,578,556 8,003, ,775,000 14,376,781 38,151, ,050,000 9,022,656 28,072, ,420,000 4,393,931 21,813, ,235, ,440,747 9,675, ,535, ,375 2,786,375 Total $ 90,070,000 $ 48,129,801 $ 138,199, Principal payments in the amount of $4,030,000 will be made from sinking fund payments for the 2040 term bonds. Principal payments in the amount of $635,000 and $1,900,000 will be made from sinking fund payments for the 2040 and 2043 term bonds, respectively. 33

99 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, LONG-TERM OBLIGATIONS The changes in long-term obligations for the fiscal year ended June 30, 2015 were as follows: Revenue Bonds Payable: Restated Balance June 30, 2014 Increases Decreases Balance June 30, 2015 Current Portion June 30, ISRF Program Bonds $ 37,795,000 $ - $ 37,795,000 $ - $ A ISRF Program Bonds 95,960,000-2,640,000 93,320,000 3,515, A ISRF Program Bonds - 90,070,000-90,070,000 2,480,000 Unamortized Net Premium 12,752,706 13,585,539 1,437,448 24,900,797 - Total Revenue Bonds Payable 146,507, ,655,539 41,872, ,290,797 5,995,000 Net Pension Liability 3,839, , ,009 3,200,240 - Net Other Postemployment Benefit Obligation 1,218,000 69,000-1,287,000 - Compensated Absences Payable 176, , , ,940 - Total $ 151,741,797 $104,261,616 $ 42,910,436 $ 213,092,977 $ 5,995,000 The June 30, 2014 balance has been increased by the $3,839,409 for the net pension liability as a result of implementing the Statements (see Note 2.B). 34

100 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, CONDUIT BOND INFORMATION AND DEBT OBLIGATIONS IBank has served as the conduit bond issuer for many private, nonprofit and governmental entities. Conduit bonds are a limited obligation of IBank payable solely from the pledged revenues of the conduit borrower. As such, the balance of outstanding conduit bonds is not reflected in the financial statements due to the conduit bond borrower s repayment pledges for those bonds. Conduit Bond information 1 : Fees earned from 7/1/14 thru 6/30/15: o Application Fees $ 18,000 o Issuance Fees $ 257,458 o Annual Fees $ 69,500 o Other $ 947 Conduit Bond Support Operating Expenses $ 950,652 2 Amount of conduit bonds authorized but unsold as of 6/30/15 $ 18,000,000 Amount of conduit bond debt issued from 7/1/14-6/30/15 $ 270,300,000 Amount of conduit bonds outstanding as of 6/30/15 $ 4 Billion 3 Number of conduit bonds transactions outstanding as of 6/30/ This information is provided pursuant to Government Code section 5872(a). Conduit Bond Support Operating Expenses include expenses such as salaries and benefits, administrative services, rent, utilities, travel, training, equipment and external services. Includes bonds issued by the former California Economic Development Financing Authority, which were assumed by IBank pursuant to Chapter 4, Statutes of 1998, bonds issued by the California Consumer Power and Conservation Financing Authority, which were assumed by IBank pursuant to Resolution adopted by the IBank Board on September 28, 2004, and excludes conduit bonds that were issued by special purpose trusts created by IBank. 7. RETIREMENT PLAN Plan Description All of the employees of IBank participate in the California Public Employees Retirement System (CalPERS), which is included in the State of California s (State) Comprehensive Annual Financial Report as a fiduciary component unit. CalPERS administers the Public Employees Retirement Fund (PERF). PERF is an agent multiple-employer defined benefit retirement plan. Departments and agencies within the State, including the Funds, are in a cost-sharing arrangement in which all risks and costs are shared proportionately by participating State agencies. Since all State agencies and certain related organizations, including the Funds, are considered collectively to be a single employer for plan purposes, the actuarial present value of vested and non-vested accumulated plan benefits attributable to the IBank employees cannot be determined. The significant actuarial assumptions used to compute the actuarially determined State contribution requirements are the same as those used to compute the State pension benefit obligation as defined by CalPERS. CalPERS issues a publicly available financial report that includes financial statements and required supplementary information for this plan. This report is available online at 35

101 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The California Legislature passed and the Governor signed the Public Employees Pension Reform Act of 2013 (PEPRA) on September 12, PEPRA contained a number of provisions intended to reduce future pension obligations. PEPRA primarily affects new pension plan members who are enrolled for the first time after December Benefit provisions and other requirements are established by State statute. Benefits Provided The benefits for the Plan are based on members years of service, age, final compensation, and benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five or ten years of credited service. The Plans provisions and benefits in effect at June 30, 2015, are summarized as follows: First Tier: Hire date Prior to January 15, 2011 January 15, 2011 to December 31, 2012 On or after January 1, 2013 Benefit formula Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 to to to 67 Monthly benefits, as a % of eligible compensation 1.1 to 2.5% to 2.418% 1.0 to 2.5% Second Tier: Hire date Prior to January 1, 2013 On or after January 1, 2013 Benefit formula Benefit vesting schedule 10 years service 10 years service Benefit payments monthly for life monthly for life Retirement age 50 to to 67 Monthly benefits, as a % of eligible compensation 0.5 to 1.25% 0.65 to 1.25% Contributions 36 Section 20814(c) of the California Public Employees Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through the CalPERS annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. IBank is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

102 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 For the measurement period ended June 30, 2014 (the measurement date), the average active employee contribution rate was 6.525% of annual pay and the employer s contribution rate is % of annual payroll. These rates reflect Section , which mandates that certain employees must contribute more as of July 1, Furthermore, any reduction in employer contributions due to the increase in the employee contributions must be paid by the employer towards the unfunded liability. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any Employer Paid Member Contributions or situations where members are paying a portion of the employer contribution. For the fiscal year ended June 30, 2015, the contributions recognized as part of pension expense was $273,600. Pension Liabilities, Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2015, the Funds reported net pension liabilities for their proportionate share of the net pension liability of $3,200,240. The Funds net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2014, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The Funds proportion of the net pension liability was based on the State Controller s Office (SCO) projection for the Funds. The SCO identified a total of 29 entities that are reported in the State s CAFR which are proprietary funds (enterprise and internal service) and fiduciary funds (pension and other employee benefit trust funds), component units (discretely presented and fiduciary), and related organizations, that have State employees with pensionable compensation (covered payroll). The SCO calculated and provided these funds/organizations with their allocated pensionable compensation percentages by plan. The Funds proportionate share of the net pension liability for the Plan as of June 30, 2014 was %. For the fiscal year ended June 30, 2015, the Funds recognized pension expense of $230,840. At June 30, 2015, the Funds reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources IBank contributions subsequent to the measurement date $ 356,434 $ - Net difference between projected and actual earnings on pension plan investments - 596,410 Total $ 356,434 $ 596,410 37

103 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The $356,434 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Actuarial Assumptions Year Ended June $ (149,102) 2017 (149,103) 2018 (149,102) 2019 (149,103) Total $ (596,410) For the measurement period ended June 30, 2014 (measurement date), the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and the June 30, 2014 total pension liabilities were based on the following actuarial method and assumptions: Actuarial Cost Method Entry-Age Normal Actuarial Assumptions: Discount Rate 7.5% Inflation 2.75% Salary Increases Varies (1) Investment Rate of Return 7.5% (2) Mortality (3) CalPERS Membership Data Post Retirement Benefit Increase Up to 2.75% (4) (1) Depending on age, service and type of employment (2) Net of pension plan investment and administrative expenses, including inflation (3) The mortality table used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report. (4) Contract COLA up to 2.75% until Purchasing Power Protection Allowance Floor on Purchasing Power applies 38 All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS website under Forms and Publications.

104 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Discount Rate The discount rate used to measure the total pension liability was 7.50% for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The stress test results are presented in a detailed report called GASB Crossover Testing Report that can be obtained at CalPERS website under the GASB 68 section. According to Paragraph 30 of GASB 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50% investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65%. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that is scheduled to be completed in February Any changes to the discount rate will require CalPERS Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time when CalPERS may change its methodology. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 39

105 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Strategic Allocation Real Return Years 1 10 (a) Real Return Years 11+ (b) Asset Class Global Equity 47.0% 5.25% 5.71% Global Fixed Income 19.0% 0.99% 2.43% Inflation Sensitive 6.0% 0.45% 3.36% Private Equity 12.0% 6.83% 6.95% Real Estate 11.0% 4.50% 5.13% Infrastructure and Forestland 3.0% 4.50% 5.09% Liquidity 2.0% -0.55% -1.05% Total 100.0% (a) An expected inflation of 2.5% used for this period. (b) An expected inflation of 3.0% used for this period. Sensitivity of the Funds Proportionate Share Net Pension Liability to Changes in the Discount Rate The following presents the Funds proportionate share of the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 7.50 percent, as well as what the Funds proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.50 percent) or 1 percentage-point higher (8.50 percent) than the current rate: Discount Rate 1% (6.50%) Current Discount Rate (7.50%) Discount Rate + 1% (8.50%) Funds Proportionate Share of Plan s Net Pension Liability $ 4,658,553 $ 3,200,240 $ 1,979,470 40

106 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, OTHER POSTEMPLOYMENT BENEFITS (OPEB) The State also provides postemployment health care and dental benefits to its employees and their spouses and dependents, when applicable, through a substantive single-employer defined benefit plan to which the State contributes as an employer (State s Substantive Plan). The design of health and dental benefit plans can be amended by the CalPERS Board of Administration and the California Department of Human Resources, respectively. Employer and retiree contributions are established and may be amended by the Legislature. The employer contribution for health premiums maintains the average 100/90 percent contribution formula established in the Government Code. Under this formula, the State averages the premiums of the four largest health benefit plans in order to calculate the maximum amount the State will contribute toward the retiree s health benefits. The State also contributes 90 percent of this average for the health benefits of each of the retiree s dependents. Employees vest for this benefit after serving 10 years with the State. With 10 years of service credit, employees are entitled to 50 percent of the State s full contribution. This rate increases by 5% per year and with 20 years of service, the employee is entitled to the full 100/90 formula. IBank participates in the State s Substantive Plan on a cost sharing basis. IBank recognizes the costs of providing health and dental insurance to annuitants based on the required contribution, which is actuarially determined, and funded on a pay-as-you-go basis. The State Controller s Office obtains an annual actuarial valuation of the State s Substantive Plan which can be found on its website at A portion of the State s postemployment benefit costs have been allocated to the CIEDB Fund as follows: Annual required contribution $ 110,000 Interest on net OPEB obligation 18,000 Adjustment to annual required contribution (17,000) Annual OPEB cost (expense) 111,000 Contributions made (42,000) Increase in net OPEB obligation 69,000 Net OPEB obligation beginning of year 1,218,000 Net OPEB obligation end of year $ 1,287,000 The annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three fiscal years, allocated to the CIEDB Fund, were as follows: Percentage of Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/13 $ 127,000 35% $ 948,000 6/30/14 $ 418,000 35% $ 1,218,000 6/30/15 $ 111,000 39% $ 1,287,000 41

107 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Additional disclosure detail required by GASB Statement No. 45, regarding other postemployment benefits is presented in the State s Comprehensive Annual Financial Report for the year ended June 30, 2014, which is the latest available on the State Controller s Office website at 9. COMMITMENTS In June 2003, the Board approved a preliminary loan guarantee commitment for the Imperial Irrigation District (IID). The preliminary loan guarantee commitment established a conditional obligation to guarantee a future issuance of revenue bonds by IID (IID Bonds) for the purpose of financing a water supply project (IID Guarantee). During the fiscal year, IBank transferred $20 million from the CIEDB Fund to the Guarantee Trust Fund in conjunction with the preliminary loan guarantee commitment for the IID. In October 2010, the State Legislature enacted Senate Bill 856 (SB 856) that directed IBank to deposit a specified amount required for the IID Guarantee in a reserve account within the Guarantee Trust Fund. SB 856 further directed that this IID Guarantee amount be held for the benefit of bondholders of potential IID Bonds. At June 30, 2015, the required IID Guarantee amount was on deposit in a reserve account within the Guarantee Trust Fund, and no IID Guarantee or IID Bonds have been approved or issued. As of June 30, 2015 the Board had conditionally approved two Loans totaling $11,935,354 that do not yet have fully executed loan documentation. When IBank and the borrower execute the required loan documentation, IBank will be obligated to fund the Loan. 10. CONTINGENCIES One borrower with three Loans pledged to the common pool of loans supporting the 2014 and 2015 ISRF Bonds declared a fiscal emergency on July 18, 2012, and filed a Chapter 9 bankruptcy petition on August 1, On August 28, 2013, the federal bankruptcy court judge ruled that the borrower was eligible for Chapter 9 bankruptcy protection. On May 29, 2015 the borrower filed a plan of adjustment with the bankruptcy court reflecting an intent to continue routine debt service payments to IBank. IBank filed a proof claim in bankruptcy court on June 17, As of June 30, 2015, the bankruptcy case was still pending as the court awaits the results of negotiations between the borrower and its largest creditors. The borrower made all scheduled Loan payments during the fiscal year and the subsequent payments due on August 1, 2015; the borrower s next Loan payments are due February 1,

108 REQUIRED SUPPLEMENTARY INFORMATION

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110 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK REQUIRED SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE OF THE FUNDS PROPORTIONATE SHARE OF THE NET PENSION LIABILITY As of June 30, 2015 Last 10 Years* Funds proportion of the net pension liability % Funds proportionate share of the net pension liability $ 3,200,240 Funds covered-employee payroll $ 1,249,884 Fund s proportionate share of the net pension liability as a percentage of their coveredemployee payroll 39.06% Plan fiduciary net position as a percentage of the total pension liability 73.05% 2015 Notes to Schedule: Changes of benefit terms. In 2015, there were no changes to the benefit terms. Changes in assumptions. In 2015, there were no changes in assumptions. * - Fiscal year 2015 was the 1st year of implementation of GASB 68, therefore only one year is shown. 43

111 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE OF FUNDS CONTRIBUTIONS As of June 30, 2015 Last 10 Years* Contractually required contribution $ 356,434 Contributions in relation to the contractually required contribution 356,434 Contribution deficiency (excess) $ - Funds covered-employee payroll $ 1,615,972 Contributions as a percentage of covered-employee payroll 22.06% 2015 Notes to Schedule: The actuarial methods and assumptions used to determine contribution rates for fiscal year ended June 30, 2015 was from the June 30, 2013 Valuation Date. Actuarial Cost Method Entry-Age Normal Actuarial Assumptions: Inflation 2.75% Salary Increase Varies (1) Payroll Growth 3.0% (2) Investment Rate of Return 7.5% Retirement Age 2010 Experience Study (3) Mortality 2010 Experience Study (4) (1) Depending on age, service and type of employment (2) Net of pension plan investment and administrative expenses, including inflation (3) The probabilities of Retirement are based on the 2010 CalPERS Experience Study for the period from 1997 to (4) The probabilities of mortality are based on the 2010 CalPERS Experience Study for the period from 1997 to Pre-retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. * - Fiscal year 2015 was the 1st year of implementation of GASB 68, therefore only one year is shown 44

112 STATISTICAL SECTION

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114 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK STATISTICAL SECTION FOR THE FISCAL YEAR ENDED JUNE 30, 2015 This part of the comprehensive annual financial report presents detailed information as a context for understanding the information in the financial statements and note disclosures as it relates to the financial health. CONTENTS PAGE Financial Trends These schedules contain trend information to help the reader understand how the financial performance has changed over time. Schedule of Net Position 46 Schedule of Revenues, Expenses, and Changes in Fund Net Position 48 Infrastructure State Revolving Fund (ISRF) Program Ten Largest Borrowers 50 Revenue Capacity This schedule contains information to help the reader assess the most significant revenue source. Schedule of ISRF Program Loans Receivable and Interest Rates 51 Debt Capacity These schedules contain information to help the reader assess the current level of outstanding debt and capacity to issue additional debt in the future. Schedule of Statutory Debt Limit Capacity 53 Schedule of Outstanding ISRF Program Bonds and Related Debt Ratio 55 Schedule of Aggregate Pledged Resources Coverage for ISRF Program Bonds 57 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the financial activities take place. California Demographic and Economic Indicators 58 California Employment by Industry 60 Operating Information These schedules contain data to help the reader understand how the information in the financial report relates to the programs provided and the activities performed. Number of Employees by Identifiable Activity 61 Major Program Activity 62 45

115 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF NET POSITION 1 FOR THE PAST TEN FISCAL YEARS ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS Cash, cash equivalents, and investments $ 153,613,453 $ 126,220,856 $ 108,852,319 $ 125,709,510 $ 113,447,173 Program loans receivable 269,294, ,990, ,749, ,504, ,209,650 Other assets 4,991,913 5,474,496 5,371,504 5,583,167 5,938,389 Total assets 427,899, ,685, ,973, ,797, ,595,212 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions Loss on refunding debt Total deferred outflows of resources TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 427,899,608 $ 414,685,764 $ 419,973,760 $ 442,797,166 $ 450,595,212 LIABILITIES. DEFERRED INFLOWS OF RESOURCES AND NET POSITION LIABILITIES Revenue bonds payable $ 106,816,821 $ 103,510,754 $ 100,432,424 $ 145,839,491 $ 140,710,150 Undisbursed loan commitments 75,791,904 56,963,471 57,012,908 28,404,385 37,639,398 Net pension liability Other liabilities 3 3,430,607 3,762,184 4,080,853 5,164,622 5,434,308 Total liabilities 186,039, ,236, ,526, ,408, ,783,856 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions Total deferred inflows of resources NET POSITION Restricted - Expendable by statute 241,860, ,449, ,447, ,388, ,811,356 Total net position 241,860, ,449, ,447, ,388, ,811,356 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 427,899,608 $ 414,685,764 $ 419,973,760 $ 442,797,166 $ 450,595, This schedule is condensed from its original format and combines the California Infrastructure and Economic Development Bank Fund and the California Infrastructure Guarantee Trust Fund. In fiscal year and , Series 2014A and Series 2015A ISRF Program Bonds were issued in part to refund the Series 2004, Series 2005 and Series 2008 ISRF Program Bonds. These advance refundings resulted in a loss that is amortized over the life of the refunded bonds. Beginning in fiscal year , bond issuance costs were recognized as expense when incurred, loan origination fees were recognized as revenue when due, and beginning of the year net position was restated to include prior year unamortized balances. 4 Beginning in fiscal year , GASB 68 required the recognition of the net pension liability and the related deferred outflows of resources, deferred inflows of resources, and pension expenses.

116 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF NET POSITION 1 FOR THE PAST TEN FISCAL YEARS ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS $ 103,701,676 $ 99,283,799 $ 93,685,407 $ 143,080,564 $ 214,344,782 Cash, cash equivalents, and investments 320,958, ,333, ,813, ,868, ,513,224 Program loans receivable 5,493,189 5,401,190 4,371,482 3,747,020 3,765,003 Other assets 430,153, ,018, ,870, ,695, ,623,009 Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to ,434 pensions ,910 4,362,447 Loss on refunding debt ,910 4,718,881 Total deferred outflows of resources TOTAL ASSETS AND DEFERRED OUTFLOWS $ 430,153,061 $ 428,018,220 $ 412,870,311 $ 439,560,712 $ 533,341,890 OF RESOURCES LIABILITIES. DEFERRED INFLOWS OF RESOURCES AND NET POSITION LIABILITIES $ 135,189,315 $ 129,526,688 $ 123,683,680 $ 146,507,706 $ 208,290,797 Revenue bonds payable 18,955,223 19,307,372 7,880,252 6,562,703 37,666,191 Undisbursed loan commitments ,200,240 Net pension liability 4 5,272,741 5,415,247 2,787,755 4,794,542 3,296,412 Other liabilities 3 159,417, ,249, ,351, ,864, ,453,640 Total liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to ,410 pensions ,410 Total deferred inflows of resources NET POSITION 270,735, ,768, ,518, ,695, ,291,840 Restricted - Expendable by statute 270,735, ,768, ,518, ,695, ,291,840 Total net position TOTAL LIABILITIES, DEFERRED INFLOWS $ 430,153,061 $ 428,018,220 $ 412,870,311 $ 439,560,712 $ 533,341,890 OF RESOURCES AND NET POSITION 47

117 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION 1 FOR THE PAST TEN FISCAL YEARS OPERATING REVENUES Interest on loans receivable $ 8,206,839 $ 9,021,323 $ 9,530,573 $ 10,192,579 $ 10,694,987 Investment income 2 2,978,175 4,694,661 3,789, Administration fees 1,136,241 1,918,934 1,721,640 1,956,453 1,830,283 Total operating revenues 12,321,255 15,634,918 15,041,276 12,149,032 12,525,270 OPERATING EXPENSES Interest on bond debt 3,088,414 4,631,379 4,204,219 5,452,702 5,846,017 Amortization of bond issuance costs 3 74,009 88,639 86,010 99,690 99,620 Program support 2,783,542 2,325,821 2,752,827 3,620,774 3,545,456 Total operating expenses 5,945,965 7,045,839 7,043,056 9,173,166 9,491,093 OPERATING INCOME 6,375,290 8,589,079 7,998,220 2,975,866 3,034,177 NONOPERATING REVENUE Investment earnings ,965, ,511 Total nonoperating revenue ,965, ,511 Changes in net position 6,375,290 8,589,079 7,998,220 4,941,093 3,422,688 NET POSITION, Beginning of year 4 235,484, ,860, ,449, ,447, ,388,668 NET POSITION, End of year $ 241,860,276 $ 250,449,355 $ 258,447,575 $ 263,388,668 $ 266,811,356 1 This schedule combines the California Infrastructure and Economic Development Bank Fund and the California Infrastructure Guarantee Trust Fund. 2 Beginning in fiscal year , investment income was classified as nonoperating revenue. 3 Beginning in fiscal year , bond issuance costs were recognized as expense when incurred and beginning of the year net position was reduced by the unamortized balance. 4 Restated in fiscal years , and

118 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION 1 FOR THE PAST TEN FISCAL YEARS OPERATING REVENUES $ 10,442,066 $ 10,419,722 $ 10,270,967 $ 10,421,447 $ 9,206,557 Interest on loans receivable Investment income 2 1,535,375 1,826,084 1,428,048 1,726,297 1,552,859 Administration fees 11,977,441 12,245,806 11,699,015 12,147,744 10,759,416 Total operating revenues 5,708,393 5,552,600 5,379,682 5,031,074 4,632, , , ,673,325 3,968,784 3,058,486 4,158,113 4,206,661 OPERATING EXPENSES Interest on bond debt Amortization of bond issuance costs 3 Program support 8,534,045 9,632,103 8,438,168 9,189,187 8,838,762 Total operating expenses 3,443,396 2,613,703 3,260,847 2,958,557 1,920,654 OPERATING INCOME NONOPERATING REVENUE 481, , , , ,235 Investment earnings 2 481, , , , ,235 Total nonoperating revenue 3,924,426 3,033,131 3,473,149 3,177,137 2,161,889 Changes in net position 266,811, ,735, ,045, ,518, ,129,951 NET POSITION, Beginning of year 4 $ 270,735,782 $ 273,768,913 $ 278,518,624 $ 281,695,761 $ 280,291,840 NET POSITION, End of year 49

119 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND INFRASTRUCTURE STATE REVOLVING FUND (ISRF) PROGRAM TEN LARGEST BORROWERS AS OF JUNE 30, 2015 AND JUNE 30, 2006 June 30, 2015 June 30, 2006 Percentage of Percentage of Total ISRF Total ISRF ISRF Program Program ISRF Program Program Loans Loans Loans Loans Receivable 1 Rank Receivable Receivable 1 Rank Receivable City of San Bernardino Municipal $ 20,644, % $ 9,157, % Water Department City of Hawthorne 14,309, % 19,142, % City of Santa Cruz 14,130, % City of San Luis Obispo 13,961, % Fresno Metropolitan Flood Control District 13,827, % 18,701, % City of Porterville 11,623, % City of Pittsburg 11,387, % North Tahoe Fire Protection District 9,267, % City of Davis 8,977, % City of Bakersfield as successor agency to the Bakersfield Redevelopment Agency 2 8,589, % Orange County School of the Arts 3 19,180, % City of El Segundo 10,000, % City of San Bernardino 10,000, % City of Madera 10,000, % Stockton Port District 9,761, % County of Sacramento Redevelopment 9,561, % Agency Successor Agency 2 City of Hanford 9,560, % Total of ten largest ISRF Program borrowers 126,718, % 125,065, % All other ISRF Program borrowers 183,794, % 144,228, % Total ISRF Program Loans receivable $ 310,513, % $ 269,294, % These amounts represent the total ISRF Program Loans receivable from each borrower and may include one or more Loans and may involve more than one type of revenue stream pledged to repay the Loans. Effective February 1, 2012, California redevelopment agencies were dissolved and other governmental entities became successor agencies. A successor agency assumed the obligations of the former redevelopment agency, including Loans. Formerly Orange County High School of the Arts. The loan was paid in full during fiscal year 2013/14. 50

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121 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF ISRF PROGRAM LOANS RECEIVABLE AND INTEREST RATES FOR THE PAST TEN FISCAL YEARS Total ISRF Program Loans receivable $269,294,242 $282,990,412 $305,749,937 $311,504,489 $331,209,650 Weighted-average interest rate on total ISRF Program Loans receivable % 3.27% 3.23% 3.24% 3.28% Number of new ISRF Program Loans Range of interest rate on new ISRF Program Loans % % % % % Range of loan term on new ISRF Program Loans years years years years years 1 2 The weighted-average interest rate on ISRF Program Loans receivable is calculated by multiplying each loan's outstanding balance by its interest rate, then dividing the sum of those individual amounts by the ISRF Program Loans receivable balance at June 30. Determined based upon the effective date of the Loan agreement. 51

122 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF ISRF PROGRAM LOANS RECEIVABLE AND INTEREST RATES FOR THE PAST TEN FISCAL YEARS $320,958,196 $323,333,231 $314,813,422 $291,868,218 $310,513,224 Total ISRF Program Loans receivable Weighted-average interest rate on total 3.29% 3.26% 3.25% 3.18% 3.17% ISRF Program Loans receivable Number of new ISRF Program Loans 2 Range of interest rate on 3.24% % 2.29% % % new ISRF Program Loans Range of loan term on 30 years years 30 years years years new ISRF Program Loans 52

123 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF STATUTORY DEBT LIMIT CAPACITY 1 FOR THE PAST TEN FISCAL YEARS IBank's legal limit on public development facility debt $5.00 billion $5.00 billion $5.00 billion $5.00 billion $5.00 billion Total amount outstanding on bonds issued to finance public development facilities 2 $ 106,816,821 $ 103,510,754 $ 100,432,424 $ 145,839,491 $ 140,710,150 Remaining capacity for public development facility debt $4.89 billion $4.90 billion $4.90 billion $4.85 billion $4.86 billion IBank's legal limit on rate reduction bonds $10.00 billion $10.00 billion $10.00 billion $10.00 billion $10.00 billion Total amount outstanding on rate reduction bonds 3 $ 921,758,121 $ 313,693,353 $ 1,661,939 $ - $ - Remaining capacity for rate reduction bonds $9.08 billion $9.69 billion $9.998 billion $10.00 billion $10.00 billion Pursuant to California Government Code section 63071(b) and pertains only to bonds issued to finance public development facilities and for rate reduction bonds. There is no statutory debt limit on conduit revenue bonds issued for economic development facilities. The amount outstanding represents the ISRF Program Bonds shown in the Schedule of Outstanding ISRF Program Bonds and Debt Ratio. Rate reduction bonds are conduit revenue bonds. 53

124 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF STATUTORY DEBT LIMIT CAPACITY 1 FOR THE PAST TEN FISCAL YEARS IBank's legal limit on public $5.00 billion $5.00 billion $5.00 billion $5.00 billion $5.00 billion development facility debt Total amount outstanding on bonds issued to finance public $ 135,189,315 $ 129,526,688 $ 123,683,680 $ 146,507,706 $ 208,290,797 development facilities 2 Remaining capacity for public $4.86 billion $4.87 billion $4.88 billion $4.85 billion $4.79 billion development facility debt IBank's legal limit on rate $10.00 billion $10.00 billion $10.00 billion $10.00 billion $10.00 billion reduction bonds Total amount outstanding on $ - $ - $ - $ - $ - rate reduction bonds 3 Remaining capacity for rate $10.00 billion $10.00 billion $10.00 billion $10.00 billion $10.00 billion reduction bonds 54

125 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF OUTSTANDING ISRF PROGRAM BONDS AND RELATED DEBT RATIO FOR THE PAST TEN FISCAL YEARS Series 2004 ISRF Program Bonds 1 $ 50,225,000 $ 48,930,000 $ 47,615,000 $ 46,275,000 $ 44,910,000 Series 2005 ISRF Program Bonds 1 52,800,000 50,960,000 49,530,000 48,030,000 46,470,000 Series 2008 ISRF Program Bonds ,375,000 46,605,000 Series 2014A ISRF Program Bonds Series 2015A ISRF Program Bonds Unamortized Net Premium 3,791,821 3,620,754 3,287,424 3,159,491 2,725,150 Total ISRF Program Bonds outstanding $ 106,816,821 $ 103,510,754 $ 100,432,424 $ 145,839,491 $ 140,710,150 Series-pledged ISRF Program Loans receivable 3 $ 154,295,885 $ 148,316,271 $ 143,622,194 $ 211,216,003 $ 203,348,112 Ratio of ISRF Program Bonds outstanding to series-pledged ISRF Program Loans receivable The Series 2014A ISRF Program Bonds issued in fiscal year refunded the Series 2004 and Series 2005 ISRF Program Bonds. 2 The Series 2015A ISRF Program Bonds issued in fiscal year refunded the Series 2008 Program Bonds. 3 Excludes non-pledged loans. 55

126 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF OUTSTANDING ISRF PROGRAM BONDS AND RELATED DEBT RATIO FOR THE PAST TEN FISCAL YEARS $ 43,515,000 $ 42,055,000 $ 40,525,000 $ - $ - Series 2004 ISRF Program Bonds 1 44,835,000 43,140,000 41,360, Series 2005 ISRF Program Bonds 1 44,500,000 42,330,000 40,095,000 37,795,000 - Series 2008 ISRF Program Bonds ,960,000 93,320,000 Series 2014A ISRF Program Bonds ,070,000 Series 2015A ISRF Program Bonds 2,339,315 2,001,688 1,703,680 12,752,706 24,900,797 Unamortized Net Premium $ 135,189,315 $ 129,526,688 $ 123,683,680 $ 146,507,706 $ 208,290,797 Total ISRF Program Bonds outstanding Series-pledged ISRF Program Loans $ 195,160,107 $ 185,227,425 $ 189,272,085 $ 254,251,622 $ 305,562,752 receivable 3 Ratio of ISRF Program Bonds outstanding to series-pledged ISRF Program Loans receivable 56

127 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND SCHEDULE OF AGGREGATE PLEDGED RESOURCES COVERAGE FOR ISRF PROGRAM BONDS 1 FOR THE PAST TEN BOND YEARS 2 Bond Year Series-pledged ISRF Program Reserve Total Amount Debt Service Loan Account Available for ISRF Program Bonds Debt Service Coverage Repayments 3 Earnings 4 Debt Service 5 Principal Interest Total Ratio $ 4,522,348 $ 136,247 $ 4,658,595 $ 1,145,000 $ 2,262,343 $ 3,407, ,033, ,757 11,313,202 3,135,000 4,200,794 7,335, ,595, ,128 9,941,689 2,745,000 4,600,174 7,345, ,591, ,755 9,927,646 2,840,000 4,516,674 7,356, ,515,584 38,140 14,553,724 4,695,000 6,430,871 11,125, ,863,784 3,005 14,866,789 5,135,000 6,242,953 11,377, ,964,643 44,480 15,009,123 5,325,000 6,044,653 11,369, ,716,041 70,085 14,786,126 5,545,000 5,838,753 11,383, ,588, ,364 14,816,621 5,745,000 5,624,003 11,369, ,441,134 67,309 25,508,443 5,000,000 6,841,787 11,841, Schedule reflects the aggregate of the ISRF Program Bond series outstanding in each bond year. 2 Bond year means the period of twelve consecutive months from October 2 through the following October 1. 3 Includes interest and principal paid on Series-Pledged Loans 4 Investment income includes only that amount received on funds pledged to ISRF Program Bonds debt service. 5 Excludes capitalized interest in bond year Includes unscheduled full repayment of a Series-Pledged Loan. 57

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129 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND CALIFORNIA DEMOGRAPHIC AND ECONOMIC INDICATORS FOR THE PAST TEN CALENDAR YEARS State population (in thousands) Personal income (in millions) Per capita personal income 1 Labor force and employment (in thousands) Civilian labor force Employed Unemployed Unemployment rate 35,986 36,247 36,553 36,856 37,077 $ 1,396,173 $ 1,499,452 $ 1,564,441 $ 1,596,282 $ 1,536,430 $ 38,798 $ 41,368 $ 42,799 $ 43,311 $ 41,439 17,545 17,687 17,921 18,207 18,220 16,592 16,821 16,961 16,894 16, ,314 2, % 4.9% 5.4% 7.2% 11.3% Sources: Population as of December Demographic Research Unit, California Department of Finance Personal income as of March 25, Bureau of Economic Analysis, United States Department of Commerce Labor force and employment as of August 21, Labor Market Information Division, California Employment Development Department 1 Calculated by dividing total personal income by population. 58

130 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND CALIFORNIA DEMOGRAPHIC AND ECONOMIC INDICATORS FOR THE PAST TEN CALENDAR YEARS ,309 37,570 37,872 38,205 38,499 $ 1,579,148 $ 1,683,204 $ 1,768,039 $ 1,817,010 $ 1,944,369 $ 42,326 $ 44,802 $ 46,685 $ 47,559 $ 50,504 18,336 18,418 18,519 18,597 18,811 16,068 16,250 16,590 16,933 17,397 2,268 2,168 1,929 1,664 1, % 11.8% 10.4% 8.9% 7.5% State population (in thousands) Personal income (in millions) Per capita personal income 1 Labor force and employment (in thousands) Civilian labor force Employed Unemployed Unemployment rate 59

131 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND CALIFORNIA EMPLOYMENT BY INDUSTRY FOR CALENDAR YEARS 2014 AND 2005 INDUSTRY Percentage of Percentage of Total State Total State Employees Employment Employees Employment Farming 417, % 378, % Mining and logging 31, % 23, % Construction 675, % 905, % Manufacturing 1,269, % 1,505, % Trade, transportation & utilities 2,871, % 2,820, % Information 457, % 473, % Financial activities 784, % 920, % Professional & business services 2,433, % 2,162, % Educational & health services 2,414, % 1,802, % Leisure and hospitality 1,757, % 1,475, % Other services 539, % 505, % Government Federal 242, % 250, % State 496, % 463, % Local 1,672, % 1,706, % TOTALS 16,062, % 15,391, % Sourc Labor Market Information Division, California Employment Development Department Industry Employment and Labor Force - by Annual Average as of August 15,

132 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND NUMBER OF EMPLOYEES BY IDENTIFIABLE ACTIVITY 1 FOR THE PAST TEN FISCAL YEARS Executive/ Administration/ Legal Bond Programs Compliance 2 External Affairs 2 Fiscal 3 Legal/Legislation 3 Loan Programs Small Business Finance Center 2 Total Employees Data represents permanent, full-time positions. 2 For FY and FY , IBank had two employees that were assigned to the Small Business Loan Guarantee Program, the activities of which are not included in this report. 3 Beginning FY , employee activity categories were broken out further to specifically identify Compliance, External Affairs, Fiscal, Legal/Legislation and Small Business Finance Center. 4 Legal will be included in the title until FY Beginning FY , activity category title Conduit Financing Programs was changed to Bond Programs and Infrastructure State Revolving Fund Program and Support was changed to Loan Programs. 61

133 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND MAJOR PROGRAM ACTIVITY FOR THE PAST TEN FISCAL YEARS Infrastructure State Revolving Fund (ISRF) Program Preliminary Applications: 1 Number of applications received Financing amount requested $ 48,293,789 $ 70,878,000 $ 32,074,224 $ 60,980,525 $ 29,597,760 Financing Applications: Number of applications received Financing amount requested $ 44,910,000 $ 29,110,000 $ 26,450,000 $ 14,297,000 $ 6,020,000 Approved Loans: Number of loans approved Financing amount approved $ 44,916,000 $ 23,800,000 $ 29,751,600 $ 22,847,500 $ 17,000,000 Loan Disbursements: Number of transactions Total amount disbursed $ 37,889,135 $ 38,909,915 $ 30,764,260 $ 43,879,185 $ 21,146,788 Number of outstanding loans Conduit Financing Programs Preliminary Applications: 2 Number of applications received Financing amount requested $ 13,200,000 $ 20,500,000 $ 21,335,000 $ 20,000,000 $ 9,850,000 Financing Applications: Number of applications received Financing amount requested $ 177,300,000 $ 692,010,000 $ 1,559,380,000 $ 1,722,550,000 $ 814,310,000 Bonds Sold: Number of bonds sold Financing amount sold $ 265,640,000 $ 814,422,774 $ 1,030,136,886 $ 1,248,990,000 $ 985,885,000 1 Beginning in fiscal year , the ISRF Program no longer required Preliminary Applications. 2 Industrial development conduit revenue bonds are the only Conduit Bond Financing Program applicants that submit a Preliminary Application. All other Conduit Bond Financing Program applicants submit only a Financing Application. 62

134 CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND MAJOR PROGRAM ACTIVITY FOR THE PAST TEN FISCAL YEARS Infrastructure State Revolving Fund Program Preliminary Applications: Number of applications received $ 49,887,500 $ 5,470,231 $ 27,908, Financing amount requested Financing Applications: Number of applications received $ 7,737,500 $ 10,000,000 $ 18,722,500 $ 48,243,460 $ 63,575,501 Financing amount requested Approved Loans: Number of loans approved $ 3,500,000 $ 16,756,500 $ 12,122,500 $ 12,050,000 $ 56,356,772 Financing amount approved Loan Disbursements: Number of transactions $ 19,861,726 $ 16,151,949 $ 18,927,120 $ 6,540,050 $ 4,263,908 Total amount disbursed Number of outstanding loans Conduit Financing Programs Preliminary Applications: Number of applications received $ 11,500, $ 5,950,000 $ 16,351,499 Financing amount requested Financing Applications: Number of applications received $ 695,065,000 $ 753,925,000 $ 719,080,000 $ 481,250,000 $ 429,181,499 Financing amount requested Bonds Sold: Number of bonds sold $ 203,300,000 $ 851,100,000 $ 328,780,000 $ 735,423,063 $ 270,300,000 Financing amount sold 63

135 This Comprehensive Annual Financial Report was prepared by the California Infrastructure and Economic Development Bank s Fiscal Unit. Diane J. Nanik Manager Betty Daquioag-Correa Senior Accounting Officer Tracey Thompson Senior Accounting Officer The Fiscal Unit was assisted by other IBank staff and the staff of the Governor s Office of Business and Economic Development, the California Department of General Service Contracted Fiscal Services Unit, and the California Department of Resources Recycling and Recovery Information Technology Services Branch. To obtain copies of this report, please contact: TEVEIA BARNES, EXECUTIVE DIRECTOR California Infrastructure and Economic Development Bank P.O. Box 2830 Sacramento, CA (916) This report is also available on IBank s website at

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137 APPENDIX C SUMMARY OF THE INDENTURE The following is a summary of certain provisions of the Indenture, dated as of February 1, 2014 (the Original Indenture ), between the California Infrastructure and Economic Development Bank (the Issuer ) and U.S. Bank National Association, as trustee (the Trustee ), as supplemented by the First Supplemental Indenture, dated as of February 1, 2014 (the First Supplemental Indenture ) and the Second Supplemental Indenture, dated as of June 1, 2015 (the Second Supplemental Indenture ) and as supplemented and amended by the Third Supplemental Indenture, dated as of June 1, 2016 (the Third Supplemental Indenture ; the Original Indenture, as supplemented and amended is referred to herein as the Indenture ), between the Issuer and the Trustee. Such summary is not intended to be complete or definitive, is supplemental to the summary of other provisions of the Indenture contained elsewhere in this Official Statement, and is qualified in its entirety by reference to the full terms of the Indenture. All capitalized terms used and not otherwise defined in this Official Statement shall have the meanings assigned to such terms in the Indenture. Definitions Accreted Value means, with respect to any Capital Appreciation Bond, the principal amount thereof plus the interest accrued thereon, compounded at the approximate interest rate thereon on each date specified therein. The Accreted Value at any date shall be the amounts set forth in the Accreted Value Table as of such date, if such date is a compounding date, and if not, as of the immediately preceding compounding date. For purposes of the Indenture, the term principal of shall also include Accreted Value, if appropriate. Accreted Value Table means the table denominated as such which appears as an exhibit to, and to which reference is made in, a Supplemental Indenture providing for a Series of Capital Appreciation Bonds issued pursuant to such Supplemental Indenture. Act means the Bergeson-Peace Infrastructure and Economic Development Bank Act, constituting Division 1 of Title 6.7 of the California Government Code (commencing at Section thereof) as now in effect and as it may from time to time hereafter be amended. Administrative Expenses means (i) all reasonable fees, charges and expenses of the Trustee and any authenticating agents, paying agents, registrars, dissemination agents, attorneys, accountants, financial consultants, rebate analysts or other Person employed by the Trustee or the Issuer; (ii) all administrative costs of the Issuer that are noted as Administrative Expenses in the Indenture and all administrative costs that are charged directly or apportioned to the administration of the Pledged Loans, any Series of Bonds or any Parity Obligations, Subordinate Obligations or Fee and Expense Obligations; (iii) in the event the Issuer employs or hires attorneys or staff or incurs other fees, charges or expenses for the collection of payments required by any Loan Agreement or Pledged Loan or the enforcement of performance or observance of any obligation or agreement on the part of any Borrower contained in any Loan Agreement or Pledged Loan, the reasonable fees, charges and expenses of such attorneys, staff and such other fees, charges and expenses so incurred by the Issuer; and (iv) in the event the Trustee employs attorneys or incurs other fees, charges or expenses for the collection of payments required by the Indenture or the enforcement of performance or observance of any obligation or agreement on the part of the Issuer contained in the Indenture, the reasonable fees, charges and expenses of such attorneys and such other fees, charges and expenses so incurred by the Trustee, as well as the costs to indemnify the Trustee and its respective members, directors, officers, employees and agents from and against, all costs, expenses and charges, including reasonable counsel fees, incurred for the collection of payments due or C-1

138 for the enforcement or performance or observance of any covenant or agreement of the Issuer under the Indenture; provided that such costs of enforcement shall be payable solely from the Revenues. Administrative Expense Fund means the fund by that name established pursuant to the Indenture. Alternate Credit Enhancement means, with respect to a Series of Bonds, any Insurance, letter of credit, line of credit, surety bond or other instrument, if any, which secures, enhances or guarantees the payment of principal of and interest on a Series of Bonds, issued by an insurance company, commercial bank, pension fund or other institution, and delivered or made available to the Trustee, as a replacement or substitution for any Credit Enhancement then in effect. Alternate Liquidity Facility means, with respect to a Series of Bonds, a line of credit, letter of credit, standby purchase agreement or similar liquidity facility, which secures, enhances or guarantees the payment of purchase price of such Series of Bonds under certain conditions specified therein, issued by a commercial bank, insurance company, pension fund or other institution, and delivered or made available to the Trustee, as a replacement or substitute for any Liquidity Facility then in effect. Annual Debt Service means with respect to any Obligations and for any Bond Year, the aggregate amount of Debt Service on Obligations becoming due and payable during such Bond Year. Assumed Debt Service means for any Bond Year the aggregate amount of principal or similar payments that would be payable on all Obligations if each Excluded Principal Payment were amortized on a substantially level debt service basis or other amortization schedule provided by the Issuer for a period commencing on the date of calculation of such Assumed Debt Service and ending on the date specified by the Issuer not exceeding thirty (30) years from the date of calculation, such Assumed Debt Service to be calculated on a level debt service basis or other amortization basis provided by the Issuer based on a fixed interest rate equal to the rate at which the Issuer could borrow for such period, as set forth in a certificate of a financial advisor or investment banker, delivered to the Trustee, who may rely conclusively on such certificate, such certificate to be delivered within thirty (30) days of the date of calculation. Authorized Representative means the Executive Director of the Issuer and any assignee of the Executive Director of the Issuer or such other person as may be designated to act on behalf of the Issuer by resolution of the Board or by a written certificate delivered to the Trustee by an Authorized Representative. Beneficial Owner means any Person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Bond, including, without limitation, any Person holding Bonds through nominees or depositories, including the Securities Depository. Board means the Board of Directors of the Issuer. Bond Obligation means, as of any given date of calculation, (i) with respect to any Outstanding Current Interest Bond, the principal amount of such Bond, and (ii) with respect to any Outstanding Capital Appreciation Bond, the Accreted Value thereof. Bond Proceeds Fund means a fund by that name established with respect to a Series of Bonds pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of Bonds. Bond Reserve Requirement means, with respect to any Reserve Fund, the amount specified as such in the Supplemental Indenture establishing such Reserve Fund. C-2

139 Bond Year means the period of twelve consecutive months ending on October 1 in any year in which the Bonds are Outstanding. Bondholder or Holder or owner whenever used with respect to a Bond, means the person in whose name such Bond is registered. Bonds means the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds authorized by, and at any time Outstanding pursuant to, the Indenture, which are secured by the lien of the Indenture and payable from the Revenues as provided therein. Borrower means each entity that receives financial assistance under a Loan Agreement. Borrower s Loan Account means an account by that name established with respect to a Borrower within a Bond Proceeds Fund pursuant to a Supplemental Indenture establishing the terms and provisions of a Series of Bonds. Borrower s Loan Subaccount means a subaccount by that name established within the Restricted Assets Account or the Unrestricted Assets Account pursuant to the Indenture. Business Day means, except as is otherwise provided in the Supplemental Indenture pursuant to which a Series of Bonds are issued, any day other than (i) a Saturday, Sunday, State holiday, legal holiday or a day on which banking institutions in the State or the State of New York or the jurisdiction in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; (ii) for purposes of payments and other actions relating to Bonds secured by a Credit Enhancement or supported by a Liquidity Facility, a day upon which commercial banks in the city in which is located the office of the issuing bank at which demands for payment under the Credit Enhancement or Liquidity Facility, as applicable, are to be presented are authorized or obligated by law or executive order to be closed; (iii) a day on which the New York Stock Exchange is closed; or (iv) a day on which the payment system of the Federal Reserve System is not operational. Capital Appreciation Bonds means the Bonds of any Series designated as Capital Appreciation Bonds in the Supplemental Indenture providing for the issuance of such Series of Bonds and on which interest is compounded and paid at maturity or on prior redemption. Certificate, Statement, Request, Requisition and Order of the Issuer mean, respectively, a written certificate, statement, request, requisition or order signed in the name of the Issuer by an Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by the Indenture, each such instrument shall include the statements provided for in the Indenture. Code means the Internal Revenue Code of 1986, and the regulations applicable thereto or issued thereunder, or any successor to the Internal Revenue Code of Reference to any particular Code section shall, in the event of such a successor Code, be deemed to be reference to the successor to such Code section. Collateral means all of the Issuer s right, title, and interest, whether now owned or acquired, in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and C-3

140 other property from time to time credited to or on deposit in the Pledged Funds and Accounts and (c) all other Revenues credited to or on deposit in the Pledged Funds and Accounts. Common Bond Reserve Requirement means, as of any date of calculation, an amount equal to the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund Participating Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the Common Reserve Fund Participating Bonds in any Bond Year during the period commencing with the Bond Year in which the determination is being made and terminating with the last Bond Year in which any Common Reserve Fund Participating Bond is due, or (c) 125% of the sum of the Debt Service for the Common Reserve Fund Participating Bonds for all Bond Years during the period commencing with the Bond Year in which such calculation is made (or if appropriate, the first full Bond Year following the issuance of any Common Reserve Fund Participating Bonds) and terminating with the last Bond Year in which any Debt Service for the Common Reserve Fund Participating Bonds is due, divided by the number of such Bond Years, all as computed and determined by the Issuer and specified in writing to the Trustee; provided, that with respect to the issuance of additional Common Reserve Fund Participating Bonds, if the amount on deposit in the Common Reserve Fund would have to be increased by an amount greater than ten percent (10%) of the stated principal amount of such additional Common Reserve Fund Participating Bonds (or, if the issue has more than a de minimis amount of original issue discount or premium, of the issue price of such Common Reserve Fund Participating Bonds) then the Common Bond Reserve Requirement shall be such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition to funding the Common Reserve Fund with the proceeds of Bonds, the Issuer may fund the Common Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common Bond Reserve Requirement. Under the Indenture, the term used for the Common Bond Reserve Fund Requirement is 2014A Bond Reserve Requirement. Common Reserve Fund means the fund by that name established pursuant to the Indenture. Under the Indenture, the term used for the Common Reserve Fund is 2014A Reserve Fund. Common Reserve Fund Participating Bonds means the Bonds of each Series which, pursuant to the terms of the Indenture and the Supplemental Indenture relating to such Series, are secured by amounts in the Common Reserve Fund. Under the Indenture, the term used for the Common Reserve Fund Participating Bonds is 2014A Reserve Fund Participating Bonds. Continuing Disclosure Agreement means, with respect to each Series of Bonds requiring an undertaking regarding disclosure under Rule 15c2-12, the continuing disclosure agreement or continuing disclosure certificate, dated the date of issuance of such Series of Bonds, executed by the Issuer, as the same may be supplemented, modified or amended in accordance with its terms. Corporate Trust Office or corporate trust office means the corporate trust office of the Trustee at U.S. Bank National Association, One California Street, Suite 1000, San Francisco, California 94111, Attention: Global Corporate Trust Services, or such other or additional offices as may be designated by the Trustee from time to time; provided, that for registration, transfer, exchange, surrender and payment of the Bonds, Corporate Trust Office shall initially mean the corporate trust operations office of the Trustee in Saint Paul, Minnesota. Costs of Issuance means all items of expense directly or indirectly payable by or reimbursable to the Issuer and related to the authorization, issuance, sale and delivery of a Series of Bonds, including but not limited to underwriter s spread (whether paid directly by the Issuer or derived through purchase of a Series of Bonds at a discount below the price at which the Series of Bonds is expected to be sold to the public), advertising and printing costs, costs of preparation and reproduction of documents, filing and recording fees, travel expenses and costs relating to rating agency meetings and other meetings C-4

141 concerning such Series of Bonds, initial fees, expenses and charges of the Trustee, fees and expenses of the Issuer, legal fees and charges, fees and disbursements of consultants and professionals, financial advisor fees and expenses, rating agency fees, agent for sale fees, fees and charges for preparation, execution, transportation and safekeeping of Bonds, surety, insurance, credit enhancement and liquidity costs, fees payable in connection with the execution or termination of an Interest Rate Swap Agreement in connection with the issuance of a Series of Bonds and any other cost, charge or fee incurred in connection with the issuance of a Series of Bonds or any Parity Obligations delivered in connection with a Series of Bonds. Costs of Issuance Fund means a fund by that name established pursuant to the provisions of a Supplemental Indenture to pay Costs of Issuance with respect to a Series of Bonds being issued pursuant to such Supplemental Indenture. Issuer. Counterparty means an entity which has entered into an Interest Rate Swap Agreement with the Coverage Test means, as of any date of calculation, that the Revenues (excluding any Subsidy Payments) (assuming that the Pledged Loan Repayments are paid at the times and in the amounts required by the Loan Agreements, unless a payment default has occurred and is continuing under such Loan Agreement) for each Bond Year in which any Bonds are scheduled to be Outstanding, are projected to be at least 1.20 times Annual Debt Service in each such Bond Year. For the purpose of demonstrating compliance with the Coverage Test in accordance with the Indenture, the Issuer may use and rely on any assumptions the Issuer deems reasonable under then-existing circumstances, including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. Credit Enhancement means, with respect to a Series of Bonds, any Insurance, letter of credit, line of credit, surety bond or other instrument, if any, that secures, enhances or guarantees the payment of principal of and interest on a Series of Bonds, issued by an insurance company, commercial bank, pension fund or other institution, and delivered or made available to the Trustee, as from time to time supplemented or amended pursuant to its terms, or, in the event of the delivery or availability of an Alternate Credit Enhancement, such Alternate Credit Enhancement. Credit Enhancement Provider means, with respect to a Series of Bonds, the Insurer, commercial bank, pension fund or other institution issuing (or having primary obligation, or acting as agent for the institutions obligated, under) a Credit Enhancement then in effect with respect to such Series of Bonds. Current Interest Bonds means the Bonds of any Series designated as Current Interest Bonds in the Supplemental Indenture providing for the issuance of such Series of Bonds and that pay interest to the Holders thereof on a periodic basis prior to maturity. Debt Service, when used with respect to any Obligations, means, as of any date of calculation and with respect to any Bond Year, the sum of (i) the interest falling due on such Obligations during such Bond Year, (ii) the principal or Mandatory Sinking Account Payments required to be paid with respect to such Obligations during such Bond Year and (iii) any other regularly scheduled payments on such Obligations during such Bond Year to the extent not included in clauses (i) and (ii) of this definition, all of which are to be computed on the assumption that no portion of such Obligations shall cease to be outstanding during such Bond Year except by reason of the application of such scheduled payments; provided, however, that for purposes of such computation: C-5

142 (A) Excluded Principal Payments (and the interest related thereto provided such interest is being paid from the same source as the Excluded Principal Payments) shall be excluded from such calculation and Assumed Debt Service shall be included in such calculation; (B) in determining the principal amount due in each Bond Year, payment shall (unless a different subsection of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made in accordance with any amortization schedule established for such Obligations, including any Mandatory Sinking Account Payments or any scheduled redemption or payment of Obligations on the basis of Accreted Value, and for such purpose, the redemption payment or payment of Accreted Value shall be deemed a principal payment and interest that is compounded and paid as Accreted Value shall be deemed due on the scheduled redemption or payment date of such Capital Appreciation Bond and any contingencies that may result in a request for earlier payment shall be disregarded; (C) if any Obligations bear, or if any Obligations proposed to be issued will bear, interest at a variable interest rate for which an Interest Rate Swap Agreement is not in place and the interest on which is excluded or expected to be excluded from gross income for federal income tax purposes, the interest rate on such Obligations for periods when the actual interest rate cannot yet be determined shall be assumed to be equal to the average of the SIFMA Swap Index for the five (5) years preceding such date of calculation (provided, however, that if such index is no longer published, the interest rate on such Obligations shall be calculated based upon such similar index as the Issuer shall designate in writing to the Trustee) or such higher rate as shall be specified in a Certificate of the Issuer delivered to the Trustee, plus the applicable spread, if any, for such Obligations; (D) if any Obligations bear, or if any Obligations proposed to be issued will bear, interest at a variable interest rate for which an Interest Rate Swap Agreement is not in place and the interest on which is included or expected to be included in gross income for federal income tax purposes, the interest rate on such Obligations shall be calculated at an interest rate equal to 100% of the average One Month USD LIBOR Rate during the five (5) years preceding such date of calculation or such higher rate as shall be specified in a Certificate of the Issuer delivered to the Trustee (provided, however, that if such index is no longer published, the interest rate on such Obligations shall be calculated based upon such similar index as the Issuer shall designate in writing to the Trustee) plus the applicable spread, if any, for such Obligations; (E) with respect to any Obligations bearing interest, or expected to bear interest, at a variable interest rate for which an Interest Rate Swap Agreement is in place providing for a fixed rate of interest to maturity or for a specific term with respect to such Obligations, the interest rate on such Obligations shall be assumed to be the fixed interest rate specified in such Interest Rate Swap Agreement for such term, plus the applicable spread, if any, payable by the Issuer on such Obligations; (F) with respect to any Obligations bearing interest, or expected to bear interest, at a fixed interest rate for which an Interest Rate Swap Agreement is in place providing for a net variable interest rate with respect to such Obligations for a specific term, the interest rate on such Obligations shall be assumed to be equal for such term to the sum of (i) the fixed interest rate or rates to be paid on the Obligations, minus (ii) the fixed interest rate receivable by the Issuer under such Interest Rate Swap Agreement, plus (iii) the average interest rate of the index on which the Interest Rate Swap Agreement is based, as identified in a Certificate of the Issuer delivered to the Trustee, or, if not based on an identifiable index, then the average of the SIFMA Swap Index, in each case, over the five (5) years preceding the date of calculation or such higher rate as shall be specified in a Certificate of the Issuer delivered to the Trustee, plus the applicable spread, if any, payable by the Issuer under such Interest Rate Swap Agreement; C-6

143 (G) if any Obligations feature an option, on the part of the owners or an obligation under the terms of such Obligations, to tender all or a portion of such Obligations to the Issuer, the Trustee or other fiduciary or agent, and requires that such Obligations or portion thereof be purchased if properly presented, then for purposes of determining the amounts due in any Bond Year on such Obligations, the options or obligations of the owners of such Obligations to tender the same for purchase or payment prior to the end of the term of such Obligation shall be ignored; (H) payments on Obligations shall be excluded to the extent such payments are to be paid from amounts on deposit with the Trustee or other fiduciary in escrow specifically therefor and interest payments shall be excluded to the extent that such interest payments are (i) to be paid from the proceeds of Obligations or other available funds held by the Trustee or other fiduciary as capitalized interest specifically to pay such interest or (ii) paid or expected to be paid from Subsidy Payments; (I) if any Obligation is a Guarantee, there shall be included in Debt Service (i) if the Guarantee has not been drawn upon, twenty-five percent (25%) of the Issuer s maximum possible monetary liability under the Guarantee in any Bond Year that such Guarantee is permitted to be drawn upon or (ii) if the Guarantee has been drawn upon, one hundred percent (100%) of the Issuer s monetary liability in each Bond Year under the Guarantee which has been drawn upon, until such time as all amounts drawn upon the Guarantee have been repaid to the Issuer, and, if the Guarantee remains in effect after such repayment, for two Bond Years thereafter; and (J) payments on Obligations shall be excluded to the extent such payments are expected to be paid with amounts credited to or on deposit in the Pledged Funds and Accounts that are not treated as Revenues in the same Bond Year that such amounts are used to exclude payments on such Obligations for purposes of the Coverage Test. Equity Fund means the fund by that name established pursuant to the Indenture. Event of Default means any of the events specified in the Indenture and described under the caption Events of Default and Remedies Events of Default below. Excluded Principal Payments means each principal or similar payment on Obligations which the Issuer determines (in the Certificate of the Issuer delivered to the Trustee) that the Issuer intends to pay with moneys that are not Revenues (such as commercial paper, balloon indebtedness or bond anticipation notes) but from future debt obligations of the Issuer, grants from the State or federal government, or any agency or instrumentality thereof, or any other source of funds of the Issuer, upon which determination of the Issuer the Trustee may conclusively rely. No such determination shall affect the security for such Obligations or the obligation of the Issuer to pay such payments from amounts securing such Obligations. Fee and Expense Obligations means any obligations of the Issuer which constitute fees, expenses and similar charges in connection with any Bonds, Parity Obligations or Subordinate Obligations (including fees and expenses and termination payments on Interest Rate Swap Agreements), which obligations are secured by the lien of the Indenture and payable from the Revenues as provided therein. Fees and Expenses Fund means the fund by that name established pursuant to the Indenture. Fiscal Year means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other 12-month period hereafter selected and designated as the official fiscal C-7

144 year period of the Issuer, which designation shall be provided to the Trustee in a Certificate delivered by the Issuer. Fitch means Fitch Inc., and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Fitch shall be deemed to refer to any other nationally recognized securities rating agency selected by the Issuer. Government Obligations means: (A) non-callable obligations of, or obligations guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States, including, but not limited to, all direct or fully guaranteed U.S. Treasury obligations, Farmers Home Administration certificates of beneficial ownership, General Services Administration Participation certificates, U.S. Maritime Administration Guaranteed Title XI financing, Small Business Administration Guaranteed participation certificates and Guaranteed pool certificates, Government National Mortgage Association ( GNMA ) - GNMA guaranteed mortgage-backed securities and GNMA guaranteed participation certificates, U. S. Department of Housing and Urban Development Local authority bonds, Washington Metropolitan Area Transit Authority Guaranteed transit bonds, and State and Local Government Series; (B) non-callable obligations of government-sponsored agencies that are not backed by the full faith and credit of the U. S. Government, including, but not limited to, Federal Home Loan Mortgage Corp. (FHLMC) Debt Obligations, Farm Credit System (formerly Federal Land Banks, Intermediate Credit Banks, and Banks for Cooperatives) Consolidated Systemwide bonds and notes, Federal Home Loan Banks (FHL Banks) Consolidated debt obligations, Federal National Mortgage Association (FNMA) Debt Obligations, and Resolution Funding Corp. (REFCORP) Debt obligations; and (C) stripped securities where the principal-only and interest-only strips are derived from noncallable obligations issued by the U. S. Treasury and REFCORP securities stripped by the Federal Reserve Bank of New York, excluding custodial receipts, i.e. CATs, TIGERS, unit investment trusts and mutual funds, etc. Guarantee means any obligation of the Issuer guaranteeing in any manner, whether directly or indirectly, any obligation of any Person. Holder or Bondholder, whenever used herein with respect to a Bond, means the person in whose name such Bond is registered. Indenture means the Indenture, dated as of February 1, 2014, between the Trustee and the Issuer, as originally executed or as it may from time to time be supplemented or amended by any Supplemental Indenture delivered pursuant to the provisions thereof. Insurance means any financial guaranty insurance policy or municipal bond insurance policy issued by an Insurer insuring the payment when due of principal of and interest on a Series of Bonds as provided in such financial guaranty insurance policy or municipal bond insurance policy. Insurer means any provider of Insurance with respect to a Series of Bonds. Interest Fund means the fund by that name established pursuant to the Indenture. C-8

145 Interest Fund Requirement means, for any Transfer Calculation Period, (i) the aggregate amount of interest becoming due and payable on the Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness which shall be governed by clause (ii) below) during such Transfer Calculation Period (excluding any interest for which there are moneys deposited in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay such interest during said Transfer Calculation Period) plus (ii) the aggregate amount of interest becoming due and payable on Outstanding Current Interest Bonds constituting Variable Rate Indebtedness during the such Transfer Calculation Period, calculated, if the actual rate of interest is not known, at the interest rate specified in writing by the Issuer, or if the Issuer has not specified an interest rate in writing, calculated at the maximum interest rate borne by such Variable Rate Indebtedness during the month prior to the month of deposit plus one hundred (100) basis points. If there are Liquidity Facility Bonds outstanding during any Transfer Calculation Period, the Interest Fund Requirement shall take into account and include the Liquidity Facility Rate on Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds. Interest Payment Date, with respect to each Series of Bonds, shall have the meaning specified in the Supplemental Indenture establishing the terms and provisions of such Series of Bonds. Interest Rate Swap Agreement or Swap means an interest rate swap, cap, collar, option, floor, forward, derivative, or other hedging agreement, arrangement or security, however denominated, entered into between the Issuer and a Counterparty, in connection with or incidental to, the issuance or carrying of Obligations, including, without limitation, an interest rate swap, cap, collar, option, floor, forward, derivative, or other hedging agreement, arrangement or security entered into in advance of the issuance of Obligations or incurrence of Obligations. Interest Subsidy Bonds means Bonds for which the Issuer is entitled to receive Subsidy Payments. Issuer means the California Infrastructure and Economic Development Bank, organized and existing pursuant to the Act, and its successors. Issuer Retained Rights means (i) the right to receive any Pledged Loan Fees and Expenses, (ii) any right of the Issuer to indemnification, (iii) the right of the Issuer to receive notices, certificates, opinions or similar documentation, and (iv) the right of the Issuer to enforce the obligations of any Borrower contained in the Pledged Loans, including, but not limited to, default remedies. Letter of Credit Fund means a fund by that name established to hold funds that are drawn on Credit Enhancement provided in the form of a letter of credit and that are to be applied to pay the principal of or interest on a Series of Bonds, which fund shall be established pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of Bonds. Liquidity Facility means, with respect to a Series of Bonds, a line of credit, letter of credit, standby purchase agreement or similar liquidity facility, which secures, enhances or guarantees the payment of purchase price of such Series of Bonds under certain conditions specified therein, issued by a commercial bank, insurance company, pension fund or other institution, and delivered or made available to the Trustee, as from time to time supplemented or amended pursuant to its terms, or, in the event of the delivery or availability of an Alternate Liquidity Facility, such Alternate Liquidity Facility. Liquidity Facility Bonds means any Bonds purchased with moneys drawn under (or otherwise obtained pursuant to the terms of) a Liquidity Facility, but excluding any Bonds no longer considered to be Liquidity Facility Bonds in accordance with the terms of the applicable Liquidity Facility. If C-9

146 designated as such in a Supplemental Indenture, Bonds purchased with moneys drawn under Credit Enhancement in the form of a letter of credit or other similar instrument shall be treated as Liquidity Facility Bonds. Liquidity Facility Provider means, with respect to a Series of Bonds, the commercial bank, insurance company, pension fund or other institution issuing (or having primary obligation, or acting as agent for the institutions obligated, under) a Liquidity Facility then in effect with respect to such Series of Bonds. Liquidity Facility Rate means, with respect to a Series of Bonds, the interest rate per annum, if any, specified in the Liquidity Facility delivered in connection with such Series of Bonds as applicable to Liquidity Facility Bonds. Loan means any loan, lease or other obligation of a Borrower to the Issuer under the Program. Loan Agreement means any agreement evidencing a Pledged Loan or providing security therefore, made by the Issuer with any Borrower under the Program, together with all extensions, renewals, modifications or replacements thereof. Mandatory Sinking Account Payment means, with respect to Bonds of any Series and maturity, the amount required by the Supplemental Indenture establishing the terms and provisions of such Series of Bonds to be deposited by the Issuer in a Sinking Account for the payment of Term Bonds of such Series and maturity. Moody s means Moody s Investors Service, a corporation duly organized and existing under the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Moody s shall be deemed to refer to any other nationally recognized securities rating agency selected by the Issuer. Obligations means any Bonds or Parity Obligations. One Month USD LIBOR Rate means the rate for deposits in U.S. dollars for a one-month maturity that appears on Reuters Screen LIBOR01 Page (or such other page as may replace that page on that service, or such other service as may be nominated by the British Bankers Association, for the purpose of displaying London interbank offered rates for U.S. dollar deposits) as of 11:00 a.m., London time, on the date of determination of such rate, except that, if such rate does not appear on such page on such date, the One Month USD LIBOR Rate means a rate determined on the basis of the rates at which deposits in U.S. dollars for a one-month maturity and in a principal amount of at least U.S. $1,000,000 are offered at approximately 11:00 a.m., London time, on such date, to prime banks in the London interbank market by three major banks in the London interbank market (herein referred to as the Reference Banks ) selected by the Issuer (provided, however, that the Issuer may appoint an agent to identify such Reference Banks). The Issuer or its agent is to request the principal London office of each of such Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the One Month USD LIBOR Rate will be the arithmetic mean of such quotations. If fewer than two quotations are provided, the One Month USD LIBOR Rate will be the arithmetic mean of the rates quoted by three (if three quotations are not provided, two or one, as applicable) major banks in New York City, selected by the Issuer or its agent, at approximately 11:00 a.m., New York City time, on such date for loans in U.S. dollars to leading European banks in a principal amount of at least U.S. $1,000,000 having a onemonth maturity. If none of the banks in New York City selected by the Issuer or its agent is then quoting C-10

147 rates for such loans, then the One Month USD LIBOR Rate for the ensuing interest period will mean the One Month USD LIBOR Rate most recently in effect. Opinion of Bond Counsel means a written opinion of a law firm of national standing in the field of public finance selected by the Issuer. Outstanding, when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture described below under the caption Disqualified Bonds ) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) Bonds with respect to which all liability of the Issuer shall have been discharged in accordance with the provisions of the Indenture described below under the caption Discharge of Liability on Bonds, including Bonds (or portions of Bonds) referred to the Indenture described below under the caption Money Held for Particular Bonds; and (iii) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture; provided, however, that if the principal of or interest due on any Bonds shall be paid by the Credit Enhancement Provider pursuant to the Credit Enhancement issued in connection with such Bonds, such Bonds shall remain Outstanding for all purposes and shall not be considered defeased or otherwise satisfied or paid by the Issuer and the pledge of the Collateral pledged therefor as provided in the Indenture and all covenants, agreements and other obligations of the Issuer to the Holders shall continue to exist and shall run to the benefit of such Credit Enhancement Provider and such Credit Enhancement Provider shall be subrogated to the rights of such Holders. Parity Obligations means any obligation of the Issuer (excluding fees and expenses and termination payments on Interest Rate Swap Agreements, which fees and expenses and termination payments shall be secured as Fee and Expense Obligations) incurred in accordance with the Indenture, all of which obligations are secured by the lien of the Indenture and payable from the Revenues as provided in the Indenture. Participating Underwriter means any of the original underwriters of a Series of Bonds required to comply with 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. Permitted Investments means any of the following, if and to the extent the same are at the time legal for investment of funds held under the Indenture: (A) bonds or interest-bearing notes or obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of principal and interest; (B) bonds or interest-bearing notes on obligations that are guaranteed as to principal and interest by a federal agency of the United States; (C) bonds and notes of the State, or those for which the faith and credit of the State are pledged for the payment of principal and interest, provided that the ratings of such bonds and notes of the State are rated, at the time of purchase, within the top three Rating Categories, by at least two of the following rating agencies: S&P, Moody s and Fitch; (D) bonds or warrants, including, but not limited to, revenue warrants, of any county, city, metropolitan water district, State water district, State water storage district, irrigation district in the State, municipal utility district, or school district of the State, provided that the ratings of such bonds or warrants C-11

148 are rated, at the time of purchase, within the top three Rating Categories, by at least two of the following rating agencies: S&P, Moody s and Fitch; (E) bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by federal land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, in debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, in bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, in stock, bonds, debentures and other obligations of the Federal National Mortgage Association established under the National Housing Act as amended, and in the bonds of any federal home loan bank established under that act, obligations of the Federal Home Loan Mortgage Corporation, in bonds, notes, and other obligations issued by the Tennessee Valley Issuer under the Tennessee Valley Act as amended, and bonds, notes, and other obligations guaranteed by the Commodity Credit Corporation for the export of California agricultural products under the Commodity Credit Corporation Charter Act as amended; (F) (1) commercial paper rated, at the time of purchase, within the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch. Eligible paper is further limited to issuing corporations or trusts approved by the State of California Pooled Money Investment Board that meet the conditions in either subparagraph (a) or subparagraph (b): (a) both of the following: (i) (ii) organized and operating within the United States; and having total assets in excess of five hundred million dollars ($500,000,000); or (b) both of the following: (i) (ii) organized within the United States as a special purpose corporation or trust; and having program wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or surety bond; (2) purchases of eligible commercial paper may not exceed 180 days maturity, represent more than 10 percent of the outstanding paper of an issuing corporation or trust, nor exceed 30 percent of the resources of an investment program. At the request of the State of California Pooled Money Investment Board, the investment shall be secured by the Issuer by depositing with the State Treasurer securities authorized by California Government Code Section having a market value at least 10 percent in excess of the amount of the state s investment; (G) bills of exchange or time drafts drawn on and accepted by a commercial bank rated, at the time of investment, in the top three Rating Categories, by at least two of the following rating agencies: S&P, Moody s and Fitch, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System; (H) negotiable certificates of deposits issued by a federally or state-chartered bank or savings and loan association, a state-licensed branch of a foreign bank, or a federally or state-chartered credit union rated, at the time of investment, in the top three Rating Categories, by at least two of the following C-12

149 rating agencies: S&P, Moody s and Fitch. For the purposes of this definition, negotiable certificates of deposits do not come within the provisions of Chapter 4 (commencing with Section 16500) and Chapter 4.5 (commencing with Section 16600) of the California Government Code; (I) the portion of bank loans and obligations guaranteed by the United States Small Business Administration or the United States Farmers Home Administration; (J) bank loans and obligations guaranteed by the Export-Import Bank of the United States; (K) student loan obligations insured under the Guaranteed Student Loan Program established pursuant to the Higher Education Act of 1965, as amended (20 U.S.C. Sec and following) with debt rated, at the time of investment, in the top three Rating Categories by S&P, Moody s and Fitch, if rated by Fitch and eligible for resale to the Student Loan Marketing Association established pursuant to Section 133 of the Education Amendments of 1972, as amended (20 U.S.C. Sec ); (L) obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation, or the Government Development Bank of Puerto Rico and rated, at the time of investment, in the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch; (M) bonds, debentures, and notes issued by corporations organized and operating within the United States. Securities eligible for investment under this subdivision (M) shall be rated, at the time of investment, within the top three Rating Categories, by at least two of the following rating agencies: S&P, Moody s and Fitch; (N) the California State Surplus Money Investment Fund established pursuant to California Government Code Section 16470, as amended from time to time; (O) repurchase agreements with banks, insurance companies or other financial institutions whose senior long-term debt (or in the case of entities providing a guaranty, the senior long-term debt of such guarantor) is rated, at the time of execution of such agreement, in top three Rating Categories, by at least two of the following rating agencies: S&P, Moody s and Fitch; (P) investments or other contractual arrangements with banks, insurance companies or other financial institutions whose senior long-term debt (or in the case of entities providing a guaranty, the senior long-term debt of such guarantor) is rated, at the time of investment, within the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch; or such investments or other contractual arrangements which are collateralized by Permitted Investments of the type and in the amounts consistent with maintaining the then-current ratings on the Bonds by each of the Rating Agencies, but in all events the senior long-term debt of such entities or any guarantor of debt of such entities shall be rated, at the time of investment, in the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch; (Q) forward purchase agreements collateralized with obligations described in (A) through (D) above with banks, insurance companies or other financial institutions whose senior long-term debt (or in the case of entities providing a guaranty, the senior long-term debt of such guarantor) is rated, at the time of execution of such agreement, in the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch; C-13

150 (R) money market funds including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee or such holding company provide investment advisory or other management services rated, at the time of investment, in the top three Rating Categories by at least two of the following rating agencies: S&P, Moody s and Fitch; and (S) unsecured certificates of deposit, time deposits, money market deposits, demand deposits and bankers acceptances of any bank (including those of the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee or such holding company) the short-term obligations of which are rated, at the time of investment, in the highest Rating Category by at least two of the following rating agencies: S&P, Moody s and Fitch. Person means an association, corporation, firm, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Pledged Loan Fees and Expenses means any fees and expenses owed to the Issuer under any Pledged Loan. Pledged Loan Fees and Expenses Subaccount means the subaccount by that name established within the Unrestricted Assets Account pursuant to the Indenture. Pledged Loan Repayments means all payments of principal, interest or premiums on a Pledged Loan, whether as a result of scheduled payments or prepayments or remedial proceedings taken in the event of a default thereon. Pledged Loans means all Loans listed in an exhibit to the Indenture, as such exhibit may be revised from time to time pursuant to the Indenture. Pledged Funds and Accounts means the Revenue Fund, the Interest Fund, the Principal Fund (including all Sinking Accounts therein), the Reserve Funds, the Subordinate Obligations Fund, the Fees and Expenses Fund, the Supplemental Revenue Fund, the Equity Fund and any accounts or subaccounts therein (excluding the Unrestricted Assets Account and excluding any Borrower s Loan Subaccount) and any other funds or accounts established pursuant to the Indenture and designated as such by the Issuer. Principal Fund means the fund by that name established pursuant to the Indenture. Principal Fund Requirement means, with respect to any Transfer Calculation Period, (i) the aggregate amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series during such Transfer Calculation Period, plus (ii) the aggregate of the Mandatory Sinking Account Payments to be paid during such Transfer Calculation Period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts have been created and for which mandatory redemption is required from said Sinking Accounts; provided that if the Issuer certifies to the Trustee that any principal payments during such Transfer Calculation Period are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, the Principal Fund Requirement for such Transfer Calculation Period need not include such principal to be so refunded or paid. Not later than the Transfer Date immediately preceding the beginning of each Bond Year, the Trustee shall request from the Issuer a Certificate of the Issuer setting forth the principal payments that will not be included in the Principal Fund Requirement pursuant to the preceding sentence and the reason therefor. If there are any Liquidity Facility Bonds outstanding during a Transfer Calculation Period then the Principal Fund Requirement shall take into account and include any amortizations or redemptions of any Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds. C-14

151 For purposes of the Principal Fund Requirement, Liquidity Facility Bonds shall be treated as Serial Bonds with maturity dates on the payment dates of any amortization or redemptions. Program means the Infrastructure State Revolving Fund Program established and administered by the Issuer pursuant to the Act. Purchase Fund means a fund by that name established to hold funds to be applied to pay the purchase price of a Series of Bonds, which fund shall be established pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of Bonds. Rating Agency means, as and to the extent applicable to a Series of Bonds, each of Fitch, Moody s and Standard & Poor s, but, in each instance, only so long as each such Rating Agency then maintains a rating on such Series of Bonds at the request of the Issuer. Rating Category means: (i) with respect to any long-term rating category, all ratings designated by a particular letter or combination of letters, without regard to any numerical modifier, plus or minus sign or other modifier; and (ii) with respect to any short-term or commercial paper rating category, all ratings designated by a particular letter or combination of letters and taking into account any numerical modifier, but not any plus or minus sign or other modifier. Rebate Fund means the fund by that name established pursuant to the Indenture. Rebate Requirement means, with respect to any Series of Bonds, the Rebate Requirement determined in accordance with the Tax Certificate delivered in connection with such Series of Bonds. Redemption Fund means the fund by that name established pursuant to the Indenture. Redemption Price means, with respect to any Bond (or portion thereof), the Bond Obligation of such Bond (or portion thereof) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and the Indenture. Reserve Facility means any insurance policy, letter of credit or surety bond issued by a Reserve Facility Provider and delivered to the Trustee in satisfaction of all or a portion of the Bond Reserve Requirement applicable to one or more Series of Bonds. Reserve Facility Provider means any issuer of a Reserve Facility. Reserve Fund means any fund by that name established with respect to one or more Series of Bonds pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of Bonds. Restricted Assets Account means the account by that name established within the Equity Fund pursuant to the Indenture. Revenue Fund means the fund by that name established pursuant to the Indenture. Revenues means: (i) all Pledged Loan Repayments; (ii) all investment earnings on amounts held by the Trustee in the Pledged Funds and Accounts; (iii) all Swap Revenues; and (iv) all Subsidy Payments. C-15

152 Rule 15c2-12 means Securities and Exchange Commission Rule 15c2-12, as supplemented and amended from time to time. Securities Depository means The Depository Trust Company, or, in accordance with thencurrent guidelines of the Securities and Exchange Commission, such other securities depository, or no such depositories, as the Issuer may designate in a Request of the Issuer delivered to the Trustee. Serial Bonds means Bonds, maturing in specified years, for which no Mandatory Sinking Account Payments are provided. Series, whenever used herein with respect to Bonds, means all of the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction regardless of variations in maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and delivered upon transfer or exchange or in lieu of or in substitution for (but not to refund) such Bonds as herein provided. Series 2014A Bonds means the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2014A authorized by, and at any time Outstanding pursuant to, the Indenture. Series 2016A Bonds means the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2016A authorized by, and at any time Outstanding pursuant to, the Indenture. SIFMA Swap Index means, on any date, a rate determined on the basis of the seven-day high grade market index of tax-exempt variable rate demand obligations, as produced by Municipal Market Data and published or made available by the Securities Industry & Financial Markets Association (formerly the Bond Market Association) ( SIFMA ) or by any Person acting in cooperation with or under the sponsorship of SIFMA and effective from such date. Sinking Account means an account by that name established in the Principal Fund pursuant to the Indenture for the payment of Term Bonds. Standard & Poor s or S&P means Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business, which is a subsidiary of The McGraw-Hill Companies, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of New York, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Standard & Poor s or S&P shall be deemed to refer to any other nationally recognized securities rating agency selected by the Issuer. State means the State of California. Subordinate Obligations means any obligations (excluding fees and expenses and termination payments on Interest Rate Swap Agreements, which fees and expenses and termination payments shall be secured as Fee and Expense Obligations) of the Issuer issued or incurred in accordance with the Indenture, which obligations are secured by the lien of the Indenture and payable from the Revenues as provided therein. Subordinate Obligations Fund means the fund by that name established pursuant to the Indenture. C-16

153 Subsidy Payments means payments with respect to the interest due on a Series of Bonds made by the United States Treasury to the Trustee pursuant to Section 54AA of the Code, Section 6431 of the Code, or Section 1400U-2 of the Code or any successor to, or extension or replacement of, any of such provisions of the Code, or any provisions of the Code that create substantially similar direct-pay subsidy programs to such programs created pursuant to Section 54AA, Section 6431 or Section 1400U-2 of the Code. Supplemental Indenture means any indenture hereafter duly executed and delivered, supplementing, modifying or amending the Indenture, but only if and to the extent that such supplemental indenture is authorized under the Indenture. Supplemental Revenue Fund means the fund by that name established pursuant to the Indenture. Swap Revenues means all amounts owed or paid to the Issuer by any Counterparty under any Interest Rate Swap Agreement after offset for amounts owed or paid by the Issuer to such Counterparty under such Interest Rate Swap Agreement. Tax Certificate means each Tax Certificate delivered by the Issuer at the time of issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms. Term Bonds means Bonds payable at or before their specified maturity date or dates from Mandatory Sinking Account Payments established for that purpose and calculated to retire such Bonds on or before their specified maturity date or dates. Transfer Calculation Period means (i) with respect to each Transfer Date during the period commencing on, and including, each day that is two (2) Business Days prior to any April 1 and ending on, but excluding, the day that is two (2) Business Days prior to the next succeeding October 1, the period commencing on, and including, such April 1 and ending on, and including, the next succeeding October 1 and (ii) with respect to each Transfer Date during the period commencing on, and including, each day that is two (2) Business Days prior to any October 1 and ending on, but excluding, the day that is two (2) Business Days prior to the next succeeding April 1, the period commencing on, but excluding, such October 1 and ending on, but excluding, the next succeeding April 1. Transfer Date means, initially, each day that is two (2) Business Days prior to each April 1 and October 1, commencing with October 1, 2016 and, upon delivery of a certificate of the Issuer to the Trustee specifying additional dates, each additional date specified in the certificate of the Issuer. Trustee means U.S. Bank National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, or its successor, as Trustee as provided in the Indenture. Unrestricted Assets Account means the account by that name established within the Equity Fund pursuant to the Indenture. Variable Rate Indebtedness means any indebtedness the interest rate on which is not fixed at the time of incurrence of such indebtedness, and has not at some subsequent date been fixed, at a numerical rate or rates for the entire term of such indebtedness. C-17

154 Pledge and Assignment; Revenue Fund So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and Expense Obligations or any other amounts payable under the Indenture remain unpaid, the Issuer covenants and agrees to: (a) direct the Borrower for each Pledged Loan to transfer Pledged Loan Repayments directly to the Trustee and (b) promptly transfer Pledged Loan Repayments received by it from any Borrower to the Trustee. The Trustee shall forthwith deposit in a trust fund, designated as the Revenue Fund, which fund the Trustee shall establish and maintain, all Pledged Loan Repayments transferred to the Trustee, when and as received by the Trustee. Notwithstanding anything to the contrary contained in the Indenture, amounts transferred to or received by the Trustee that constitute Pledged Loan Fees and Expenses shall not be deposited in the Revenue Fund by the Trustee but shall be transferred by the Trustee directly to the Pledged Loan Fees and Expenses Subaccount of the Unrestricted Assets Account when and as received. As security for the payment of all amounts owing on the Bonds, the Parity Obligations, the Subordinate Obligations and the Fee and Expense Obligations, in the amounts and with the priorities set forth in the Indenture, the Issuer hereby irrevocably pledges and assigns to the Trustee, and grants to the Trustee a security interest in, the Collateral, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture; provided, however, that the Collateral shall not include the Issuer Retained Rights. The Collateral shall immediately be subject to the lien of the Indenture and such lien shall be valid, binding and enforceable against the Issuer and all others asserting rights therein, including all creditors of and transferees from the Issuer or the Trustee, to the extent set forth in, and in accordance with, the Indenture irrespective of whether those parties have notice thereof and without the need for any physical delivery, recordation, filing or further act. All Bonds and Parity Obligations shall be of equal rank without preference, priority or distinction of any Bonds and Parity Obligations over any other Bonds and Parity Obligations. All Subordinate Obligations shall be of equal rank without preference, priority or distinction of any Subordinate Obligations over any other Subordinate Obligations. All Fee and Expense Obligations shall be of equal rank without preference, priority or distinction of any Fee and Expense Obligations over any other Fee and Expense Obligations. All Revenues (other than Pledged Loan Repayments) shall also be deposited in the Revenue Fund. The Trustee shall also deposit in the Revenue Fund any other amounts transferred to it by the Issuer and designated by the Issuer in writing for such purpose. The Bonds are limited obligations of the Issuer and are secured as to payment of both principal and interest, and any premium upon redemption thereof, exclusively from the Collateral pledged therefor as provided in the Indenture. On or before each January 15 and July 15, the Trustee shall deliver to the Issuer a statement as of January 1 and July 1, respectively, showing, for each Pledged Loan, all payments received since the last such statement, or since the date of issuance of the Series 2016A Bonds (in the case of the first such statement), specifically itemizing (i) the amount of any regularly scheduled principal and interest paid with respect to such Pledged Loan, (ii) the amount of any prepayment of such Pledged Loan, (iii) the outstanding principal balance of such Pledged Loan as of the date of such statement, and (iv) if applicable, whether the payment of such Pledged Loan is delinquent and in what amount. All Pledged Loans as of the date of execution and delivery thereof shall be listed on an exhibit to the Indenture. Upon the addition of any Pledged Loan, the Issuer shall within thirty (30) days after such C-18

155 addition deliver a revised exhibit to the Trustee. Upon the substitution or release of any Pledged Loan as permitted by the Indenture, the Issuer shall within thirty (30) days after such substitution or release deliver a revised exhibit to the Trustee and any Rating Agency that reflects such substitution or release. Allocation of Revenues So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and Expense Obligations or any other amounts payable under the Indenture remain unpaid, the Trustee shall set aside the moneys in the Revenue Fund in the following respective funds (each of which the Trustee shall establish, maintain and hold in trust for the benefit of the Holders of the Bonds and, as and to the extent applicable, the holders of Parity Obligations, Subordinate Obligations and Fee and Expense Obligations) on the following respective dates, in the following amounts, in the following order of priority, the requirements of each such fund (including the making up of any deficiencies in any such fund resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any deposit is made to any fund subsequent in priority; provided that (i) on a parity with such deposits the Trustee may set aside or transfer amounts with respect to any outstanding Parity Obligations as provided in the proceedings for such Parity Obligations delivered to the Trustee pursuant to the Indenture (which shall be proportionate if such amounts are insufficient to provide for all deposits required as of any date to be made with respect to the Bonds and such Parity Obligations), (ii) payments on Interest Rate Swap Agreements that constitute Parity Obligations shall be payable from the Interest Fund and the required deposits below shall be adjusted to include payments on such Interest Rate Swap Agreements during the applicable Transfer Calculation Period (which shall be proportionate in the event such amounts are insufficient to provide for all deposits required as of any date to be made with respect to the Bonds and such Parity Obligations) and (iii) if any of the deposits or transfers requires more than one such deposit or transfer and there are not then on deposit in the Revenue Fund sufficient moneys to make all such deposits and transfers, then such deposits and payments shall be made pro rata (based on the total amount of such deposits and payments then due) to the extent of available moneys. (1) Interest Fund. On each Transfer Date, the Trustee shall set aside in the Interest Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Interest Fund is equal to the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date; provided that with respect to a newly issued Series of Bonds having one or more Interest Payment Dates scheduled to occur during the Transfer Calculation Period in which such Series of Bonds is issued and prior to the next Transfer Date for such Transfer Calculation Period, the Trustee shall, no later than the first Interest Payment Date for such Series of Bonds, set aside in the Interest Fund the amount of interest becoming due on said Series of Bonds on said Interest Payment Dates. The Trustee need not make any deposit into the Interest Fund with respect to any Bonds on any Transfer Date if the amount contained therein on such Transfer Date is at least equal to the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. On October 1 of each year, any excess amounts in the Interest Fund not needed to pay interest on such date (and not held to pay interest on Bonds during the immediately following Transfer Calculation Period) shall be transferred to the Revenue Fund (but excluding, in each case, any moneys on deposit in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment Dates). (2) Principal Fund; Sinking Accounts. On each Transfer Date, the Trustee shall set aside in the Principal Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Principal Fund is equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date; provided that with respect to a newly issued Series of Bonds having Bond Obligation or Mandatory Sinking Account Payments scheduled to be due and payable during the Transfer Calculation Period in which such Series of Bonds is issued and prior to the next Transfer Date for such C-19

156 Transfer Calculation Period, the Trustee shall, no later than the first such payment date for such Series of Bonds, set aside in the Principal Fund the amount of Bond Obligation or Mandatory Sinking Account Payments due and payable on said Series of Bonds on said payment dates. All of the aforesaid deposits made in connection with future Mandatory Sinking Account Payments shall be made without priority of any payment over any other such payment. The Trustee need not make a deposit into the Principal Fund with respect to any Bonds on any Transfer Date if the amount contained therein on such Transfer Date is at least equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. On October 1 of each year, any excess amounts in the Principal Fund not needed to pay principal on such date (and not held to pay principal on Bonds during the immediately following Transfer Calculation Period) shall be transferred to the Revenue Fund. (3) Reserve Funds. On each Transfer Date, after the transfers described in (1) and (2) above have been made, the Trustee shall deposit to any Reserve Fund the amounts, if any, required pursuant to the Indenture. (4) Rebate Fund. On each Transfer Date, after the transfers described in (1), (2) and (3) above have been made, the Trustee shall deposit in the Rebate Fund the amounts, if any, required pursuant to the Indenture (5) Subordinate Obligations Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the Subordinate Obligations Fund. On each Transfer Date, after the transfers described in (1), (2), (3) and (4) above have been made, the Trustee shall deposit in the Subordinate Obligations Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the Subordinate Obligations Fund is equal to the amount necessary to make payments due and payable with respect to Subordinate Obligations during the Transfer Calculation Period applicable to such Transfer Date. (6) Fees and Expenses Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the Fees and Expenses Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4) and (5) above have been made, the Trustee shall deposit in the Fees and Expenses Fund such amount as the Issuer shall specify in writing is necessary for the payment of Fee and Expense Obligations then owing by the Issuer. (7) Administrative Expense Fund. The Trustee shall establish, maintain, and hold in trust a separate fund designated as the Administrative Expense Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5) and (6) above have been made, the Trustee shall deposit in the Administrative Expense Fund, amounts then on deposit in the Revenue Fund until the amount on deposit in the Administrative Expense Fund is equal to the amount of Administrative Expenses budgeted for such period as is specified in writing to the Trustee by the Issuer. (8) Supplemental Revenue Fund. The Trustee shall establish, maintain, and hold in trust a separate fund designated as the Supplemental Revenue Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6) and (7) above have been made, the Trustee shall deposit in the Supplemental Revenue Fund, the amount, if any, required pursuant to the Indenture. (9) Other Funds. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6), (7) and (8) above have been made, the Trustee shall deposit in any other fund or account established with respect to Parity Obligations, Subordinate Obligations or Fee and Expense Obligations such amount as may be specified in or determined under the provisions of the Supplemental Indenture or other instrument providing for the issuance or incurrence of such Parity Obligations, Subordinate Obligations or Fee and Expense Obligations to be transferred to such fund or account pursuant to this paragraph. C-20

157 (10). Equity Fund. The Trustee shall establish, maintain, and hold in trust a separate fund designated as the Equity Fund. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5), (6), (7), (8) and (9) above have been made, the Trustee shall deposit in the Equity Fund all amounts remaining in the Revenue Fund on such Transfer Date. Establishment and Application of Funds and Accounts Each of the funds and accounts described below is established by the Indenture. Interest Fund. All amounts in the Interest Fund shall be used and withdrawn by the Trustee solely for the purposes of: (a) paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture), or for reimbursing the Credit Enhancement Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay letter of credit, and (b) making periodic payments on Interest Rate Swap Agreements, as provided in the Indenture. If amounts on deposit in the Interest Fund are not sufficient to pay in full all amounts payable from the Interest Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Interest Fund and payments then due). Principal Fund. All amounts in the Principal Fund shall be used and withdrawn by the Trustee solely for the purposes of paying the Bond Obligation of the Bonds when due and payable, except that all amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to purchase or redeem or pay at maturity Term Bonds, as provided herein, or for reimbursing the Credit Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, directpay letter of credit. If amounts on deposit in the Principal Fund are not sufficient to pay in full all amounts payable from the Principal Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Principal Fund and payments then due). The Trustee shall establish and maintain within the Principal Fund a separate account for the Term Bonds of each Series and maturity, designated as the Sinking Account, inserting therein the Series and maturity designation of such Bonds. On or before the Business Day prior to any date upon which a Mandatory Sinking Account Payment is due, the Trustee shall transfer the amount of such Mandatory Sinking Account Payment (being the principal thereof, in the case of Current Interest Bonds, and the Accreted Value, in the case of Capital Appreciation Bonds) from the Principal Fund to the applicable Sinking Account. With respect to each Sinking Account, on each Mandatory Sinking Account Payment date established for such Sinking Account, the Trustee shall apply the Mandatory Sinking Account Payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of such Series and maturity for which such Sinking Account was established, in the manner provided in the Indenture or the Supplemental Indenture pursuant to which such Series of Bonds was created; provided that, at any time prior to giving such notice of such redemption, the Trustee shall, upon receipt of a Request of the Issuer, apply moneys in such Sinking Account to the purchase of Term Bonds of such Series and maturity at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Fund) as is directed by the Issuer, except that the purchase price (excluding accrued interest, in the case of Current Interest Bonds) shall not exceed the principal amount or Accreted Value thereof. If, during the 12-month period (or six-month period with respect to Bonds having semi-annual Mandatory Sinking Account Payments) immediately preceding said Mandatory Sinking Account Payment date, the Trustee has purchased Term Bonds of such Series and maturity with moneys in such Sinking Account, or, during said period and prior to giving said notice of redemption, the Issuer has deposited Term Bonds of such Series and maturity with the Trustee, or Term Bonds of such Series and maturity were at any time purchased or redeemed by the Trustee from the Redemption Fund and allocable to said Mandatory Sinking Account Payment, such C-21

158 Term Bonds so purchased or deposited or redeemed shall be applied, to the extent of the full principal amount thereof, to reduce said Mandatory Sinking Account Payment. All Term Bonds purchased or deposited pursuant to this subsection shall be cancelled by the Trustee and destroyed by the Trustee and a certificate of destruction shall be delivered to the Issuer by the Trustee. Any amounts remaining in a Sinking Account on October 1 of each year following the redemption as of such date of the Term Bonds for which such account was established shall be withdrawn by the Trustee and transferred to the Revenue Fund. All Term Bonds purchased from a Sinking Account or deposited by the Issuer with the Trustee in a 12-month period ending September 30 (or in a six-month period ending March 31 or September 30, with respect to Bonds having semi-annual Mandatory Sinking Account Payments) and purchased prior to the giving of notice by the Trustee for redemption from Mandatory Sinking Account Payments for such period shall be allocated first to the next succeeding Mandatory Sinking Account Payment for such Series and maturity of Term Bonds, if any, occurring on the next April 1 or October 1, then as a credit against such future Mandatory Sinking Account Payments for such Series and maturity of Term Bonds as may be specified in a Request of the Issuer. All Term Bonds redeemed by the Trustee from the Redemption Fund shall be credited to such future Mandatory Sinking Account Payments for such Series and maturity of Term Bonds as may be specified in a Request of the Issuer. Reserve Funds. The Issuer may at its sole discretion at the time of issuance of any Series of Bonds or at any time thereafter by Supplemental Indenture provide for the establishment of a Reserve Fund as additional security for a Series of Bonds. Any Reserve Fund so established by the Issuer shall be available to secure one or more Series of Bonds as the Issuer shall determine and shall specify in the Supplemental Indenture establishing such Reserve Fund. Any Reserve Fund established by the Issuer shall be held by the Trustee and shall comply with the requirements of the Indenture described below. If there is any deficiency in any Reserve Fund on any Transfer Date such that amounts on deposit in such Reserve Fund together with the available amount of any Reserve Facility comprising part of the Bond Reserve Requirement for such Reserve Fund fall below the applicable Bond Reserve Requirement and such deficiency is (i) due to a withdrawal from the Reserve Fund for purposes of making up any deficiency in the Interest Fund or the Principal Fund relating to the Bonds of the Series to which the Reserve Fund relates or (ii) results from a valuation of Permitted Investments held on deposit in the Reserve Fund pursuant to the Investment of Funds and Accounts section of the Indenture, then, with the priority set forth in the Allocation of Revenues section of the Indenture, the Trustee shall deposit in such Reserve Fund the amount necessary to replenish such deficiency or repay any and all obligations due and payable under the terms of any Reserve Facility comprising part of the Bond Reserve Requirement for such Reserve Fund until the amount on deposit in such Reserve Fund together with the available amount of any Reserve Facility comprising part of the Bond Reserve Requirement for such Reserve Fund is equal to the Bond Reserve Requirement for such Reserve Fund. Upon deposit to a Reserve Fund of the amount necessary to repay any and all obligations due and payable under the terms of any Reserve Facility, the Trustee shall transfer such amount to each Reserve Facility Provider providing a Reserve Facility satisfying a portion of the Bond Reserve Requirement relating to the Bonds of the Series to which the Reserve Fund relates as their interests may appear. Subordinate Obligations Fund. All moneys in the Subordinate Obligations Fund shall be used and withdrawn by the Trustee to pay Subordinate Obligations as such amounts become due and payable. If amounts on deposit in the Subordinate Obligations Fund are not sufficient to pay in full all amounts payable from the Subordinate Obligations Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Subordinate Obligations Fund and payments then due). Fees and Expenses Fund. All amounts in the Fees and Expenses Fund shall be used and withdrawn by the Trustee solely for the purpose of paying fees, expenses and similar charges owed by the Issuer in connection with the Bonds or any Parity Obligations or Subordinate Obligations (including C-22

159 termination payments on any Interest Rate Swap Agreement) as such amounts shall become due and payable. If amounts on deposit in the Fees and Expenses Fund are not sufficient to pay in full all amounts payable from the Fees and Expenses Fund, such amounts shall be applied pro rata (based on the total amount on deposit in the Fees and Expenses Fund and payments then due). Administrative Expense Fund. All amounts deposited in the Administrative Expense Fund shall be used and withdrawn by the Trustee solely to pay Administrative Expenses as they become due and payable as directed by the Issuer. Supplemental Revenue Fund. The Trustee shall not transfer amounts on deposit in the Revenue Fund to any fund or account subordinate in priority to the Supplemental Revenue Fund until the Issuer shall deliver to the Trustee a Certificate of the Issuer calculating the Coverage Test (taking into account amounts already on deposit in the Supplemental Revenue Fund). If, based on such calculation, the Coverage Test will not be satisfied as of the date of calculation, then the Issuer shall also specify, in the Certificate of the Issuer delivered to the Trustee, the amount required to be deposited in the Supplemental Revenue Fund to pay any projected shortfalls in the scheduled payment of Bonds or Parity Obligations and to satisfy the Coverage Test as of the date of calculation. Pursuant to the Certificate of the Issuer and with the priority set forth in the Allocation of Revenues section of the Indenture, the Trustee shall transfer funds from the Revenue Fund to the Supplemental Revenue Fund. The Trustee shall also deposit in the Supplemental Revenue Fund any other amounts transferred to it by the Issuer and designated by the Issuer in writing for such purpose. All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by the Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any deficiency in the payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for such purpose. If, on any date, the Issuer delivers to the Trustee a Certificate of the Issuer demonstrating compliance with the Coverage Test without taking into account the amount (or a portion thereof) then on deposit in the Supplemental Revenue Fund and requesting that such amount (or portion thereof) be released from the Supplemental Revenue Fund, then the amount (or such portion thereof) on deposit in the Supplemental Revenue Fund shall be withdrawn by the Trustee and deposited, transferred or utilized pursuant to the instructions set forth in the Certificate of the Issuer subject to compliance with any applicable provisions of any Tax Certificate and, in the event that such instructions provide for depositing such amount (or such portion thereof), in the Unrestricted Assets Account, then such amount (or portion thereof) shall be deposited in the Unrestricted Assets Account free and clear of the lien of the Indenture. Equity Fund; Establishment, Funding and Allocation of Restricted Assets Account and Unrestricted Assets Account. Unless otherwise specified by the Issuer in a Certificate of the Issuer delivered to the Trustee, all amounts transferred to the Equity Fund in any Fiscal Year pursuant to the Allocation of Revenues section of the Indenture shall first be deposited by the Trustee in the Unrestricted Assets Account until the amount so transferred to the Unrestricted Assets Account in such Fiscal Year is equal to the Issuer s projected operating expenses for such Fiscal Year plus the Issuer s projected operating expenses for one-half of the following Fiscal Year (or such lesser amount as may be determined in the sole discretion of the Issuer), all as specified in a Certificate of the Issuer delivered to the Trustee prior to the first Transfer Date of the Fiscal Year. After making the transfers to the Unrestricted Assets Account described in the preceding sentence, all amounts transferred to the Equity Fund in the Fiscal Year pursuant to the Allocation of Revenues section of the Indenture shall be deposited by the Trustee in the Restricted Assets Account. The Trustee shall establish, maintain and hold in trust a separate account within the Equity Fund, designated as the Restricted Assets Account. The Trustee shall deposit in the Restricted Assets C-23

160 Account all amounts required by the Indenture together with any other amounts provided to the Trustee by the Issuer for deposit in the Restricted Assets Account. Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Restricted Assets Account shall be used and withdrawn by the Trustee as directed in a Certificate of the Issuer for any lawful purpose of the Program. If, on any date, the Issuer delivers to the Trustee a Certificate of the Issuer demonstrating compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund and requesting that the amount on deposit in the Restricted Assets Account (or such portion thereof specified in the Certificate of the Issuer) be released from the Restricted Assets Account, then the amount (or such portion thereof) on deposit in the Restricted Assets Account shall be withdrawn by the Trustee and deposited, transferred or utilized pursuant to the instructions set forth in the Certificate of the Issuer and, in the event that such instructions provide for depositing such amount (or such portion thereof), in the Unrestricted Assets Account, then such amount (or portion thereof) shall be deposited in the Unrestricted Assets Account free and clear of the lien of the Indenture. The Trustee shall establish and maintain a separate account within the Equity Fund, designated as the Unrestricted Assets Account and a separate subaccount within the Unrestricted Assets Account, designated as the Pledged Loan Fees and Expenses Subaccount. The Unrestricted Assets Account shall be maintained by the Trustee for the benefit of the Issuer, shall be controlled by the Issuer, is not part of the Collateral and shall not be subject to the lien of the Indenture. The Trustee shall deposit in the Unrestricted Assets Account all amounts required by the Indenture together with any other amounts provided to the Trustee by the Issuer for deposit in the Unrestricted Assets Account. Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the Unrestricted Assets Account may be used, transferred or withdrawn by the Issuer at any time for any lawful purpose of the Issuer pursuant to a Certificate of the Issuer delivered to the Trustee; provided, however, that in all cases, such Certificate of the Issuer need not demonstrate compliance with the Coverage Test or other limitation except as expressly provided in this paragraph. At such time as the Trustee receives a Certificate of the Issuer stating that a Loan has been fully executed by a Borrower, the name of the Borrower and the amount of such Loan, the Trustee shall transfer the amount of such Loan from the Restricted Assets Account or the Unrestricted Assets Account, as applicable, to a separate subaccount that the Trustee shall establish and maintain within the Restricted Assets Account or the Unrestricted Assets Account, as applicable, designated as the Loan Subaccount, inserting therein the name of the Borrower. Moneys on deposit in each Borrower s Loan Subaccount within the Restricted Assets Account and the Unrestricted Assets Account will be disbursed to the Borrower (or to the Issuer to reimburse the Issuer for any disbursements made to such Borrower on its Loan prior to the date the Trustee created such Borrower s Loan Subaccount) upon receipt by the Trustee of a Requisition of the Issuer; provided, however, that interest, profits and other income received from the investment of moneys in such Borrower s Loan Subaccount shall be transferred by the Trustee at the direction of the Issuer. The Issuer may direct the Trustee in writing to transfer the amount of funds then held in a Borrower s Loan Subaccount that the Issuer has decided will not be disbursed to the Borrower to the Restricted Assets Account or the Unrestricted Assets Account, as applicable. Redemption Fund. All moneys deposited by the Issuer with the Trustee for the purpose of optionally redeeming Bonds of any Series shall, unless otherwise directed by the Issuer, be deposited in the Redemption Fund. All amounts deposited in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of redeeming Bonds of such Series and maturity as shall be specified by the Issuer in a Request to the Trustee, in the manner, at the times and upon the terms and conditions specified in the Supplemental Indenture pursuant to which the Series of Bonds was created; provided that, at any time prior to giving such notice of redemption, the Trustee shall, upon receipt of a Request of the Issuer, apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding, in the case of Current Interest Bonds, C-24

161 accrued interest, which is payable from the Interest Fund) as is directed by the Issuer, except that the purchase price (exclusive of any accrued interest) may not exceed the Redemption Price or Accreted Value then applicable to such Bonds; and provided further that in lieu of redemption of Bonds of any Series, or in combination therewith, amounts in the Redemption Fund may be transferred to the Interest Fund and Principal Fund and credited against debt service on Bonds of any Series as set forth in a Certificate of the Issuer. All Term Bonds purchased or redeemed from the Redemption Fund shall be allocated to Mandatory Sinking Account Payments applicable to such Series and maturity of Term Bonds as may be specified in a Request of the Issuer. Rebate Fund. Within the Rebate Fund, the Trustee shall maintain such accounts as shall be necessary in order to comply with the terms and requirements of each Tax Certificate as directed in writing by the Issuer. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the federal government of the United States of America, and neither the Trustee nor any Holder nor any other Person shall have any rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be governed by the Indenture and by the applicable Tax Certificate. Payment Provisions Applicable to Interest Rate Swap Agreements The Issuer shall, promptly after Swap Revenues are paid by the Counterparty under an Interest Rate Swap Agreement, transfer or cause to be transferred, the Swap Revenues to the Trustee for deposit in the Revenue Fund. Payments on Interest Rate Swap Agreements that are payable as Parity Obligations shall be payable by the Trustee to the Counterparty from the Interest Fund as provided in the Indenture. Payments on Interest Rate Swap Agreements that are payable as Subordinate Obligations shall be payable by the Trustee to the Counterparty from the Subordinate Obligations Fund. Payments on Interest Rate Swap Agreements that are payable as Fee and Expense Obligations shall be payable by the Trustee to the Counterparty from the Fees and Expenses Fund. The Issuer may apply termination payments received from any Counterparty to the defeasance or redemption of all or a portion of any Bonds then Outstanding. Investment in Funds and Accounts All moneys in any of the funds and accounts held by the Trustee or established pursuant to the Indenture (including any Bond Proceeds Fund held by the Trustee) shall be invested, as directed by the Issuer, solely in Permitted Investments. Moneys in any Reserve Fund shall be invested in Permitted Investments maturing in not more than five years, or having a put option or demand option providing funds upon request for the purpose of payment of the Bonds to which such Reserve Fund relates as provided herein. Moneys in the remaining funds and accounts shall be invested in Permitted Investments maturing or available on demand not later than the date on which it is estimated that such moneys will be required by the Trustee. Unless otherwise provided in a Supplemental Indenture establishing the terms and provisions of a Series of Bonds or a Request of the Issuer delivered to the Trustee: (i) all interest, profits and other income received from the investment of moneys in the Interest Fund representing accrued interest or capitalized interest shall be retained in the Interest Fund; (ii) all interest, profits and other income received from the investment of moneys in any Reserve Fund shall be retained in such Reserve Fund to the extent C-25

162 of any deficiency therein, and otherwise shall be transferred to the Revenue Fund; (iii) all interest, profits and other income received from the investment of moneys in a Costs of Issuance Fund shall be retained in such Costs of Issuance Fund until such time as such Costs of Issuance Fund is closed, and any earnings received on a Costs of Issuance Fund subsequent to the closure of such Costs of Issuance Fund shall be transferred to the Revenue Fund; (iv) all interest, profits and other income received from the investment of moneys in the Equity Fund, the Restricted Assets Account, the Unrestricted Assets Account, any Bond Proceeds Fund, any Borrower s Loan Account or any Borrower s Loan Subaccount shall be retained in such fund or account, unless the Issuer shall direct that such earnings be transferred to the Revenue Fund or the Rebate Fund; (v) all interest, profits and other income received from the investment of moneys in the Rebate Fund shall be retained in the Rebate Fund, except as otherwise provided in the Indenture, (vi) all interest, profits and other income received from the investment of moneys in any Letter of Credit Fund or Purchase Fund shall be retained in such Letter of Credit Fund or Purchase Fund, as applicable; and (vii) all interest, profits and other income received from the investment of moneys in any other fund or account shall be transferred to the Revenue Fund. Notwithstanding anything to the contrary contained in this paragraph, an amount of interest received with respect to any Permitted Investment equal to the amount of accrued interest, if any, paid as part of the purchase price of such Permitted Investment shall be credited to the fund or account from which such accrued interest was paid. All Permitted Investments credited to any Reserve Fund shall be valued (at the lesser of cost or market value) as of the Transfer Date immediately preceding April 1 and October 1 of each year, such market value to be determined by the Trustee in the manner then currently employed by the Trustee or in any other manner consistent with corporate trust industry standards. Notwithstanding anything to the contrary herein, in making any valuations of investments hereunder, the Trustee may utilize and rely on computerized securities pricing services that may be available to it, including those available through its regular accounting system. Issuance of Additional Bonds and Other Obligations Issuance of Additional Bonds. Subsequent to the issuance of the Series 2014A Bonds, the Issuer may by Supplemental Indenture establish one or more additional Series of Bonds and the Issuer may issue, and the Trustee may authenticate and deliver to the purchasers thereof, Bonds of any Series so established, in such principal amount as shall be determined by the Issuer, but only with respect to each additional Series of Bonds issued subsequent to the Series 2014A Bonds, upon compliance by the Issuer with the provisions of the Indenture and subject to the specific conditions set forth below, each of which is made a condition precedent to the issuance of any such additional Series of Bonds. (A) No Event of Default shall have occurred and then be continuing (or the issuance of such additional Series of Bonds will cure any such Event of Default). (B) If a Supplemental Indenture providing for the issuance of such Series requires either (i) the establishment of a Reserve Fund to provide additional security for such Series of Bonds, or (ii) that the balance on deposit in an existing Reserve Fund be increased, forthwith upon the receipt of the proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement with respect to such Series of Bonds and all other Bonds secured by such Reserve Fund to be considered Outstanding upon the issuance of such additional Series of Bonds, then the Supplemental Indenture providing for the issuance of such additional Series of Bonds shall require deposit of the amount necessary. Said deposit shall be made as provided in the Supplemental Indenture providing for the issuance of such additional Series of Bonds and may be made from the proceeds of the sale of such Series of Bonds or from other funds of the Issuer or from both such sources or, subject to the terms of the Indenture and any Supplemental Indenture governing such Reserve Fund, may be made in the form of a Reserve Facility. C-26

163 (C) The aggregate principal amount of Bonds issued under the Indenture shall not exceed any applicable limitation imposed by the Act. (D) The Issuer shall deliver to the Trustee a Certificate of the Issuer demonstrating either (i) compliance with the Coverage Test after taking into account the issuance of such additional Series of Bonds or (ii) that Annual Debt Service will not be increased in any Bond Year after taking into account the issuance of such additional Series of Bonds. For the purpose of demonstrating compliance with the Coverage Test in accordance with this paragraph, the Issuer shall not take into account amounts on deposit or expected to be on deposit in the Supplemental Revenue Fund. Nothing in the Indenture contained shall prevent or be construed to prevent the Supplemental Indenture providing for the issuance of an additional Series of Bonds from pledging or otherwise providing, in addition to the security given or intended to be given by the Indenture, additional security for the benefit of such additional Series of Bonds or any portion thereof. Limitations on the Issuance of Obligations Secured by or Payable From Collateral; Parity Obligations; Subordinate Obligations; Fee and Expense Obligations. The Issuer will not, so long as any of the Bonds are Outstanding, issue any obligations or securities, howsoever denominated, secured in whole or in part by, or payable in whole or in part from, the Collateral or any portion thereof (including the Revenues) except as set forth below. (A) Bonds authorized pursuant to the Indenture, as described above under the caption Issuance of Additional Bonds. (B) Parity Obligations, provided that the following conditions to the issuance or incurrence of such Parity Obligations are satisfied: (1) Such Parity Obligations have been duly and legally authorized by the Issuer for any lawful purpose; (2) No Event of Default shall have occurred and then be continuing (or the issuance of such Parity Obligations will cure any such Event of Default), as evidenced by the delivery to the Trustee of a Certificate of the Issuer to that effect; (3) The Issuer shall have delivered to the Trustee a Certificate of the Issuer demonstrating either (i) compliance with the Coverage Test after taking into account the issuance or incurrence of such Parity Obligations but without taking into account amounts on deposit or expected to be on deposit in the Supplemental Revenue Fund or (ii) that Annual Debt Service will not be increased in any Bond Year after taking into account the issuance or incurrence of such Parity Obligations; provided, however that if the Parity Obligation being issued or incurred consists of an Interest Rate Swap Agreement (excluding fees and expenses and termination payments on such Interest Rate Swap Agreement), the Issuer shall be deemed to have complied with the requirements of this section to the extent that the Series of Bonds to which the Interest Rate Swap Agreement relates (x) satisfies the requirements of the Issuance of Additional Bonds section of the Indenture after taking into account the adjustment of Debt Service on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements entered into concurrently with, or subsequent to, the issuance of such Bonds), or (y) is expected to satisfy the requirements of the Issuance of Additional Bonds section of the Indenture after taking into account the adjustment of Debt Service on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements C-27

164 entered into in advance of the issuance of such Bonds), each as evidenced by a Certificate of the Issuer delivered to the Trustee; and (4) As and to the extent applicable, the Trustee is designated as paying agent or trustee for such Parity Obligations and the Issuer delivers to the Trustee a transcript of the proceedings providing for the issuance of such Parity Obligations (but the Trustee shall not be responsible for the validity or sufficiency of such proceedings or such Parity Obligations). (C) Subordinate Obligations, provided that the following conditions to issuance or incurrence of such Subordinate Obligations are satisfied: (1) Such Subordinate Obligations have been duly and legally authorized by the Issuer for any lawful purpose; (2) No Event of Default shall have occurred and then be continuing (or the issuance of such Subordinate Obligations will cure any such Event of Default), as evidenced by the delivery to the Trustee of a Certificate of the Issuer to that effect; and (3) As and to the extent applicable, the Trustee is designated as paying agent or trustee for such Subordinate Obligations and the Issuer delivers to the Trustee a transcript of the proceedings providing for the issuance of such Subordinate Obligations (but the Trustee shall not be responsible for the validity or sufficiency of such proceedings or such Subordinate Obligations). (D) Fee and Expense Obligations. Designation of Parity Obligations, Subordinate Obligations and Fee and Expense Obligations The Issuer shall designate additional Parity Obligations, Subordinate Obligations or Fee and Expense Obligations in a Supplemental Indenture or a Certificate of the Issuer delivered to the Trustee concurrently with the issuance or incurrence of such Parity Obligations, Subordinate Obligations or Fee and Expense Obligations. Certain Covenants of the Issuer Punctual Payments. The Issuer shall punctually pay or cause to be paid the principal, purchase price or Redemption Price of and interest on all the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, and shall punctually pay or cause to be paid all Mandatory Sinking Account Payments, but in each case solely from the Collateral pledged therefore as provided in the Indenture. Extension of Payment of Bonds. The Issuer shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any Bonds or claims for interest by the purchase or funding of such Bonds or claims for interest or by any other arrangement and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing described in this section shall be deemed to limit the right of the Issuer to issue bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of Bonds. C-28

165 Against Encumbrances. Except as provided in the Indenture, the Issuer shall not create any pledge, lien, charge or other encumbrance upon the Collateral, or any portion thereof, having priority over, or having parity with, the lien of the Indenture. Continuing Disclosure. Upon the issuance of any Series of Bonds requiring an undertaking regarding continuing disclosure under Rule 15c2-12, the Issuer shall comply with and carry out all of the provisions of the Continuing Disclosure Agreement executed and delivered in connection with such Series of Bonds. Notwithstanding any other provision of the Indenture, failure of the Issuer to comply with the provisions of any Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however that the Trustee shall, at the written request of any Participating Underwriter or of the Holders of at least twenty-five (25%) aggregate principal amount of any Series of Bonds then Outstanding (but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Trustee whatsoever, including, without limitation, reasonable fees and expenses of its attorneys), or any Holder or beneficial owner may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under the Indenture. Release, Substitution, Addition and Amendment of Pledged Loans. The Issuer may release any Pledged Loan from the lien of the Indenture, substitute Loans for existing Pledged Loans or add additional Pledged Loans, in each case, by delivering to the Trustee the following: (i) a revised description of the Pledged Loans; (ii) a Certificate of the Issuer identifying the Loans that are to become Pledged Loans and/or the Pledged Loans that are to be released; and (iii) a Certificate of the Issuer that demonstrates compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund and after taking into effect such release, substitution or addition. Upon delivery of such certificates to the Trustee, (1) the Loans substituted for existing Pledged Loans or added in such certificate shall become Pledged Loans and be subject to the lien of the Indenture automatically and without the need for physical delivery, recordation, filing, or other further act, and (2) the Loans released or for which other Pledge Loans are substituted in such certificate shall no longer be Pledged Loans and shall be released from the lien of the Indenture automatically and without the need for physical delivery, recordation, filing, or other further act. The Issuer may amend the Pledged Loan Repayment provisions of any Loan Agreement if, prior to such amendment, the Issuer delivers to the Trustee and each Rating Agency a Certificate of the Issuer that demonstrates compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental Revenue Fund after taking into effect the amendment. The Issuer may amend any of the other provisions of any Loan Agreement in its discretion without delivery of a Certificate of the Issuer. The Trustee shall execute such consents to releases, additions or amendments and such other instruments as the Issuer may reasonably request in order to evidence the release, substitution, addition or amendment but only upon satisfaction of the requirements of this section or the Defeasance section of the Indenture, as applicable. No release, substitution, addition or amendment of any Pledged Loan shall occur except as expressly provided in this section and the Defeasance section of the Indenture. C-29

166 Events of Default and Remedies Events of Default. The following events shall be Events of Default: (A) default in the due and punctual payment of the principal or Redemption Price of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, or otherwise, or default in the redemption from any Sinking Account of any Bonds in the amounts and at the times provided therefor; (B) default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; (C) the Issuer fails to observe or perform any covenant, condition, agreement or provision in the Indenture on its part to be observed or performed, other than as referred to in subsection (A) or (B) of this section, for a period of sixty (60) days after written notice, specifying such failure and requesting that it be remedied, has been given to the Issuer by the Trustee or by any Credit Enhancement Provider; except that, if such failure can be remedied but not within such sixty (60) day period and if the Issuer has taken all action reasonably possible to remedy such failure within such sixty (60) day period, such failure shall not become an Event of Default for so long as the Issuer diligently proceed to remedy the same in accordance with and subject to any directions or limitations of time established by the Trustee; (D) if any payment default exists under any agreement governing any Parity Obligations and such default continues beyond the grace period, if any, provided for with respect to such default; or (E) any Event of Default designated as such in a Supplemental Indenture. Application of the Revenues and Other Funds After Default; No Acceleration. If an Event of Default occurs and is continuing, the Trustee shall apply all Revenues and any other amounts then held by it in the Pledged Funds and Accounts or thereafter received by the Trustee under any of the provisions of the Indenture for credit to or deposit in the Pledged Funds and Accounts (except as otherwise provided in the Indenture) as follows and in the following order: (1) to the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Holders of the Bonds and Parity Obligations, including the costs and expenses of the Trustee and the Bondholders in declaring such Event of Default, and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel and other agents) incurred in and about the performance of its powers and duties under the Indenture; (2) to the payment of the whole amount of Bond Obligation then due on the Bonds and amounts then due on Parity Obligations (upon presentation of the Bonds and Parity Obligations to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Indenture, with interest on such Bond Obligation, at the rate or rates of interest borne by the respective Bonds and on Parity Obligations, to the payment to the persons entitled thereto of all installments of interest then due and the unpaid principal or Redemption Price of any Bonds and Parity Obligations that have become due, whether at maturity, by call for redemption or otherwise, in the order of their due dates, with interest on the overdue Bond Obligation and Parity Obligations at the rate borne by the respective Bonds and Parity Obligations, and, if the amount available is not sufficient to pay in full all the Bonds and Parity Obligations due on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal or Accreted Value (plus accrued interest) or other amounts due on such date to the persons entitled thereto, without any discrimination or preference; C-30

167 (3) to the payment of Subordinate Obligations, provided that if the amount available shall not be sufficient to pay in full all Subordinate Obligations due on any date, then to the payment thereof ratably, according to the amounts due on such date to the persons entitled thereto, without any discrimination or preference; (4) to the payment of Fee and Expense Obligations, provided that, if the amount available is not sufficient to pay in full all Fee and Expense Obligations due on any date, then to the payment thereof ratably, according to the amounts due on such date to the persons entitled thereto, without any discrimination or preference; and (5) to the payment of all other obligations payable under the Indenture. Notwithstanding anything to the contrary in the Indenture, in no event are the Bonds subject to acceleration if an Event of Default occurs and is continuing except that Liquidity Facility Bonds are subject to acceleration as set forth in the Liquidity Facility. Trustee to Represent Bondholders. The Trustee is irrevocably appointed (and the successive respective Holders of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Holders of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Holders under the provisions of the Bonds, the Indenture, the Act and applicable provisions of any other law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondholders, the Trustee in its discretion may, and, with respect to any Series of Bonds for which a Credit Enhancement has been provided, upon the written request of the Credit Enhancement Provider providing such Credit Enhancement, or if such Credit Enhancement Provider is then failing to make a payment required pursuant to such Credit Enhancement, upon the written request of the Holders of not less than a majority in aggregate amount of Bond Obligation of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall proceed to protect or enforce its rights or the rights of such Holders by such appropriate action, suit, mandamus or other proceedings as it deems most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Holders under the Indenture, the Act or any other law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Collateral pledged under the Indenture, pending such proceedings; provided, however, that, with respect to any Series of Bonds for which a Credit Enhancement has been provided, the Trustee may only act with the consent of the Credit Enhancement Provider providing such Credit Enhancement. All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Holders of such Bonds, subject to the provisions of the Indenture. Bondholders Direction of Proceedings. Notwithstanding anything in the Indenture to the contrary (except provisions relating to the rights of a Credit Enhancement Provider to direct proceedings as set forth in the Indenture as described below), the Holders of a majority in aggregate amount of Bond Obligation of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee and upon furnishing the Trustee with indemnification satisfactory to it, to direct the method of conducting all remedial proceedings taken by the Trustee under the Indenture, provided that (a) such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that C-31

168 is not inconsistent with such direction, and (c) the Trustee shall have the right to decline to follow any such direction that in the opinion of the Trustee would be unjustly prejudicial to Bondholders or holders of Parity Obligations not parties to such direction. Limitation on Bondholders Right to Sue. No Holder of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture, the Act or any other applicable law with respect to such Bond, unless: (1) such Holder has given the Trustee written notice of the occurrence of an Event of Default; (2) the Holders of not less than a majority in aggregate amount of Bond Obligation of the Bonds then Outstanding have made written request upon the Trustee to exercise the powers granted by the Indenture or to institute such suit, action or proceeding in its own name; (3) such Holder or said Holders have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (4) the Trustee has refused or omitted to comply with such request for a period of sixty (60) days after such written request has been received by, and said tender of indemnity has been made to, the Trustee; provided, however, that the written consent of a Credit Enhancement Provider providing a Credit Enhancement with respect to a Series of Bonds is required if the Credit Enhancement with respect to such Series of Bonds is in full force and effect and if the Credit Enhancement Provider providing such Credit Enhancement is not then failing to make a payment as required in connection therewith. Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy under the Indenture or under law; it being understood and intended that no one or more Holders of Bonds have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Holders of Bonds, or to enforce any right under the Indenture, the Act or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Holders of the Outstanding Bonds, subject to the provisions of the Indenture. Credit Enhancement Provider Directs Remedies Upon Event of Default. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as defined in the Indenture, the Credit Enhancement Provider then providing Credit Enhancement for any Series of Bonds shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Bonds secured by such Credit Enhancement or granted to the Trustee for the benefit of the Holders of the Bonds secured by such Credit Enhancement, provided that the Credit Enhancement Provider s consent shall not be required as otherwise provided herein if such Credit Enhancement Provider is in default of any of its payment obligations as set forth in the Credit Enhancement provided by such Credit Enhancement Provider. Modification or Amendment to the Indenture Amendments Permitted With Consent of Holders. The Indenture and the rights and obligations of the Issuer, the Holders of the Bonds and the Trustee may be modified or amended by a Supplemental Indenture, which the Issuer and the Trustee may enter into when the written consent of the Holders of a majority in aggregate amount of Bond Obligation of the Bonds (or, if such Supplemental Indenture is only applicable to a Series of Bonds, such Series of Bonds) then Outstanding is filed with the Trustee; provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity remain Outstanding, the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Bonds Outstanding. The Credit Enhancement Provider for a Series of Bonds shall be deemed to be the Holder of such Series for all purposes of the Indenture except the payment of principal of and interest on C-32

169 such Series of the Bonds. The written consent of the Holders of a Series of Bonds may be effected (a) through a consent by the underwriter of such Series of Bonds at the time of the issuance of such Series of Bonds and (b) through a provision of a Supplemental Indenture that deems any Holders purchasing such Series of Bonds to consent for purposes of the provisions described in this subsection by virtue of its purchase of such Series of Bonds. No such modification or amendment shall (a) extend the maturity of any Bond, or reduce the amount of principal thereof, or extend the time of payment or reduce the amount of any Mandatory Sinking Account Payment provided for the payment of any Bond, or reduce the rate of interest thereon, or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Holder of each Bond so affected, or (b) reduce the aforesaid percentage of Bond Obligation Holders whose consent is required to effect any such modification or amendment, or permit the creation of any lien on the Collateral pledged under the Indenture prior to or on a parity with the lien created by the Indenture, or deprive the Holders of the Bonds of the lien created by the Indenture on such Collateral (in each case, except as expressly provided in the Indenture), without the consent of the Holders of all of the Bonds then Outstanding. The Holders are not required to approve the particular form of any Supplemental Indenture; it is sufficient if the Holders consent to the substance thereof. Promptly after the execution and delivery by the Issuer and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture to the Holders of the Bonds at the addresses shown on the registration books of the Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. Amendments Permitted Without Consent of Holders. The Indenture and the rights and obligations of the Issuer, of the Trustee and of the Holders of the Bonds may also be modified or amended by a Supplemental Indenture, which the Issuer and the Trustee may enter without the consent of any Bondholders, but only to the extent permitted by the Law and only for any one or more of the following purposes: (1) to add other covenants and agreements thereafter to be observed to the covenants and agreements of the Issuer in the Indenture contained, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Issuer; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the Issuer may deem necessary or desirable, and that does not materially and adversely affect the interests of the Holders of the Bonds; (3) to modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and that do not materially and adversely affect the interests of the Holders of the Bonds; (4) to provide for the issuance of an additional Series of Bonds pursuant to the provisions of Article III of the Indenture; (5) to make modifications or adjustments necessary, appropriate or desirable to provide for the issuance or incurrence, as applicable, of Interest Subsidy Bonds, Capital Appreciation Bonds, Parity Obligations, Subordinate Obligations, Fee and Expense Obligations or Variable Rate Indebtedness, with C-33

170 such interest rate, payment, maturity and other terms as the Issuer may deem desirable; subject to the provisions of the Indenture relating to the Issuance of Additional Bonds; (6) to make modifications or adjustments necessary, appropriate or desirable to provide for change from one interest rate mode to another in connection with any Series of Bonds; (7) to make modifications or adjustments necessary, appropriate or desirable to accommodate Credit Enhancements, Liquidity Facilities and Reserve Facilities; (8) to make modifications or adjustments necessary, appropriate or desirable to provide for the appointment of an auction agent, a broker-dealer, a remarketing agent, a tender agent and/or a paying agent in connection with any Series of Bonds; (9) to provide for any additional covenants or agreements necessary to maintain the taxexempt status of interest on any Series of Bonds; (10) if the Issuer agrees in a Supplemental Indenture to maintain the exclusion of interest on a Series of Bonds from gross income for purposes of federal income taxation, to make such provisions as are necessary or appropriate to ensure such exclusion; (11) to provide for the issuance of Bonds in book-entry form or bearer form and/or to modify or eliminate the book-entry registration system for any Series of Bonds; (12) to modify, alter, amend or supplement the Indenture in any other respect, including amendments that would otherwise be described in the Indenture as described above under the caption Amendments Permitted With Consent of Holders, if the effective date of such amendments is a date on which all Bonds affected thereby are subject to mandatory tender for purchase pursuant to the provisions of the Indenture or if notice of the proposed amendments is given to Holders of the affected Bonds at least thirty (30) days before the proposed effective date of such amendments and, on or before such effective date, such Holders have the right to demand purchase of their Bonds pursuant to the provisions of the Indenture or if all Bonds affected thereby are in an auction mode and a successful auction is held following notice of such amendment; and (13) for any other purpose that does not materially and adversely affect the interests of the Holders of the Bonds. Any Supplemental Indenture entered into pursuant to the Indenture as described in this section shall be deemed not to materially adversely affect the interest of the Holders so long as (i) all affected Bonds are secured by a Credit Enhancement and (ii) each Credit Enhancement Provider for such Bonds has given its written consent to such Supplemental Indenture. Defeasance Discharge of Indenture. Bonds of any Series or a portion thereof may be paid by the Issuer in any of the following ways: (A) by paying or causing to be paid the Bond Obligations of and interest on such Outstanding Bonds, as and when they become due and payable; (B) by depositing with the Trustee or, subject to the provisions in the Indenture as described below under the caption Discharge of Liability on Bonds, an escrow agent or other fiduciary, in trust, at C-34

171 or before maturity, money or securities in the necessary amount (as provided in the Indenture as described below under the caption Deposit of Money or Securities ) to pay or redeem such Outstanding Bonds; or (C) by delivering to the Trustee, for cancellation by it, such Outstanding Bonds. If the Issuer pays all Series for which any Bonds are Outstanding and also pay or causes to be paid all other sums payable and to be payable under the Indenture (including any termination payment payable under an Interest Rate Swap Agreement) and under any Parity Obligations, Subordinate Obligations and Fee and Expense Obligations by the Issuer, then and in that case, at the election of the Issuer (evidenced by a Certificate of the Issuer, filed with the Trustee, signifying the intention of the Issuer to discharge all such indebtedness and the Indenture), and notwithstanding that any Bonds shall not have been surrendered for payment, the Indenture and the pledge of Collateral made under the Indenture and all covenants, agreements and other obligations of the Issuer under the Indenture shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon Request of the Issuer, the Trustee shall cause an accounting for such period or periods as may be requested by the Issuer to be prepared and filed with the Issuer and shall execute and deliver to the Issuer all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the Issuer all moneys or securities or other property held by it pursuant to the Indenture that, as evidenced by a verification report, upon which the Trustee may conclusively rely, from an independent certified public accountant, a firm of independent certified public accountants or other independent consulting firm, are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption. Discharge of Liability on Bonds. Upon the deposit with the Trustee, escrow agent or other fiduciary, in trust, at or before maturity, of money or securities in the necessary amount (as provided in the Indenture as described in the next section) to pay or redeem any Outstanding Bond (whether upon or prior to its maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption has been given as provided in the Indenture or provision satisfactory to the Trustee has been made for the giving of such notice, then all liability of the Issuer in respect of such Bond shall cease, terminate and be completely discharged, provided that the Holder thereof shall thereafter be entitled to the payment of the principal of and premium, if any, and interest on the Bonds, and the Issuer shall remain liable for such payment, but only out of such money or securities deposited with the Trustee as aforesaid for their payment. If the deposit specified in the preceding paragraph is made with an escrow agent or other fiduciary that is not also the Trustee, either the Issuer or such escrow agent or other fiduciary shall provide a written certification to the Trustee, upon which the Trustee may conclusively rely, that such deposit has been made. If the Bonds being discharged are Variable Rate Indebtedness, (i) the Bonds shall be redeemed at the first possible redemption date or purchase date applicable to such Bonds after any required notice is provided and to the extent the rate of interest payable on such Bonds prior to such redemption or purchase date is not known, such rate of interest shall be assumed to be the maximum rate payable thereon or (ii) the Trustee shall receive a confirmation from the Rating Agency then rating the Bonds that the defeasance will not result in the reduction or withdrawal of the then-current ratings on the Bonds. The Issuer may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, that the Issuer may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. C-35

172 Notwithstanding anything to the contrary, if the principal of or interest on a Series of Bonds is paid by a Credit Enhancement Provider pursuant to the Credit Enhancement issued in connection with such Series of Bonds, the obligations of the Issuer shall not be deemed to be satisfied or considered paid by the Issuer by virtue of such payments, and the right, title and interest of the Issuer in the Indenture and the obligations of the Issuer under the Indenture shall not be discharged and shall continue to exist and to run to the benefit of such Credit Enhancement Provider, and such Credit Enhancement Provider shall be subrogated to the rights of the Holders of the Bonds of such Series. Deposit of Money or Securities. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and shall be: (A) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds that are to be redeemed prior to maturity and with respect to which notice of such redemption has been given as provided in the Indenture or provision satisfactory to the Trustee has been made for the giving of such notice, the amount to be deposited or held shall be the principal amount or Redemption Price of such Bonds and all unpaid interest thereon to the redemption date; or (B) Government Obligations the principal of and interest on which when due will provide money sufficient to pay the principal or Redemption Price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or Redemption Price and interest become due, provided that, in the case of Bonds that are to be redeemed prior to the maturity thereof, notice of such redemption has been given as provided in the Indenture or provision satisfactory to the Trustee has been made for the giving of such notice; provided, in each case, that the Trustee has been irrevocably instructed (by the terms of the Indenture or by Request of the Issuer) to apply such money to the payment of such principal or Redemption Price and interest with respect to such Bonds. Payment of Bonds After Discharge of Indenture. Any moneys held by the Trustee in trust for the payment of the principal, Redemption Price, or interest on any Bond and remaining unclaimed for one (1) year after such principal, Redemption Price, or interest has become due and payable (whether at maturity or upon call for redemption as provided in the Indenture), if such moneys were so held at such date, or one (1) year after the date of deposit of such principal, Redemption Price or interest on any Bond if such moneys were deposited after the date when such Bond became due and payable, shall be repaid to the Issuer free from the trusts created by the Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Issuer as aforesaid, the Trustee may (at the cost of the Issuer) first mail to the Holders of any Bonds remaining unpaid at the addresses shown on the registration books maintained by the Trustee a notice, in such form as may be deemed appropriate by the Trustee, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Issuer of the moneys held for the payment thereof. All moneys held by or on behalf of the Trustee for the payment of principal or Accreted Value of or interest or premium on Bonds, whether at redemption or maturity, shall be held in trust for the account of the Holders thereof and the Trustee shall not be required to pay Holders any interest on, or be liable to the Holders or any other person (other than the Issuer) for interest earned on, moneys so held. Any interest earned thereon shall belong to the Issuer and shall be deposited upon receipt by the Trustee into the Revenue Fund. C-36

173 Disqualified Bonds In determining whether the Holders of the requisite aggregate Bond Obligation of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds that are owned or held by or for the account of the Issuer, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Issuer or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee shall establish to the satisfaction of the Trustee the pledgee s right to vote such Bonds and that the pledgee is not a person directly or indirectly controlled by, or under direct or indirect common control with, the Issuer. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Issuer shall specify in a Certificate to the Trustee those Bonds disqualified pursuant to the Indenture and the Trustee may conclusively rely on such certificate. Waiver of Personal Liability No member of the Issuer s board of directors, or any person executing the Bonds shall be personally liable on the Bonds or subject to any personal liability or accountability by reason of the issuance thereof. No recourse shall be had for the payment of the principal of or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Indenture against any past, present or future officer, director, member, employee or agent of the Issuer, or of any successor public entity, either directly or through the Issuer or any successor public entity, or any person executing the Bonds, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members, employees or agents or any person executing the Bonds, as such is hereby expressly waived and released as a condition of and consideration for the execution of the Indenture and the issuance of Bonds. Establishment, Funding and Application of Common Reserve Fund Pursuant to the First Supplemental Indenture, the Trustee shall establish, maintain and hold in trust the Common Reserve Fund for the benefit of the Holders of Common Reserve Fund Participating Bonds. The Common Reserve Fund shall secure all Common Reserve Fund Participating Bonds and the Issuer shall specify in the Supplemental Indenture relating to such Series of Bonds whether the Bonds of such Series constitute Common Reserve Fund Participating Bonds. Upon the designation of any Series of Bonds as Common Reserve Fund Participating Bonds, the amount on deposit in the Common Reserve Fund shall be increased to an amount equal to the Common Bond Reserve Requirement as of the date of designation of such Series of Bonds as Common Reserve Fund Participating Bonds. As described in the forepart of this Official Statement, the Issuer will satisfy the initial Common Bond Reserve Requirement by causing the Initial Common Reserve Fund Securities to be deposited with the Trustee in the Common Reserve Fund on the date of delivery of the Series Common Bonds. In lieu of making a Common Bond Reserve Requirement deposit in cash or in replacement of moneys then on deposit in the Common Reserve Fund (which shall be transferred by the Trustee to the Issuer), or in substitution of any Reserve Facility comprising part of the Common Bond Reserve Requirement, the Issuer may, at any time and from time to time, deliver to the Trustee an irrevocable letter of credit issued by a financial institution having unsecured debt obligations rated at the time of delivery of such letter of credit at least equal to the then-current rating on the Common Reserve Fund Participating Bonds from Moody s and Standard & Poor s, in an amount, that, together with cash, Permitted Investments or other Reserve Facilities, as described in the next paragraph, then on deposit in the Common Reserve Fund, will equal the Common Bond Reserve Requirement. Such letter of credit C-37

174 shall have a term no less than three (3) years or, if less, no less than the final maturity of the Common Reserve Fund Participating Bonds in connection with which such letter of credit was obtained and shall provide by its terms that it may be drawn upon as provided in the Indenture. At least six months prior to the stated expiration of such letter of credit, the Issuer shall either (i) deliver a replacement letter of credit, (ii) deliver an extension of the letter of credit for at least one (1) additional year or, if less, no less than the final maturity date of the Common Reserve Fund Participating Bonds in connection with which such letter of credit was obtained, or (iii) deliver to the Trustee a Reserve Facility satisfying the requirements described in the next paragraph. Upon delivery of such replacement Reserve Facility, the Trustee shall deliver the then-effective letter of credit to or upon the order of the Issuer. If the Issuer fails to deposit a replacement Reserve Facility with the Trustee, the Issuer shall deposit with the Trustee the amount necessary so that an amount equal to the Common Bond Reserve Requirement will be on deposit in the Common Reserve Fund no later than the stated expiration date of the letter of credit. If an amount equal to the Common Bond Reserve Requirement as of the date following the expiration of the letter of credit is not on deposit in the Common Reserve Fund one (1) week prior to the expiration date of the letter of credit (excluding from such determination the letter of credit), the Trustee shall draw on the letter of credit to fund the deficiency resulting therefrom in the Common Reserve Fund. In lieu of making a Common Bond Reserve Requirement deposit in cash or in replacement of moneys then on deposit in the Common Reserve Fund (which shall be transferred by the Trustee to the Issuer) or in substitution of any Reserve Facility comprising part of the Common Bond Reserve Requirement, the Issuer may, at any time and from time to time, deliver to the Trustee a surety bond or an insurance policy in an amount which, together with moneys, Permitted Investments, or other Reserve Facilities then on deposit in the Common Reserve Fund, is no less than the Common Bond Reserve Requirement. Such surety bond or insurance policy shall be issued by an insurance company whose unsecured debt obligations (or for which obligations secured by such insurance company s insurance policies) are rated at the time of delivery at least equal to the then-current rating on the Common Reserve Fund Participating Bonds by Moody s and Standard & Poor s. Such surety bond or insurance policy shall have a term of no less than the final maturity of the Common Reserve Fund Participating Bonds in connection with which such surety bond or insurance policy is obtained. If such surety bond or insurance policy for any reason lapses or expires, the Issuer shall immediately implement (i) or (iii) described in the preceding paragraph or deposit with the Trustee the amount necessary so that an amount equal to the Common Bond Reserve Requirement will be on deposit in the Common Reserve Fund. Subject to the provisions of the Indenture described in the next paragraph, all amounts in the Common Reserve Fund (including all amounts which may be obtained from a Reserve Facility on deposit in the Common Reserve Fund) shall be used and withdrawn by the Trustee, as hereinafter provided: (i) after the application of any amounts held in the Supplemental Revenue Fund as provided in the Indenture, for the purpose of making up any deficiency in the Interest Fund or the Principal Fund relating to the Common Reserve Fund Participating Bonds; or (ii) together with any other moneys available therefor, (x) for the payment or redemption of all Common Reserve Fund Participating Bonds then Outstanding, (y) for the defeasance or redemption of all or a portion of the Common Reserve Fund Participating Bonds then Outstanding, provided, however, that if funds on deposit in the Common Reserve Fund are applied to the defeasance or redemption of a portion of the Common Reserve Fund Participating Bonds, the amount on deposit in the Common Reserve Fund immediately subsequent to such partial defeasance or redemption shall equal the Common Bond Reserve Requirement applicable to all Common Reserve Fund Participating Bonds Outstanding immediately subsequent to such partial defeasance or redemption, or (z) for the payment of the final principal and interest payment of the Common Reserve Fund Participating Bonds. Unless otherwise directed in a Supplemental Indenture establishing the terms and provisions of a Series of Common Reserve Fund Participating Bonds, the Trustee shall apply amounts held in cash or Permitted Investments in the Common Reserve Fund prior to applying amounts held in the form of Reserve Facilities in the Common Reserve Fund, and if there is more than one Reserve Facility being held C-38

175 on deposit in the Common Reserve Fund, shall, on a pro rata basis with respect to the portion of the Common Reserve Fund held in the form of a Reserve Facility (calculated by reference to the maximum amount of such Reserve Facility), draw under each Reserve Facility issued with respect to the Common Reserve Fund, in a timely manner and pursuant to the terms of such Reserve Facility to the extent necessary to obtain sufficient funds on or prior to the date such funds are needed to pay the Bond Obligation of, Mandatory Sinking Account Payments with respect to, and interest on the Common Reserve Fund Participating Bonds when due. If the Trustee has notice that any payment of principal of or interest on a Common Reserve Fund Participating Bond has been recovered from a Holder pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee, pursuant to the terms of, and if so provided by, the terms of the Reserve Facility, if any, securing the Common Reserve Fund Participating Bonds, shall so notify the issuer thereof and draw on such Reserve Facility to the lesser of the extent required or the maximum amount of such Reserve Facility to pay to such Holders the principal and interest so recovered. Except for amounts on deposit in the Common Reserve Fund in excess of the Common Bond Reserve Requirement resulting from the sale or other disposition, or the maturity or redemption, of all or a portion of the Initial Common Reserve Fund Securities, any amounts in the Common Reserve Fund in excess of the Common Bond Reserve Requirement shall be transferred by the Trustee on April 1 and October 1 of each year (1) to the Revenue Fund or (2) if requested by the Issuer in writing prior to such April 1 or October 1 and subject to the requirements of any applicable Tax Certificate, to or upon the Order of the Issuer; provided that such amounts shall be transferred only from the portion of the Common Reserve Fund held in the form of cash or Permitted Investments. Amounts on deposit in the Common Reserve Fund in excess of the Common Bond Reserve Requirement resulting from the sale or other disposition, or the maturity or redemption, of all or a portion of the Initial Common Reserve Fund Securities shall be transferred by the Trustee to or upon the Order of the Issuer subject to the requirements of any applicable Tax Certificate. In addition, amounts on deposit in the Common Reserve Fund shall be transferred by the Trustee to or upon the Order of the Issuer (i) upon the defeasance, retirement or refunding of Common Reserve Fund Participating Bonds, provided that such transfer shall not be made unless (a) immediately thereafter all of the Common Reserve Fund Participating Bonds shall be deemed to have been paid pursuant to the Indenture, or (b) the amount remaining in the Common Reserve Fund after such transfer shall not be less than the Common Bond Reserve Requirement or (ii) upon the replacement of cash on deposit in the Common Reserve Fund with one or more Reserve Facilities in accordance with the Indenture, subject in the case of both clauses (i) and (ii) to the requirements of the applicable Tax Certificate. Series 2016A Bonds are Common Reserve Fund Participating Bonds Pursuant to the Second Supplemental Indenture, the Series 2016A Bonds are designated as Common Reserve Fund Participating Bonds and shall be secured by the Common Reserve Fund established pursuant to the First Supplemental Indenture. See Establishment, Funding and Application of Common Reserve Fund above. C-39

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177 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT

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179 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (this Disclosure Agreement ) is executed as of June 1, 2016, between the California Infrastructure and Economic Development Bank ( IBank ) and U.S. Bank National Association, as Dissemination Agent (the Dissemination Agent ) in connection with the issuance of $ of Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Series 2016A Bonds ). The Series 2016A Bonds will be issued and secured pursuant to an Indenture, dated as of February 1, 2014 (the Master Indenture ), between IBank and U.S. Bank National Association, as trustee (the Trustee ), as supplemented by a Third Supplemental Indenture, dated as of June 1, 2016, between IBank and the Trustee (the Third Supplemental Indenture ). The Master Indenture, as supplemented, including as supplemented by the Third Supplemental Indenture is referred to herein as the Indenture. ) The parties hereto hereby covenant and agree as follows: SECTION 1. Nature of the Disclosure Agreement. This Disclosure Agreement is executed for the benefit of the Holders and Beneficial Owners (as defined below) of the Series 2016A Bonds from time to time, but shall not be deemed to create any monetary liability on the part of IBank to any other persons, including Holders (as defined below) or Beneficial Owners of the Series 2016A Bonds based on the Rule (as defined below). The sole remedy in the event of any failure of IBank to comply with this Disclosure Agreement shall be an action to compel performance of any act required hereunder. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Financial Information means (a) financial information concerning the ISRF Program of the type appearing under the caption PRO FORMA CASH FLOW TABLE (for the most recently completed fiscal year; projections need not be updated) to the Official Statement, and (b) financial information and operating data concerning Borrowers and Pledged Loans of the type appearing in the Official Statement in APPENDIX A PLEDGED LOANS, and (c) financial information with respect to each Significant Borrower as further described herein. Annual Financial Information shall also include Audited Financial Statements, if then available, or Unaudited Financial Statements. Annual Report shall mean the Annual Report filed by IBank, or by the Trustee on behalf of IBank, pursuant to and as described in Sections 3 and 4 of this Disclosure Agreement. Audited Financial Statements means the annual financial statements, if any, of IBank and any Significant Borrower, as the case may be, audited by such auditor as shall then be required or permitted by State law. In the event that IBank determines to provide separate audited financial statements for the ISRF Program, then such separate audited financial statements shall constitute Audited Financial Statements for purposes of this Disclosure Agreement. Audited Financial Statements shall be prepared in accordance with GAAP; provided, however, that IBank or any Significant Borrower may, from time to time, if required by federal or State legal requirements, modify the basis upon which its financial statements are prepared; provided further, however, that in the case of any Significant Borrower, Audited Financial Statements may be prepared in accordance with such other accounting principles as shall be specified in the initial filing of Annual Financial Information of such Significant Borrower by IBank or such Significant Borrower or in the initial official statement or other disclosure document of IBank setting forth the financial and operating data of such Significant Borrower. Notice of any such modification shall include a reference to the specific federal or State law or regulation describing such accounting basis and shall be provided by IBank or any Significant Borrower, as applicable, to the MSRB. D-1

180 Beneficial Owner shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Series 2016A Bonds (including persons holding Series 2016A Bonds through nominees, depositories or other intermediaries). Counsel means any nationally recognized bond counsel or counsel expert m federal securities laws as they relate to municipal securities selected by IBank. Dissemination Agent shall mean the Trustee acting in such capacity hereunder, or any successor Dissemination Agent designated in writing by Bank pursuant to Section 7 hereof. EMMA means the Electronic Municipal Marketplace Access website of the MSRB, currently located at GAAP means generally accepted accounting principles as prescribed from time to time for governmental units by the Governmental Accounting Standards Board. Holder shall mean any person listed on the registration books of IBank as the registered owner of any Bonds. ISRF Program means IBank s Infrastructure State Revolving Fund Program. Listed Events shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. MSRB shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designed by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through EMMA. Official Statement shall mean the official statement relating to the Series 2016A Bonds, dated June, Pledged Loan shall have the meaning ascribed thereto in the Indenture. Significant Borrower means a Borrower under a Pledged Loan that has an aggregate unpaid principal amount equal to or greater than twenty percent (20%) of the aggregate unpaid principal amount of all Pledged Loans. As of the date hereof, there are no Significant Borrowers. Significant Borrower Annual Financial Information means financial information and operating data of the type necessary, in the opinion of Counsel, to comply with the Rule (whether expressly set forth therein or incorporated by reference therein). Significant Borrower Annual Financial Information shall include Audited Financial Statements of the Significant Borrower, if then available, or Unaudited Financial Statements of the Significant Borrower. Rule means Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 CFR Part 240, c2-12), as amended, as in effect on the date of this Disclosure Agreement, including any official interpretations thereof issued either before or after the effective date of this Disclosure Agreement which are applicable to this Disclosure Agreement. Unaudited Financial Statements means the same as Audited Financial Statements, except that they shall not have been audited. D-2

181 SECTION 3. Provision of Annual Reports. (a) IBank, shall, not later than 240 days after the end of each fiscal year of the IBank in which any of the Series 2016A Bonds are Outstanding, commencing with the report for the Fiscal Year, file, or caused to be filed, an Annual Report with the MSRB. (b) If in any year, IBank does not file, or cause to be filed, the Annual Report with the MSRB by the time specified in subsection (a) above, IBank shall instead file, or cause to be filed, a notice with the MSRB stating that the Annual Report has not been timely completed and, if known, stating the date by which IBank expects to file the Annual Report. Giving of a notice under this subsection (b) shall not excuse failure to file the Annual Report pursuant to subsection (a) above. SECTION 4. Content of Annual Reports. (a) The Annual Report shall contain or include by reference Annual Financial Information. If Unaudited Financial Statements are included as part of the Annual Financial Information because Audited Financial Statements are not available at the time of filing, the Audited Financial Statements shall be filed by IBank (in the same manner as the Annual Report) when available. (b) The Annual Report may consist of one or more documents. Any of the Annual Financial Information may be included in the Annual Report by reference to other documents which have been filed with the MSRB, including any final official statement of IBank or any Significant Borrower. IBank shall clearly identify in the Annual Report each such document so included by reference. (c) IBank shall not be required to undertake any responsibility with respect to any Annual Financial Information required by or provided pursuant to any Pledged Loan, and neither IBank, its directors, officers, nor employees have any responsibility or liability to any person, including any Owner of the Series 2016A Bonds, with respect to any such Annual Financial Information or for the performance or enforcement of any Pledged Loan, except as provided in a Pledged Loan or other undertaking of a Significant Borrower and except as provided in the final sentence of this Section 4(c). IBank covenants to exercise and enforce any and all rights to the full extent permitted by law to obtain Annual Financial Information of any Significant Borrower under a Pledged Loan, including without limitation seeking mandate or specific performance by court order to cause any Significant Borrower to provide Significant Borrower Annual Financial Information. SECTION 5. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 5, IBank shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016A Bonds in a timely manner not more than ten (10) business days after the occurrence of the Listed Event: (i) (ii) (iii) (iv) Principal and interest payment delinquencies; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; (v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form TEB) or other D-3

182 material notices of determinations with respect to the tax status of the Series 2016A Bonds, or other material events affecting the tax status of the Series 2016A Bonds; (vi) (vii) (viii) (ix) Tender offers; Defeasances; Rating changes; or Bankruptcy, insolvency, receivership or similar event of IBank. Note: for the purposes of the event identified in subparagraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for IBank in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of IBank, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of IBank. (b) Pursuant to the provisions of this Section 5, IBank shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016A Bonds, if material: (i) Unless described in paragraph 5(a)(v), other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Series 2016A Bonds or other material events affecting the tax status of the Series 2016A Bonds; Bonds; (ii) (iii) (iv) (v) Modifications to rights of Series 2016A Bond holders; Optional, unscheduled or contingent Series 2016A Bond calls; Release, substitution, or sale of property securing repayment of the Series 2016A Non-payment related defaults; (vi) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or (vii) trustee. Appointment of a successor or additional trustee or the change of name of a Whenever IBank obtains knowledge of the occurrence of a Listed Event described in subsection 5(b), IBank shall as soon as possible determine if such event would be material under applicable federal securities laws. D-4

183 If IBank determines that the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, IBank shall file, or cause to be filed, a notice of such occurrence with EMMA in a timely manner not more than ten (10) business days after the event. SECTION 6. Termination of Reporting Obligation. The obligations of IBank under Sections 3, 4 and 5 of this Disclosure Agreement with respect to the Series 2016A Bonds shall terminate upon the maturity, legal defeasance or prior redemption of all of the Series 2016A Bonds. If such termination occurs prior to the final maturity of any Series 2016A Bonds, IBank shall give notice of such termination with respect to such Series 2016A Bonds in the same manner as for a Listed Event under Section 5. SECTION 7. Dissemination Agent. IBank may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out the obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have no obligation to make disclosure about the Series 2016A Bonds except as expressly provided herein. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with IBank, apart from the relationship created by the Rule shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition except as may be provided by written notice from IBank. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by IBank pursuant to this Disclosure Agreement. SECTION 8. Appointment of Initial Dissemination Agent; Duties of Dissemination Agent. (a) IBank appoints U.S. Bank National Association as the initial Dissemination Agent hereunder. IBank directs the Dissemination Agent on its behalf to make filings with the MSRB in accordance with this Section 8 and within the time frame set forth in clause (c) below, and the Dissemination Agent agrees to act as IBank s agent in making such filings, the following: (i) (ii) the Annual Report pursuant to Section 4 hereof; Listed Event occurrences pursuant to Section 5 hereof; (iii) the notices of failure to provide information which IBank has agreed to provide pursuant to subsection 3(b) hereof; and (iv) such other information as IBank shall determine to file with the MSRB through the Dissemination Agent and shall provide to the Dissemination Agent. If IBank chooses to include any information in any Annual Financial Information or Operating Data report or in any notice of occurrence of an Event, in addition to that which is specifically required by this Agreement, IBank shall have no obligation under this Agreement to update such information or include it in any future Annual Financial Information or Operating Data report or notice of occurrence of an Event. form: (b) The information which IBank has agreed to file with the MSRB shall be in the following (i) as to all notices, reports and financial statements to be provided to the Dissemination Agent by IBank, in the form required by the Rule or other applicable document or agreement; and (ii) as to all other notices or reports, in such form as the Dissemination Agent shall deem suitable for the purpose of which such notice or report is given. D-5

184 (c) The Dissemination Agent shall file the Annual Report with the MSRB within five (5) business days of receipt thereof from IBank; notice of Listed Event occurrences within two (2) business days of receipt thereof from IBank (or such lesser period as necessary in order for such Listed Event occurrence to be provided to the MSRB for filing no more than ten (10) business days after the occurrence thereof); and the notice of failure to provide the Annual Report by the date due each year within two (2) business days after such failure. If on any such date, information required to be provided by IBank to the Dissemination Agent has not been provided on a timely basis, the Dissemination Agent shall file such information with the MSRB as soon thereafter as it is provided to the Dissemination Agent. (d) In addition, the Dissemination Agent shall make the the Annual Report, the Listed Event occurrences and the notice of failure to provide the Annual Report available to any Bondholder upon request, but need not transmit such materials to the Bondholders who do not so request. With respect to requests for information from Bondholders, the Dissemination Agent may require payment by requesting of holders a reasonable charge for duplication and transmission of the information and for the Dissemination Agent s administrative expenses incurred in providing the information. (e) To the extent IBank is obligated to file any Annual Financial Information with the MSRB pursuant to this Agreement, such Annual Financial Information may be set forth in the document or set of documents transmitted to the MSRB, or may be included by specific reference to documents available on EMMA or filed with the Securities and Exchange Commission (materials filed by (i) electronic facsimile transmissions confirmed by first class mail, postage prepaid, or (ii) first class mail, postage prepaid; or (iii) by whatever means are acceptable to the Securities and Exchange Commission). (f) Nothing in this Agreement shall be construed to require the Dissemination Agent to interpret or provide an opinion concerning the information filed with the MSRB or made available to Bondholders. If the Dissemination Agent receives a request for an interpretation or opinion, the Dissemination Agent may refer such request to IBank for response. SECTION 9. Dissemination Agent Compensation. IBank shall pay or reimburse the Dissemination Agent for its fees and expenses for the Dissemination Agent s services rendered in accordance with this Agreement. SECTION 10. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, IBank may amend or waive any provision of this Disclosure Agreement, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5 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 Series 2016A Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of Counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2016A Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by a majority of the Holders of the Series 2016A Bonds Outstanding or (ii) does not, in the opinion of Counsel, materially impair the interests of the Holders or Beneficial Owners of the Series 2016A Bonds. D-6

185 In the event of any amendment or waiver of a provision of this Disclosure Agreement, IBank shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type of financial information or operating data being presented by the State. SECTION 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent IBank from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement 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 Agreement. If IBank 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 Agreement, IBank shall not have any obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Holders and Beneficial Owners from time to time of the Series 2016A Bonds, and shall create no rights in any other person or entity (except the right of the Trustee or any Holder or Beneficial Owner to enforce the provisions of this Disclosure Agreement on behalf of the Holders of the Series 2016A Bonds). This Disclosure Agreement is not intended to create any monetary rights on behalf of any person based upon the Rule. SECTION 13. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of IBank shall be contrary to law, then such agreement or agreements. such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenant or portions thereof and shall in no way affect the validity hereof, and the Holders of the Series 2016A Bonds shall retain all the benefits afforded to them hereunder. SECTION 14. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To IBank: To the Dissemination Agent: California Infrastructure and Economic Development Bank 1325 J Street, Suite 1823 Sacramento, CA Attention: General Counsel U.S. Bank National Association One California Street, Suite 1000 San Francisco, CA Attention: Global Corporate Trust Services SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 16. Governing Law. The laws of the State of California shall govern this Disclosure Agreement, the interpretation thereof and any right or liability arising hereunder. Any action or proceeding to enforce or interpret any provision of this Disclosure Agreement shall be brought, commenced or prosecuted in Sacramento County, California, unless waived by IBank. D-7

186 IN WITNESS WHEREOF, the parties have executed this Disclosure Agreement by their duly authorized representatives as of the date first above written. THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK By: Teveia R. Barnes Executive Director U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent By: Authorized Officer D-8

187 APPENDIX E PROPOSED FORM OF OPINION OF BOND COUNSEL June [ ], 2016 California Infrastructure and Economic Development Bank Sacramento, California Ladies and Gentlemen: California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (Final Opinion) We have acted as bond counsel to the California Infrastructure and Economic Development Bank (the Issuer ) in connection with the issuance of $[ ] aggregate principal amount of the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Bonds ), issued pursuant to an indenture, dated as of February 1, 2014 (the Master Indenture ), as supplemented by a first supplemental indenture, dated as of February 1, 2014 (the First Supplemental Indenture ), as further supplemented by a second supplemental indenture, dated as of June 1, 2015 (the Second Supplemental Indenture ), and as further supplemented and amended by a third supplemental indenture, dated as of June 1, 2016 (the Third Supplemental Indenture and collectively with the First Supplemental Indenture, the Second Supplemental Indenture and the Master Indenture, the Indenture ), each between the Issuer and U.S. Bank National Association, as trustee (the Trustee ). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture. In such connection, we have reviewed the Indenture and the Tax Certificate, dated the date hereof (the Tax Certificate ) executed by the Issuer; opinions of counsel to the Issuer and the Trustee; certificates of the Issuer, the Trustee and others; and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, E-1

188 any parties other than the Issuer. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public instrumentalities in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Indenture or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement, dated [ ], 2016, or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute the valid and binding limited obligations of the Issuer. 2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Issuer. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Collateral, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP per E-2

189 APPENDIX F BOOK-ENTRY ONLY SYSTEM THE INFORMATION IN THIS APPENDIX F CONCERNING DTC (DEFINED HEREIN) AND DTC S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT IBANK BELIEVES TO BE RELIABLE, BUT IBANK DOES NOT TAKE ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF. THERE CAN BE NO ASSURANCE THAT DTC WILL ABIDE BY ITS PROCEDURES OR THAT SUCH PROCEDURES WILL NOT BE CHANGED FROM TIME TO TIME. The Depository Trust Company DTC ), New York, New York, will act as securities depository for the Series 2016A Bonds. The Series 2016A 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 Series 2016A Bond certificate will be issued for each maturity of the Series 2016A Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2016A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016A Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2016A 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 Series 2016A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of F-1

190 Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2016A Bonds, except in the event that use of the book-entry system for the Series 2016A Bonds is discontinued. To facilitate subsequent transfers, all Series 2016A 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 Series 2016A 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 Series 2016A Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2016A 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 Series 2016A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2016A Bond documents. For example, Beneficial Owners of Series 2016A Bonds may wish to ascertain that the nominee holding the Series 2016A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2016A Bonds of a single maturity 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 Series 2016A Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to IBank 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 Series 2016A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of and interest and redemption proceeds on the Series 2016A 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 IBank or the trustee 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 Trustee, or IBank, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal of and interest and redemption proceeds on each Series 2016A Bond to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants will be the responsibility of F-2

191 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 Series 2016A Bonds at any time by giving reasonable notice to IBank or the trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2016A Bond certificates are required to be printed and delivered. IBank may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2016A Bond certificates will be printed and delivered. To DTC and the requirements of the Indenture with respect to certificated Series 2016A Bonds will apply. IBANK AND THE UNDERWRITERS CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SECURITIES (I) PAYMENTS OF PRINCIPAL OF AND INTEREST ON THE SERIES 2016A BONDS (II) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE SECURITIES OR (III) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE SECURITIES, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. NEITHER IBANK NOR THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OF DTC OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OR COMPLETENESS OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST ON SECURITIES; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS UNDER THE TERMS OF THE INDENTURE; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS OWNER OF THE SECURITIES. F-3

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193 APPENDIX G LETTERS FROM CERTAIN UNDERWRITERS

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195 May 2, 2016 Mr. Blake Fowler Director, Public Finance Division Office of the Treasurer of the State of California 915 Capitol Mall, Room 261 Sacramento, CA RE: IBank Infrastructure State Revolving Fund Revenue Bonds Series 2016A Dear Mr. Fowler: Blaylock Beal Van, LLC, is providing the following language for inclusion in the Official Statement. Blaylock Beal Van, LLC ( Blaylock Beal Van or BBV ) has entered into a distribution agreement (the Agreement ) with TD Ameritrade, Inc. ( TD ) for the retail distribution of certain municipal securities offerings underwritten by or allocated to Blaylock Beal Van, including the Series 2016A Bonds. Under the Agreement, Blaylock Beal Van will share with TD a portion of the underwriting compensation paid to BBV. Sincerely, Blaylock Beal Van, LLC Cc: Teveia Barnes, Executive Director California Infrastructure and Economic Development Bank G-1

196 [Type text] BNY Mellon Capital Markets, LLC BNY Mellon Center, Suite 475 Pittsburgh, PA May 19, 2016 Mr. Blake Fowler Director of Public Finance Division Office of the Treasurer of the State of California State of California 915 Capitol Mall, Suite 110 Sacramento, California Re: Distribution Agreement relating to BNY Mellon Capital Markets, LLC s appointment as a Co- Managing Underwriter for California General Infrastructure and Economic Development Bank (IBank) Infrastructure State Revolving Fund Revenue Bonds, Series 2016 A Bonds Dear Mr. Fowler: BNY Mellon Capital Markets, LLC is providing the following language for inclusion in the Official Statement. BNY Mellon Capital Markets, as a Co-Managing Underwriter on the above referenced Bonds, and Pershing LLC, both direct or indirect subsidiaries of The Bank of New York Mellon Corporation, entered into a distribution agreement (the BNYM Distribution Agreement ) that enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to BNY Mellon Capital Markets, LLC, including the Bonds. Under the BNYM Distribution Agreement, BNY Mellon Capital Markets will share with Pershing LLC a portion of the fee or commission paid to BNY Mellon Capital Markets, LLC. Very truly yours, BNY Mellon Capital Markets, LLC cc: Teveia Barnes, Cal IBank BNY Mellon Capital Markets, LLC ( BNYMCM ) is a full service broker dealer and a wholly owned, indirect non bank subsidiary of The Bank of New York Mellon Corporation. BNYMCM is a member of FINRA and SIPC. G-2

197 June 7, 2016 California Infrastructure and Economic Development Bank Attn: Teveia Barnes State Treasurer s Office Maun Cheo mcheo@treasurer.ca.gov Re: Fidelity Capital Markets Dear Ms. Barnes: Underwriter Fidelity Capital Market ( FCM ) is a division of National Financial Services LLC ( NFS ) Sincerely, Fidelity Capital Markets (a division of National Financial Services LLC) By: Debra Saunders, Vice President G-3

198 May 17, 2016 Mr. Blake Fowler Director, Public Finance Division Office of the Treasurer of the State of California 915 Capitol Mall, Room 261 Sacramento, CA RE: California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Bonds ) Dear Mr. Fowler: J.P. Morgan Securities LLC ( JPMS ), one of the Underwriters of the Bonds, has entered into a negotiated dealer agreement (the Dealer Agreement ) with Charles Schwab & Co. ( CS&Co. ) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Dealer Agreement, CS&Co. may purchase Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells. J.P. MORGAN SECURITIES LLC cc: Teveia Barnes G-4

199 12100 Wilshire Blvd., Suite 605 Los Angeles, CA T F Toll Free May 19, 2016 Mr. Blake Fowler Director, Public Finance Division Office of the Treasurer of the State of California 915 Capitol Mall, Room 110 Sacramento, CA Re: California Infrastructure and Economic Development Bank (IBank) Infrastructure State Revolving Fund Revenue Bonds Series 2016A (the Bonds ) Dear Mr. Fowler: Loop Capital Markets LLC is providing the following language for inclusion in the Official Statement. Loop Capital Markets, one of the Underwriters of the Bonds, has entered into distribution agreements (each a Distribution Agreement ) with each of UBS Financial Services Inc. ( UBSFS ) and Deutsche Bank Securities Inc. ( DBS ) for the retail distribution of certain securities offerings at their original issue prices. Pursuant to each Distribution Agreement (if applicable to this transaction), each of UBSFS and DBS will purchase Bonds from Loop Capital Markets at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that the firm sells. Sincerely, Loop Capital Markets LLC CC: Teveia Barnes California Infrastructure and Economic Development Bank G-5

200 May 12, 2016 Mr. Blake Fowler Director Public Finance Division Office of the Treasurer of the State of California 915 Capitol Mall, Room 261 Sacramento, CA Re: California Infrastructure and Economic Development Bank (IBank) Infrastructure State Revolving Fund Revenue Bonds Series 2016A Dear Mr. Fowler: Mischler Financial Group, Inc. ( Mischler ), one of the underwriters of the above referenced bonds (the Bonds ), has entered into separate distribution agreements (each a Distribution Agreement ) with Hennion & Walsh, Inc. ( H&W ), Higgins Capital Management, Inc. ( Higgins ), J.J.B. Hilliard, W.L. Lyons, LLC ( Hilliard Lyons ) IFS Securities Inc. ( IFS ), Newbridge Securities Corporation ( NSC ) and TD Ameritrade ( TDA ) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to each Distribution Agreement, H&W, Higgins, Hilliard Lyons, IFS, NSC and TDA may purchase Bonds from Mischler at the original issue prices less a negotiated portion of the takedown applicable to any Bonds such firm sells. Sincerely, Mischler Financial Group, Inc. Cc: Teveia Barnes, IBank G-6

201 May 17, 2016 Mr. Blake Fowler Director of Public Finance Office of the Treasurer of the State of California Public Finance Division 915 Capital Mall, Room 261 Sacramento, CA RE: CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS, SERIES 2016A Dear Mr. Fowler: Piper Jaffray & Co. is providing the following language for inclusion in the Official Statement. Piper Jaffray & Co. and UnionBanc Investment Securities LLC ( UnionBanc ) entered into an agreement (the Agreement ) which enables UnionBanc to distribute certain new issue municipal securities underwritten by or allocated to Piper Jaffray & Co., including the California Infrastructure & Economic Development Bank ( IBank ) Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Bonds). Under the Agreement, Piper Jaffray & Co. will share with UnionBanc a portion of the fee or commission paid to Piper Jaffray. Sincerely, Piper Jaffray & Co. cc: Teveia Barnes, IBank G-7

202 May 18, 2016 Mr. Blake Fowler, Director of Public Finance Office of the Treasurer of the State of California Executive Office 915 Capitol Mall, Room 261 Sacramento, CA RE: Retail Agreement Letter: California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds Series 2016A Dear Mr. Fowler: The Williams Capital Group, L.P., a Co-Managing Underwriter on the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds Series 2016A, has entered into a negotiated dealer agreement ("Dealer Agreement") with TD Ameritrade for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Dealer Agreement (if applicable to this transaction), TD Ameritrade may purchase bonds from Williams Capital at the original issue price less a negotiated portion of the selling concession applicable to any bonds that such firm sells. The Williams Capital Group, L.P. cc: Teveia Barnes, California Infrastructure and Economic Development Bank THE WILLIAMS CAPITAL GROUP, L.P. 650 Fifth Avenue, 9 th Floor, New York, NY Telephone Facsimile G-8

203 May 12, 2016 Mr. Blake Fowler Director, Public Finance Division Office of the Treasurer of the State of California 915 Capitol Mall, Room 261 Sacramento, CA Re: California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the Bonds ) Dear Mr. Fowler: Wells Fargo Bank, National Association, acting through its Municipal Products Group ("WFBNA MPG") one of the underwriters of the Bonds, has entered into an agreement (the "Distribution Agreement") with its affiliate, Wells Fargo Advisors, LLC ("WFA"), for the distribution of certain municipal securities offerings, including the Bonds. Pursuant to the Distribution Agreement, WFBNA MPG will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Bonds with WFA. WFBNA MPG also utilizes the distribution capabilities of its affiliate Wells Fargo Securities, LLC ( WFSLLC ), for the distribution of municipal securities offerings, including the Bonds. In connection with utilizing the distribution capabilities of WFSLLC, WFBNA MPG pays a portion of WFSLLC s expenses based on its municipal securities transactions. WFBNA MPG, WFSLLC, and WFA are each wholly-owned subsidiaries of Wells Fargo & Company. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association. Wells Fargo Bank, National Association cc: Teveia Barnes Executive Director California Infrastructure and Economic Development Bank G-9