$9,645,000 SEMITROPIC IMPROVEMENT DISTRICT OF SEMITROPIC WATER STORAGE DISTRICT SECOND LIEN REVENUE BONDS 2013 SERIES A

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1 NEW ISSUE - FULL BOOK ENTRY ONLY RATING: S&P: A+ (See RATING herein) In the opinion of Nossaman LLP, Irvine, California, Bond Counsel, based on existing statutes, regulations, rulings and court decisions and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxable income, although Bond Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. In the further opinion of Bond Counsel, interest on the Bonds is, under existing law, exempt from State of California personal income taxes. Bond Counsel expresses no opinion regarding other federal or State tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. $9,645,000 SEMITROPIC IMPROVEMENT DISTRICT OF SEMITROPIC WATER STORAGE DISTRICT SECOND LIEN REVENUE BONDS 2013 SERIES A Dated: Date of Delivery Due: December 1, as shown on inside cover The Semitropic Improvement District of Semitropic Water Storage District Second Lien Revenue Bonds, 2013 Series A (the Bonds ) are being issued pursuant to an Indenture of Trust, dated as of September 1, 2013 (the Indenture ) between Semitropic Improvement District of Semitropic Water Storage District (the District ) and Wells Fargo Bank, National Association, Los Angeles, California (the Trustee ), and will be secured as described herein. The Bonds are being issued to provide funds (i) to finance certain improvements to the District s water system (the Project ), and (ii) to pay for the costs of issuing the Bonds. See THE PROJECT and ESTIMATED SOURCES AND USES OF FUNDS. The Bonds will be issued as fully registered Bonds registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof under the book-entry system maintained by DTC. Ultimate purchasers of the Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the Bonds. Interest on the Bonds will be payable on December 1 and June 1 of each year, commencing December 1, 2013, and principal of the Bonds will be payable on the dates set forth in the Maturity Schedule. Payments of principal and interest will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds. While the District has a number of different sources of revenue, the Bonds are limited obligations of the District payable from and secured by the Pledged Services Charges (defined herein) to be derived from the Enterprise, and from the amounts on deposit in certain funds as described herein, subject to the parity lien of certain outstanding obligations of the District and any additional obligations as provided for in the Indenture and as further described herein. The lien of the Bonds on Pledged Service Charges is subordinate to the lien of certain outstanding obligations of the District on Service Charges (the Senior Lien Bonds ). The District has covenanted to not issue any other indebtedness on parity with the Senior Lien Bonds, except for Refunding Senior Lien Bonds. See SECURITY FOR THE BONDS herein for a description of existing indebtedness with a lien on the Pledged Services Charges on parity with the Bonds. The District is not funding a debt service reserve account for the Bonds. The Bonds are subject to mandatory redemption prior to maturity as described herein. See THE BONDS - Redemption herein. THE BONDS ARE NOT A DEBT, OBLIGATION OR LIABILITY OF THE DISTRICT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE FAITH AND CREDIT OF THE DISTRICT, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND THE DISTRICT IS NOT OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR. NEITHER THE DISTRICT, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR (EXCEPT AS SET FORTH IN THE INDENTURE), NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE DISTRICT AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE DEBT SERVICE PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE DISTRICT, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement, including the section entitled RISK FACTORS, for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth herein. The Bonds are offered when, as and if issued and received by the Underwriter and subject to the approving legal opinion of Nossaman LLP, Irvine, California, Bond Counsel. Certain legal matters will be passed upon for the District by Nossaman LLP, Irvine, California, Disclosure Counsel, and the District s general counsel, Young Wooldridge, LLP, Bakersfield, California. The Underwriter is being represented by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of DTC in New York, New York, on or about September 5, Wells Fargo Securities Dated: August 20, 2013

2 MATURITY SCHEDULE Maturity (December 1) Principal Amount Interest Rate Yield CUSIP 2014 $ 820, % 0.750% 81684K AX , K AY , K AZ , K BA , K BB , K BC ,005, K BD ,045, K BE ,100, K BF ,145, K BG2 Copyright 2013, American Bankers Association. CUSIP data in this Official Statement are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. The District and the Underwriter do not assume any responsibility for the accuracy of CUSIP data.

3 SEMITROPIC IMPROVEMENT DISTRICT OF SEMITROPIC WATER STORAGE DISTRICT (KERN COUNTY, CALIFORNIA) Board of Directors Frederick A. Wegis, President Philip W. Portwood, Vice President Todd Tracy, Secretary Dan Waterhouse, Treasurer Jeff Fabbri, Director Courtney Howard, Director Pat McCarthy, Director Staff Jason Gianquinto, General Manager Luis Bobby Salinas, Controller Paul M. Oshel, District Engineer John Lynch, Operation and Maintenance Superintendent GENERAL COUNSEL Young Wooldridge, LLP Bakersfield, California TRUSTEE Wells Fargo Bank, National Association Los Angeles, California BOND COUNSEL/DISCLOSURE COUNSEL Nossaman LLP Irvine, California

4 No dealer, salesperson or other person has been authorized by the District to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described in it and, if given or made, such other information or representation must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover page, nor shall there be any offer to sell, solicitation of any offer to buy or sale of such securities by a person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. The information set forth herein has been obtained from the District and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District or the Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities under federal securities laws, as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the securities described in it and may not be reproduced or used, in whole or in part, for any other purposes. The information and expression of opinions contained in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of the District or the Storage District since the date of this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF. THE PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS CONTAINED IN SECTIONS 3(a)(2) AND 3(a)(8) OF SUCH ACT.

5 TABLE OF CONTENTS Page INTRODUCTION... 1 General... 1 The Storage District, the District and the Enterprise... 1 Security for the Bonds... 2 Forward-Looking Statements... 3 Summary of Terms... 4 THE PROJECT... 4 Description of the Project... 4 Environmental Compliance... 4 ESTIMATED SOURCES AND USES OF FUNDS... 5 DEBT SERVICE SCHEDULE... 6 THE BONDS... 6 General Provisions... 6 Redemption... 7 No Additional Senior Lien Debt... 8 Issuance of Parity Debt... 8 Book-Entry System SECURITY FOR THE BONDS General No Debt Service Reserve Account Debt Service Payments Levy of Service Charges Application of Revenues General Project Service Charges; Water Charges Estimated Debt Service Coverage RISK FACTORS Enterprise Demand and Growth Enterprise Expenses Subordination of Bonds Remedies Controlled by Owners of the Senior Lien Bonds Parity Debt No Debt Service Reserve Account Proposition Constitutional Limit on Appropriations, Fees and Charges Limited Recourse on Default Limitations on Remedies Available; Bankruptcy No Obligation to Tax Change in Law Geologic, Topographic and Climatic Conditions Environmental Considerations Impact of State Budget Secondary Market for Bonds Loss of Tax Exemption IRS Audit of Tax-Exempt Issues THE STORAGE DISTRICT AND THE DISTRICT General; Organization and Management The Consolidation Agreement Storage District Facilities Water Operations Water Service Charges i

6 Water Banking Activities Historical Unrestricted Cash Balances Historical Financial Information Current Indebtedness; Capital Improvements Storage District Investment Policy TAX MATTERS General Changes in Federal and State Tax Law Form of Opinion LITIGATION LEGAL OPINIONS PROFESSIONAL FEES CONTINUING DISCLOSURE UNDERWRITING RATING AUDITED FINANCIAL STATEMENTS MISCELLANEOUS APPENDIX A -- SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE...A-1 APPENDIX B -- AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR B-1 APPENDIX C -- PROPOSED FORM OF FINAL OPINION... C-1 APPENDIX D -- FORM OF CONTINUING DISCLOSURE AGREEMENT... D-1 APPENDIX E -- BOOK ENTRY PROVISIONS...E-1 ii

7 OFFICIAL STATEMENT $9,645,000 SEMITROPIC IMPROVEMENT DISTRICT OF SEMITROPIC WATER STORAGE DISTRICT SECOND LIEN REVENUE BONDS 2013 SERIES A INTRODUCTION General This Official Statement, including the cover page and appendices hereto, is provided to furnish certain information in connection with the offering of $9,645,000 aggregate principal amount of Semitropic Improvement District of Semitropic Water Storage District Second Lien Revenue Bonds, 2013 Series A (the Bonds ). The Bonds are being issued to provide funds (i) to finance certain improvements (the Project ) to the District s irrigation water system (the Enterprise ), and (ii) to pay for the costs of issuing the Bonds. See THE PROJECT and ESTIMATED SOURCES AND USES OF FUNDS herein. The Bonds are being issued pursuant to the provisions of an Indenture of Trust, dated as of September 1, 2013 (the Indenture ) between the District and Wells Fargo Bank, National Association (the Trustee ). The Bonds will be issued pursuant to Section et seq. of the California Government Code, as amended (the Bond Law ). The Bonds are subject to mandatory redemption prior to maturity as described herein. See THE BONDS herein. See APPENDIX A hereto for the definitions of certain capitalized terms used herein and not otherwise defined. The Storage District, the District and the Enterprise The Semitropic Water Storage District (the Storage District ) is located in north-central Kern County in the San Joaquin Valley, about 20 miles northwest of the City of Bakersfield. The Storage District was organized in 1958 for the purpose of obtaining supplemental water for its lands from the State and Federal water projects. The total area of the Storage District is approximately 221,000 acres (345 square miles), with about 151,782 acres (237 square miles) currently irrigated. Prior to formation of the District, the Storage District formed the Buttonwillow Improvement District ( Buttonwillow ) and the Pond-Poso Improvement District ( Pond-Poso ), which together encompass most of the developed agricultural land in the Storage District. During the 1970 s the Storage District, through Buttonwillow and Pond-Poso, developed water conveyance and distribution system facilities. Construction of these facilities was essentially completed by 1979, with State Water Project (the SWP ) deliveries initiated in Buttonwillow in 1

8 1973 and in Pond-Poso in Prior to these deliveries, the irrigated agricultural development within the Storage District was totally dependent on pumping the underlying ground water. The District was established in 1991 with boundaries co-terminus with Buttonwillow and Pond-Poso for the purpose of, among other things, consolidating duplicate operations of Buttonwillow and Pond-Poso. The Board of Directors of the Storage District also sits as the Board of Directors of the District. The District encompasses approximately 156,823 total acres of land, of which approximately 43,325 acres have Water Service Contracts (as defined in THE STORAGE DISTRICT AND THE DISTRICT Water Operations herein) for delivery of surface water. In addition, certain other landowners have entered into supply agreements, including agreements establishing eligibility to receive temporary water service or intermittent water deliveries in lieu of groundwater pumping, with respect to approximately 29,016 acres within the District. The remaining acres are irrigated from available excess surface supplies and groundwater supplies. The District obtains its water pursuant to certain contracts with the Kern County Water Agency (the Agency ), which obtains its supply from the SWP. See THE STORAGE DISTRICT AND THE DISTRICT herein for a description of the District and its water supply arrangements. Pursuant to an agreement among the District, the Storage District, Buttonwillow and Pond-Poso, dated January 1, 1993, as amended (the Consolidation Agreement ), the District was designated as the entity responsible for managing the water supply and operations of the Storage District, Buttonwillow and Pond-Poso, including the Storage District s irrigation water system and the water banking element of the water system (the Enterprise ). Under the terms of the Consolidation Agreement, the District also manages and maintains all property of the other three entities, and services all liabilities and obligations of the Storage District, Buttonwillow and Pond-Poso. A copy of the audited financial statements of the District for the year ended December 31, 2012 is attached hereto as APPENDIX B. Security for the Bonds The General Project Service Charges (the Service Charges ) are all general project service charges levied by the District for services provided by the District, including services enhanced by the Enterprise. The Enterprise means the District s irrigation water system, including all facilities for obtaining, storing and delivering irrigation water, including electrical generation and transmission facilities incidental thereto, now owned or operated by the District, and all other properties, structures or works hereafter acquired and constructed by the District and determined to be a part of the Enterprise, together with all additions, betterments, extensions or improvements to such facilities, properties, structures or works or any part thereof hereafter acquired or constructed. The Bonds are payable from, and are secured by, a pledge of the Pledged General Project Service Charges (the Pledged Service Charges ), and amounts on deposit in certain other funds and accounts as set forth in the Indenture. The Pledged Service Charges are all Service Charges remaining after payment of all amounts required to be paid pursuant to the Senior Lien Indenture, and also include interest with respect to any Parity Debt reimbursed to or on behalf of the District by the United States of America. The lien of the Bonds on Pledged Services Charges is subordinate to the lien on Service Charges of the District s outstanding Refunding Revenue Bonds, 2009 Series A (the Senior 2

9 Lien Bonds ), and any Refunding Senior Lien Bonds (as defined in APPENDIX A hereto), in the original principal amount of $51,080,000, of which $48,570,000 remains outstanding. The Senior Lien Bonds were issued pursuant to an Indenture of Trust, dated as of October 1, 2009, between the District and Wells Fargo Bank, National Association, relating to the Senior Lien Bonds (the Senior Lien Indenture ). The lien of the Bonds on Service Charges is on parity with the lien of the District s outstanding Subordinate Water Revenue Bonds, Series 2007 (the 2007 Bonds ), issued in the original principal amount of $5,000,000, of which $2,150,737 remains outstanding. The lien of the Bonds is subject to the parity lien, if any, of any additional obligations as provided for in the Indenture. See SECURITY FOR THE BONDS herein. See also APPENDIX A herein. The Service Charges are levied and collected pursuant to the California Water Storage District Law (Division 14 of the Water Code of the State of California (the Act ) on certain landowners within the District. In the event the Pledged Services Charges are insufficient, the Bonds are payable from any other legally available funds of the District. Such other legally available funds of the District are not pledged under the Indenture, and are available for payment of other obligations of the District. See SECURITY FOR THE BONDS - General Project Service Charges; Water Charges herein for a description of the Service Charges. The District has covenanted in the Indenture not to reduce the Pledged Services Charges in any year below an amount which would produce an amount less than 110% of Debt Service Payments (as defined in SECURITY FOR THE BONDS herein) payable in such year. The District is not funding a debt service reserve account for the Bonds, although debt service reserve accounts may be established for future Parity Debt. The owners of the Bonds will not be entitled to amounts on deposit in the reserve account, if any, established for future Parity Debt. As described in THE STORAGE DISTRICT AND THE DISTRICT herein, the District receives significant revenues from a number of sources, including water banking activities and water sales. However, other than the Pledged Service Charges as described herein, none of those revenues are pledged to repayment of the Bonds or any Parity Debt. THE DISTRICT S OBLIGATION TO MAKE DEBT SERVICE PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE FROM PLEDGED SERVICES CHARGES AND OTHER FUNDS PROVIDED FOR IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION OF THE DISTRICT TO MAKE DEBT SERVICE PAYMENTS CONSTITUTES A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, OR AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. Forward-Looking Statements This Official Statement contains forward-looking statements, including (i) statements containing projections of Service Charges and other financial items, (ii) statements of future economic performance of the Enterprise, and (iii) statements of the assumptions underlying or relating to statements described in (i) and (ii) above, (collectively, the Forward-Looking Statements ). All statements other than statements of historical facts included in this Official Statement, including without limitation statements under THE STORAGE DISTRICT AND THE 3

10 DISTRICT and SECURITY FOR THE BONDS regarding the financial position, capital resources and status of the District and the Enterprise are Forward-Looking Statements. Although the District believes that the expectations reflected in such Forward-Looking Statements are reasonable, no assurance can be given that such expectations will prove to be correct. Important factors which could cause actual results to differ materially from expectations of the District (collectively, the Cautionary Statements ) are disclosed in this Official Statement. All Forward-Looking Statements attributable to the District are expressly qualified in their entirety by the Cautionary Statements. Summary of Terms Brief descriptions of the Bonds, the Indenture, the District and the Enterprise are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the Act, the Bond Law and the Constitution and the laws of the State, as well as the proceedings of the District with respect to the Enterprise and the Bonds, are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by reference to the forms thereof included in the Indenture. Copies of the proceedings of the District referred to above, as well as the documents described in this Official Statement, are available for inspection at the offices of the District, 1101 Central Ave., Wasco, CA Description of the Project THE PROJECT Certain proceeds of the Bonds will be used in part to finance improvements (or to reimburse the District for prior qualified expenditures on improvements) (the Project ) to the Enterprise. Construction of the new components of the Project commenced January 1, 2013, with completion of all components within three years. While exact configurations and design elements of certain other components of the Project are still being developed, the entire cost of the Project is estimated at approximately $10 million, including approximately $5.1 million of reimbursements. To the extent proceeds of the Bonds are insufficient to pay the Project costs, the District anticipates using surplus revenues and other available resources. The estimated costs of the Project components are as follows: Description Est. Amount District Reimbursements $5,115,000 Madera Ave. Intertie 3,710,360 Water Banking/Energy Development Improvements 1,174,640 TOTAL $10,000,000 Environmental Compliance The components of the Project are subject to the California Environmental Quality Act ( CEQA ). Under CEQA, a project which may have a significant effect on the environment and which is to be carried out or approved by a public agency must comply with a comprehensive environmental review process. Generally, the implementation of CEQA entails three separate phases. The first phase consists of a preliminary review of a project to determine whether it is subject to CEQA. The second phase involves preparation of an initial study to determine 4

11 whether an environmental impact report ( EIR ) or negative declaration is required. An EIR must be prepared when the public agency determines that it can be fairly argued, based on substantial evidence, in light of the whole record, that a project may have a significant effect on the environment. A negative declaration may be prepared when no substantial evidence exists in light of the whole record that the project may have a significant environmental impact. A mitigated negative declaration may be prepared if the initial study identifies a potentially significant effect for which the project s proponent, before public release of a proposed negative declaration, has made or agrees to make project revisions that clearly mitigate the effects. The third phase is preparation of an EIR if the project may have a significant environmental effect, or of a mitigated negative declaration if no significant effects will occur. While the Madera Ave Intertie project will require completion of environmental approvals, since much of the remaining Project involves replacement, upgrading or increasing capacity of existing facilities, or disturbing soil that is regularly subject to agricultural uses, the District does not believe that environmental considerations will adversely affect the completion of the Project within the contemplated budget or the estimated timetable. ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Bonds are anticipated to be applied as follows: SOURCES: Principal Amount of Bonds $9,645, Net Original Issue Premium 535, TOTAL SOURCES: $10,180, USES: Deposit to Acquisition Fund (1) $10,000, Delivery Costs (2) 180, TOTAL USES: $10,180, (1) See THE PROJECT above. (2) Includes fees of Bond and Disclosure Counsel and Trustee, Underwriter s discount and other costs of issuing the Bonds. 5

12 DEBT SERVICE SCHEDULE The following table sets forth the amount of debt service with respect to the Bonds for each Bond Year: Year (December 1) Principal Interest Total Debt Service 12/1/2013 $ 0 $ 91, $ 91, /1/ , , ,201, /1/ , , ,202, /1/ , , ,201, /1/ , , ,201, /1/ , , ,200, /1/ , , ,202, /1/2020 1,005, , ,198, /1/2021 1,045, , ,198, /1/2022 1,100, , ,201, /1/2023 1,145,000 57, ,202, TOTALS $9,645,000 $2,457, $12,102, General Provisions THE BONDS The Bonds shall be delivered in the form of fully registered Bonds, without coupons, in denominations of $5,000 or any integral multiple thereof, and shall be dated the date of initial delivery thereof. The Bonds will mature on the dates and in the amounts set forth on the inside front cover of this Official Statement. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ( DTC ). So long as DTC, or Cede & Co. as its nominee, is the registered owner of all Bonds, all payments on the Bonds will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined in APPENDIX E hereto) will be the responsibility of the DTC Participants, as more fully described hereinafter. See Book- Entry System below. Interest on the Bonds shall become payable on December 1 and June 1 of each year, commencing December 1, 2013, and continuing to and including the date of maturity or prior redemption, whichever is earlier. Principal of the Bonds shall become payable on December 1 in each of the years and in the amounts set forth on the inside cover page of this Official Statement. Principal and premium, if any, of the Bonds shall become payable upon presentation and surrender thereof at the Principal Office of the Trustee. Interest on the Bonds shall be based on a 360-day year composed of twelve 30-day months and shall be payable by check from the Trustee mailed on each Interest Payment Date by first class mail to the registered Owners as of the close of business on the 15th day of the calendar month (whether or not such day is a Business Day) preceding an Interest Payment Date (the Record Date ) at their addresses shown on the registration books maintained by the Trustee. Upon the written direction filed with the Trustee prior to any Record Date by the Owner of Bonds in an aggregate principal amount of $1,000,000 or more, interest with respect to such Bonds shall be payable to 6

13 the Owner thereof by federal wire transfer initiated by the Trustee to an account in a bank or a trust company in the United States designated in such written direction. Any Bond may be transferred upon presentation of such Bond to the Trustee by the person in whose name it is registered, in person or by his duly authorized attorney. Upon surrender, together with a duly executed instrument of transfer in form acceptable to the Trustee, and payment of a sum sufficient to cover any tax or other governmental charge, the Trustee shall execute and deliver a new Bond or Bonds of the same maturity, for a like aggregate principal amount. The Trustee shall not be required to transfer any Bond during the period established by the Trustee for selection of Bonds for redemption, nor shall the Trustee be required to transfer any Bond or portion thereof selected for redemption. Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount represented by such Bonds of other authorized denominations of the same maturity. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Redemption Extraordinary Casualty Redemption. The Bonds are subject to extraordinary redemption on any Interest Payment Date (but not in a total redemption amount of less than $20,000 in principal amount at any one time), upon notice as hereinafter provided, as a whole or in part in integral multiples of $5,000, from funds received by the District due to a casualty loss or governmental taking of the Enterprise or portions thereof by eminent domain proceedings, under the circumstances and upon the conditions and terms prescribed in the Indenture, in inverse order of maturities and by lot within a maturity, at a redemption price equal to the sum of the principal amount to be redeemed plus accrued interest accrued to the date fixed for redemption of the Bonds, without premium. Purchase in Lieu of Redemption. In lieu, or partially in lieu, of such call and redemption, moneys of the District may be used to purchase Outstanding Bonds prior to the selection of Bonds for redemption by the Trustee, at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) of not more than par plus accrued interest, and any accrued interest payable upon the purchase of Bonds may be paid from the amount in the Payment Fund for payment of interest on the following Interest Payment Date. Selection of Bonds for Redemption. In the event that part, but not all, of the Bonds are to be redeemed, the Trustee shall select the Bonds to be redeemed from all Bonds subject to redemption or such given portion thereof equal to a multiple of $5,000 not previously called for redemption by lot in any manner which the District, in its sole discretion, shall direct to the Trustee in writing. Notice of Redemption. When redemption is authorized or required pursuant to the Indenture, the Trustee shall give notice of the redemption of the Bonds. Such notice shall specify: (a) that the Bonds or a designated portion thereof are to be redeemed, (b) the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, the serial numbers of the Bonds to be redeemed, (c) the date of redemption, (d) the place or places where the redemption will be made, (e) the following descriptive information regarding the Bonds: date, interest rates and stated maturity dates, and (f) that a new Bond in an amount equal to that portion not so redeemed will be executed by the Trustee and delivered to the Owner in the 7

14 event of a partial redemption. Such notice shall further state that on the specified date there shall become due and payable upon each Bond to be redeemed, the portion of the principal amount of such Bond to be redeemed, together with interest accrued to said date, and that from and after such date, provided that moneys therefore have been deposited with the Trustee, interest with respect to such Bonds to be redeemed shall cease to accrue and be payable. Notice of such redemption shall be mailed by first-class mail, postage prepaid, to the District, to all municipal Securities Depositories and to at least one national Information Service which the District shall designate to the Trustee, and to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Bond registration books, at least 30 days, but not more than 60 days, prior to the redemption date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds. Effect of Notice of Redemption. Notice having been given as described above, and the moneys for the redemption (including the interest to the applicable date of redemption), having been set aside in the Redemption Account, the Bonds shall become due and payable on said date of redemption, and, upon presentation and surrender thereof at the Principal Office, said Bonds shall be paid at the unpaid principal price with respect thereto, plus interest accrued and unpaid to said date of redemption. If, on said date of redemption, moneys for the redemption of all the Bonds to be redeemed, together with interest to said date of redemption, shall be held by the Trustee so as to be available therefor on such date of redemption, and, if notice of redemption thereof shall have been given as aforesaid, then, from and after said date of redemption interest with respect to the Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed. No Additional Senior Lien Debt So long as any Bonds are Outstanding, the District has covenanted to not issue or incur any obligations payable from Service Charges senior or superior to the Bonds, including obligations on parity with the Senior Lien Bonds, except for Refunding Senior Lien Bonds. Issuance of Parity Debt The District may at any time issue Parity Debt payable from Pledged Service Charges on a parity with the Bonds to provide financing for the Enterprise in such principal amount as shall be determined by the District. The District may issue or incur any such Parity Debt if (i) no Event of Default shall have occurred and then be continuing; and (ii) the total Service Charges available to the District either (x) as shown by the books of the District for the latest Fiscal Year, as verified by a certificate of the Finance Officer, or (y) as shown by the books of the District for any more recent twelve (12) month period selected by the District, as verified by a certificate of the Finance Officer, plus (at the option of the District) the Additional Revenues, are equal to at least one hundred ten per cent (110%) of the Senior Lien Maximum Annual Debt Service and Maximum Annual Debt Service on the Bonds, the 2007 Bonds and such proposed Parity Debt. Additional Revenues means an allowance for Pledged Service Charges arising from any increase in the charges adopted prior to the incurring of such Parity Debt and effective within eighteen (18) months following the date of incurring such Parity Debt, in an amount equal to the total amount by which the Pledged Service Charges would have been increased if such 8

15 increase in charges had been in effect during the whole of the most recent completed Fiscal Year or during any more recent twelve (12) month period selected by the District, as verified by a certificate of the Finance Officer. District Maximum Annual Debt Service means, as of the date of any calculation, the maximum Debt Service due with respect to the Bonds, the 2007 Bonds and any Parity Debt and the Senior Lien Maximum Annual Debt Service for the current or any future Fiscal Year. The foregoing restrictions on the issuance of Parity Debt shall not apply to any such Parity Debt if (i) all of the proceeds of such Parity Debt (other than proceeds applied to pay costs of issuing such Parity Debt and to make any reserve fund deposit required) shall be deposited in an irrevocable escrow held in cash or invested in Federal Securities for the purpose of paying the principal of and interest and premium (if any) on any Outstanding Bonds or on any outstanding Parity Debt, and (ii) at the time of the incurring of such Parity Debt, the District certifies in writing that Maximum Annual Debt Service on the refunding Parity Debt and all Outstanding Bonds and Parity Debt (excluding the Bonds or Parity Debt to be refunded) will not exceed Maximum Annual Debt Service on the Outstanding Bonds and Parity Debt (including the Bonds or Parity Debt to be refunded). In order to maintain the parity relationship of Debt Service to all Parity Debt permitted hereunder, the District covenants that all payments in the nature of principal and interest or reserve account replenishment with respect to any Parity Debt, except with respect to Governmental Loans, will be structured to occur on the Interest Payment Dates and in each year as such payments are due with respect to Debt Service, and reserve account replenishment, if any, with respect to any Parity Debt, except with respect to Governmental Loans, will be structured to occur monthly, and to otherwise structure the terms of such Parity Debt to ensure that they are in all respects payable on a parity with Debt Service and not prior thereto; provided that the District shall not make a full payment on such Governmental Loan to the extent it would have the effect of causing the District to fail to pay Debt Service on a timely basis. In such event, the District shall pay Debt Service and payments on such Governmental Loan on a pro rata basis. If interest on any Parity Debt is reasonably anticipated to be reimbursed to or on behalf of the District by the United States of America, then interest payments with respect to such Parity Debt shall be excluded by the amount of such interest reasonably anticipated to be paid or reimbursed by the United States of America, and such reimbursements will not be included as Pledged General Project Service Charges for purposes of the coverage calculations required in subsection (a) above. Governmental Loan means a loan from the State or the United States of America, acting through any of its agencies, to finance improvements to the Enterprise, and the obligation of the District to make payments to the State or the United States of America under the loan agreement memorializing said loan on a parity basis with the payment of principal of and interest on the Bonds. Subordinate Obligations. Notwithstanding the foregoing, nothing in the Indenture shall be construed as prohibiting the issuance by the District of subordinated debt secured by Service Charges. 9

16 Book-Entry System DTC will act as securities depository for the Bonds. The Bonds will be issued as fullyregistered Bonds registered in the name of Cede & Co. (DTC s partnership nominee). One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX E - BOOK ENTRY PROVISIONS herein. The District and the Trustee cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium on the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The District and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. General SECURITY FOR THE BONDS THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PLEDGED SERVICES CHARGES PLEDGED THEREFOR IN THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE DISTRICT, OR ANY OF THE DISTRICT S INCOME OR RECEIPTS, EXCEPT THE PLEDGED SERVICES CHARGES. THE BONDS ARE NOT A DEBT, OBLIGATION OR LIABILITY OF THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE FAITH AND CREDIT OF THE DISTRICT, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND THE DISTRICT IS NOT OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR. NEITHER THE DISTRICT, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR (EXCEPT AS SET FORTH IN THE INDENTURE), NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE DISTRICT AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE DEBT SERVICE PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE DISTRICT, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The payments of principal of and interest on the Bonds and any Parity Debt (the Debt Service Payments ) are payable from and are specifically secured by a lien upon and an irrevocable parity pledge of the Pledged Services Charges, certain investment income, and all moneys initially deposited from Bond proceeds. In the event the Pledged Services Charges are insufficient, the Debt Service Payments are payable from any other legally available funds of the District. See General Project Service Charges; Water Charges below for a description of the Service Charges and other possible available revenues of the District. The Pledged Services Charges shall be applied, on a parity basis, to the payment of the Debt Service Payments which secure the Bonds, to payment of the 2007 Bonds and to any Parity Debt issued pursuant to the Indenture (see THE BONDS - Parity Debt ). 10

17 All Pledged Services Charges are irrevocably pledged by the District to the payment of the Debt Service Payments and debt service on the 2007 Bonds and any Parity Debt as provided in the Indenture, and the Pledged Services Charges shall not be used for any other purpose while any of the Debt Service Payments remain unpaid; provided, however, that out of the Pledged Services Charges, there may be apportioned such sums for such purposes as are expressly permitted by the Indenture, including payment of debt service on any Parity Debt. This pledge shall constitute a first lien on the Pledged Services Charges for the payment of the Debt Service Payments and debt service on any Parity Debt in accordance with the Indenture. The Bonds are not secured by a direct lien on the Enterprise or any other property or revenues of the District. In the Indenture the District covenants that, so long as any Bonds are outstanding, the District will not issue or incur any obligations payable from Service Charges superior to the payment of the Debt Service Payments, except for Refunding Senior Lien Bonds. In addition to the 2007 Bonds, the District is authorized to issue additional Parity Debt secured by Pledged Services Charges with a lien on a parity basis with the lien of Debt Service Payments, provided it complies with certain provisions in the Indenture. See THE BONDS Parity Debt herein. The District is also authorized to issue subordinate debt secured by Pledged Services Charges. The District has covenanted not to reduce the Pledged Services Charges in any year below an amount which would produce Pledged Services Charges in such year less than 110% of Debt Service on the Bonds and any Parity Debt payable in such year. See General Project Service Charges; Water Charges below. As described in THE STORAGE DISTRICT AND THE DISTRICT herein, the District receives significant revenues from a number of sources, including water banking activities and water sales. However, other than the Pledged Service Charges as described herein, none of those revenues are pledged to repayment of the Bonds or any Parity Debt. No Debt Service Reserve Account The District is not funding a debt service reserve account for the Bonds, although debt service reserve accounts may be established for future Parity Debt. The owners of the Bonds will not be entitled to amounts on deposit in the reserve account, if any, established for future Parity Debt. Debt Service Payments The Indenture requires the District to make Debt Service Payments as set forth in Application of Revenues below. The Debt Service Payments shall be paid directly to the Trustee, and if received by the District shall be immediately deposited with the Trustee. The District s obligation to make Debt Service Payments is a special obligation of the District payable from the Pledged Services Charges and other funds provided for in the Indenture. Neither the Bonds nor the obligation of the District to make Debt Service Payments constitutes a debt of the District, the Storage District or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction or an obligation for which the District, the Storage District or the State of California is obligated to levy or pledge any form of taxation or for which the District, the Storage District or the State of California has levied or pledged any form of taxation. 11

18 Levy of Service Charges The District has covenanted in the Indenture that it shall prescribe, revise and collect such rates and charges for the service, facilities, availability and water of the Enterprise which, after making allowances for contingencies and error in the estimates, shall provide Pledged Services Charges at least sufficient to pay 110% of the Debt Service Payments and the principal and interest on the Outstanding Parity Debt as the same shall become due and payable. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but may not reduce the rates and charges then in effect unless the Pledged Services Charges from such reduced rates and charges will at all times be sufficient to meet the requirements set forth in the Indenture. Application of Revenues Payments from Revenue Fund. To secure Debt Service Payments, all Service Charges in the Revenue Fund shall be set aside by the Finance Officer and shall be applied as follows and in the following order of priority: (a) Within five (5) Business Days of receipt of the First Revenue Installment, after payment of all amounts due under the Senior Lien Indenture, the District shall set aside in the Second Lien Debt Service Account in the Revenue Fund a sum equal to one-half of the interest on the Bonds and any Parity Debt becoming due on or prior to the next December 1, plus one-half of the principal on the Bonds and any Parity Debt becoming due on the next succeeding December 1; and within five (5) Business Days of receipt of the Second Revenue Installment, after payment of all amounts due under the Senior Lien Indenture, the District shall set aside in the Second Lien Debt Service Account of the Revenue Fund a sum equal to onehalf of the interest on the Bonds and any Parity Debt becoming due on or prior to the next succeeding December 1 not already provided for from the First Revenue Installment, plus onehalf of the principal on the Bonds and any Parity Debt becoming due on the next succeeding December 1 not already provided for from the First Revenue Installment; provided, that no such transfer to and deposit in the Second Lien Debt Service Account need be made if the amount available and contained therein is at least equal to the amount of the interest on the Bonds and any Parity Debt becoming due on or prior to the next succeeding December 1, plus the amount of the principal on the Bonds and any Parity Debt becoming due on the next succeeding December 1. Three (3) Business Days prior to the date the Trustee is required to make a Debt Service Payment pursuant to the Indenture, the District shall transfer such Debt Service Payment due on such date from amounts on deposit in the Second Lien Debt Service Account of the Revenue Fund, or from other legally available funds of the District, to the Trustee for deposit in the Payment Fund (or to the trustee of any Parity Debt, as the case may be). (b) Following the deposit of the Pledged Services Charges into the Second Lien Debt Service Account of the Revenue Fund pursuant to subsection (a), the District shall, from the remaining money in the Revenue Fund or other legally available funds of the District, transfer to any reserve established for any Parity Debt (the Parity Reserve ), the sum, if any, necessary to restore any Parity Reserve to its funding requirement; provided, that no such transfer to and deposit in any Parity Reserve need be made if the amount available and contained therein is at least equal to the funding requirement of the Parity Reserve, as applicable. 12