$15,180,000 SWEETWATER UNION HIGH SCHOOL DISTRICT PUBLIC FINANCING AUTHORITY SUBORDINATE SPECIAL TAX REVENUE BONDS, SERIES 2005B

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1 NEW ISSUE BOOK-ENTRY ONLY RATINGS Standard & Poor s: BBB+ Moody s: Baa2 (See CONCLUDING INFORMATION Ratings on the Bonds herein) In the opinion of Best Best & Krieger LLP, San Diego, California, Bond Counsel, under existing law and assuming continuing compliance with certain covenants in the documents relating to the Bonds and requirements of the Internal Revenue Code of 1986, as amended (the Code ), interest on the Bonds is not included in the gross income of the Owners thereof for federal income tax purposes. In the further opinion of Bond Counsel, interest on the Bonds will not be treated as an item of tax preference in calculating alternative minimum taxable income of individuals or corporations. Interest on the Bonds may be included in the calculation of certain taxes, however, including the alternative minimum tax and environmental tax on corporations. Interest on the Bonds will be exempt from present State of California personal income taxes. See LEGAL MATTERS - Tax Matters herein. SAN DIEGO COUNTY STATE OF CALIFORNIA $15,180,000 SWEETWATER UNION HIGH SCHOOL DISTRICT PUBLIC FINANCING AUTHORITY SUBORDINATE SPECIAL TAX REVENUE BONDS, SERIES 2005B Dated: Date of Delivery Due: September 1 as Shown on the Inside Front Cover. The cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See BONDHOLDERS RISKS herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds. Interest on the Bonds is payable on September 1, 2005, and semiannually thereafter on March 1 and September 1 of each year (each an Interest Payment Date ) until maturity or earlier sinking account or optional redemption (see THE BONDS - General Provisions and THE BONDS - Redemption herein). The Bonds are payable from the revenues pledged under the Indenture, as defined herein, consisting primarily of installment payments to be made by the Sweetwater Union High School District (the District ) to the Sweetwater Union High School District Public Financing Authority (the Authority ) for the acquisition and construction of certain school facilities pursuant to an Installment Purchase Agreement, as defined herein, and from certain funds held under the Indenture. The District s obligation to make installment payments is payable solely from Special Taxes levied in and collected from various Community Facilities Districts, as described herein, on a subordinate basis to the District s obligation to pay payments with respect to certain existing obligations of the District (see SOURCES OF PAYMENT FOR THE BONDS and BONDHOLDERS RISKS herein). It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of the Depository Trust Company in New York, New York on or about March 10, See APPENDIX D BOOK-ENTRY ONLY SYSTEM herein. The Bonds are being offered when, as and if issued, subject to the approval as to their legality by Best Best & Krieger LLP, San Diego, California, Bond Counsel. Certain legal matters will be passed on for the District and the Authority by Best Best & Krieger LLP, Riverside, California, Disclosure Counsel and by Burke, Williams & Sorensen, San Diego, California, as District Counsel. The date of the Official Statement is February 24, 2005.

2 $15,180,000 SWEETWATER UNION HIGH SCHOOL DISTRICT PUBLIC FINANCING AUTHORITY SUBORDINATE SPECIAL TAX REVENUE BONDS, SERIES 2005B MATURITY SCHEDULE $12,565,000 Serial Bonds (Base CUSIP ) Maturity Date Principal Interest Reoffering September 1 Amount Rate Yield/Price CUSIP 2005 $380, % 2.10% BB , BC , BD , BE , BF , BG , BH , BJ , BK , BL , BM , BN , BP , BQ , BR , BS , BT , BU , BV , BW 9 $1,395, % Term Bond maturing September 1, 2026, Price % CUSIP BY 5 $1,220, % Term Bond maturing September 1, 2029, Price % CUSIP CB 4 CUSIP A registered trademark of the American Bankers Association. Copyright Standard & Poor s, a Division of The McGraw-Hill Companies, Inc. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau. This data in not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP numbers are provided for convenience of reference only. Neither the School District nor the Underwriter takes any responsibility for the accuracy of such numbers.

3 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District or the Authority in any press release and in any oral statement made with the approval of an authorized officer of the District or the Authority or any other entity described or referenced herein, the words or phrases will likely result, are expected to, will continue, is anticipated, estimate, project, forecast, expect, intend and similar expressions identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the Financial Advisor or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has submitted the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Information Subject to Change. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the District or any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, and do not purport to be complete statements of any or all of such provisions. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise 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 others at prices lower than the public offering prices set forth on the inside front cover page hereof and said public offering prices may be changed from time to time by the Underwriter. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE INDENTURE HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

4 SWEETWATER UNION HIGH SCHOOL DISTRICT SAN DIEGO COUNTY, CALIFORNIA BOARD OF TRUSTEES Jim Cartmill, President Greg R. Sandoval, Vice President Jaime Mercado, Member Pearl Quinones, Member Arlie N. Ricasa, Member ADMINISTRATION Dr. Edward M. Brand, Superintendent Mr. Barry S. Dragon, Chief Financial Officer Mr. Bruce Husson, Chief Operating Officer Ms. Kathleen Wright, Director of Planning and Construction PROFESSIONAL SERVICES Bond Counsel and Disclosure Counsel Best Best & Krieger LLP San Diego and Riverside, California Financial Advisor Harrell & Company Advisors, LLC Orange, California Special Tax Consultant Special District Financing & Administration Escondido, California Trustee U.S. Bank National Association Los Angeles, California

5 TABLE OF CONTENTS INTRODUCTION...1 The Authority...1 The District...1 Security and Sources of Repayment...2 Purpose...3 Legal Matters...3 Professional Services...3 Offering of the Bonds...4 Information Concerning this Official Statement...4 THE BONDS...5 General Provisions...5 Redemption...6 Scheduled Debt Service on the Bonds...8 Aggregate Debt Service...9 THE FINANCING PLAN...10 Estimated Sources and Uses of Funds...10 The Project...10 SOURCES OF PAYMENT FOR THE BONDS...11 General...11 Installment Payments; Pledge Agreement...11 Special Taxes...12 Parity Debt...12 Reserve Account...13 THE COMMUNITY FACILITIES DISTRICTS..14 Summary of the Community Facilities District Procedures...14 The Community Facilities Districts...14 Rate and Method of Apportionment of Special Taxes...16 Credit Against Special Taxes...17 Assessed Values in Community Facilities Districts.17 Community Facilities Districts Tax Levies and Delinquencies...21 Projected Special Tax Levy and Debt Service Coverage...22 Indebtedness of the Community Facilities Districts 24 BONDHOLDERS RISKS...26 The Special Taxes...26 The Special Tax Formulas...30 Prepayment of Special Taxes...30 Credit Against Special Taxes...30 Early Redemption Risk...31 Loss of Tax Exemption...31 Secondary Market...31 LEGAL MATTERS...32 Enforceability of Remedies...32 Approval of Legal Proceedings...32 Tax Matters...32 Absence of Litigation...33 CONCLUDING INFORMATION...34 Ratings on the Bonds...34 Underwriting...34 The Financial Advisor...34 Continuing Disclosure...34 Additional Information...35 References...35 Execution...35 SUMMARY OF THE LEGAL DOCUMENTS... A-1 GENERAL INFORMATION ABOUT THE SWEETWATER UNION HIGH SCHOOL DISTRICT AND THE COUNTY OF SAN DIEGO...B-1 FORM OF CONTINUING DISCLOSURE CERTIFICATE... C-1 BOOK-ENTRY ONLY SYSTEM... D-1 FORM OF BOND COUNSEL OPINION...E-1

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7 OFFICIAL STATEMENT $15,180,000 SWEETWATER UNION HIGH SCHOOL DISTRICT PUBLIC FINANCING AUTHORITY SUBORDINATE SPECIAL TAX REVENUE BONDS, SERIES 2005B This Official Statement, which includes the cover page and appendices (the Official Statement ), is provided to furnish certain information concerning the sale of the Sweetwater Union High School District Public Financing Authority Subordinate Special Tax Revenue Bonds, Series 2005B (the Bonds ), in the aggregate principal amount of $15,180,000. INTRODUCTION This Introduction contains only a brief description of this issue and does not purport to be complete. The Introduction is subject in all respects to more complete information in the entire Official Statement and the offering of the Bonds to potential investors is made only by means of the entire Official Statement and the documents summarized herein. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision (see BONDHOLDERS RISKS herein). The Authority The Sweetwater Union High School District Public Financing Authority (the Authority ) is a joint exercise of powers authority organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the Joint Powers Act ). The Sweetwater Union High School District, pursuant to Resolution No adopted on December 13, 2004, and Community Facilities District No. 1 of the Sweetwater Union High School District, pursuant to Resolution No adopted on December 13, 2004, formed the Authority by the execution of a joint exercise of powers agreement. Pursuant to the Joint Powers Act, the Authority is authorized to issue revenue bonds to provide funds to acquire or construct public capital improvements, such revenue bonds to be repaid from the installment payments for such improvements, such as the Installment Payments described herein. The members of the Board of Trustees comprise the Authority Board of Directors. The District The Sweetwater Union High School District was established in The District encompasses 154 square miles in San Diego County, and serves approximately 40,000 students (see APPENDIX B GENERAL INFORMATION ABOUT THE SWEETWATER UNION HIGH SCHOOL DISTRICT AND THE COUNTY OF SAN DIEGO herein). 1

8 Security and Sources of Repayment The Bonds. The Bonds are secured under an Indenture of Trust dated as of February 1, 2005 (the Indenture ), by and among the Authority, the District and U.S. Bank National Association, Los Angeles, California, as trustee (the Trustee ) (see APPENDIX A SUMMARY OF THE LEGAL DOCUMENTS - THE INDENTURE herein). The Bonds are payable solely from Installment Payments (the Installment Payments ) to be made by the District to the Authority for the Project, as described herein, pursuant to a Installment Purchase Agreement dated as of February 1, 2005 (the Installment Purchase Agreement ) by and between the Authority, as Seller, and the District, as Purchaser. The Bonds are also payable from certain funds held under the Indenture and investment earnings thereon (collectively, with the Installment Payments, the Authority Revenues ) (see SOURCES OF PAYMENT FOR THE BONDS, and APPENDIX A SUMMARY OF THE LEGAL DOCUMENTS - INSTALLMENT PURCHASE AGREEMENT herein). Installment Payments. In general, the District is required under the Installment Purchase Agreement to pay to the Trustee specified Installment Payments for the Project, which amounts are sufficient in both time and amount to pay, when due, the principal and interest payable with respect to the Bonds. Except for the Authority s right, title and interest in and to the Installment Purchase Agreement, no funds or properties of the Authority or the District are pledged to or otherwise liable for the obligations of the Authority (see BONDHOLDERS RISKS herein). Pursuant to a Pledge Agreement, as defined below, the District has pledged Special Taxes to pay Installment Payments, when due. The General Fund of the District is not liable for the Installment Payments. The pledge granted by the Indenture and the Installment Purchase Agreement does not create a legal or equitable pledge, charge, lien or encumbrance upon any of the District s property, or upon its income, receipts or revenue, except the Special Taxes. The Community Facilities Districts and the Pledge Agreement. Since 1986, the District has formed fourteen separate community facilities districts within its boundaries for the purpose of paying a portion of the costs of certain District facilities. The District, acting as the legislative body for Community Facilities Districts Nos. 1 through 6, 8 and 9 through 15 (collectively, the Community Facilities Districts ), previously conducted proceedings to finance the construction of certain school facilities pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982 (the Mello- Roos Act ). The District has previously adopted ordinances levying special taxes on real property within the Community Facilities Districts to finance such improvements. In order to pledge the revenues received from the collection of the special taxes levied by the Community Facilities Districts to pay each Community Facilities District s proportionate benefit from the Project to pay the Installment Payments, the District and the Community Facilities Districts have entered into the Second Amended and Restated Payment and Pledge Agreement dated as of February 1, 2005 (the Pledge Agreement ). Pursuant to the terms and provisions of the Pledge Agreement, the Community Facilities Districts have pledged the special tax revenue (the Special Taxes ) collected by or on behalf of the Community Facilities Districts to the School District for the purpose of paying Installment Payments, which pledge shall constitute a lien on the Special Taxes on a basis subordinate to the pledge of such Special Taxes to certain other obligations of the Community Facilities Districts (the Senior Payments ) (see SOURCES OF PAYMENT FOR THE BONDS - Installment Payments; Pledge Agreement, BONDHOLDERS RISKS The Special Taxes, THE COMMUNITY FACILITIES DISTRICTS Indebtedness of the Community Facilities Districts and APPENDIX A SUMMARY OF THE LEGAL DOCUMENTS THE PLEDGE AGREEMENT ). 2

9 Concurrently with the issuance of the Bonds, the Authority will issue its Special Tax Revenue Bonds, Series 2005A (the 2005A Senior Bonds ). The 2005A Senior Bonds will be secured by an installment purchase agreement by and between the Authority and the District, for which the Community Facilities Districts have pledged the Special Taxes to the District for repayment of the 2005A Senior Bonds, on a senior basis to the pledge of the Special Taxes to the Bonds and on a parity with the Senior Payments. The Bonds are limited obligations of the Authority. The Bonds do not constitute a debt or liability of the District, the State of California or of any political subdivision thereof, other than the Authority. The Authority shall only be obligated to pay the principal of the Bonds, or the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing power of the District, the State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. The Authority has no taxing power. The obligation of the District to pay Installment Payments does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has pledged any form of taxation except for the Special Taxes. The obligation of the District to pay Installment Payments does not constitute a debt or liability of the District, the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. Purpose The Bonds are being issued to finance a portion of the costs of acquisition and construction of the site and facilities for the District s High School No. 13 (the Project ), to fund a deposit to the Reserve Account and to pay the expenses incurred in connection with the issuance of the Bonds (see THE FINANCING PLAN - Estimated Sources and Uses of Funds herein). Legal Matters All legal proceedings in connection with the issuance of the Bonds are subject to the approving opinion of Best Best & Krieger LLP, San Diego, California, Bond Counsel. Such opinion, and certain tax consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, are described more fully under the heading LEGAL MATTERS herein. Certain legal matters will be passed on for the District and the Authority by Burke, Williams & Sorensen, San Diego, California as District Counsel and by Best Best & Krieger LLP, Riverside, California, as Disclosure Counsel. Professional Services U.S. Bank National Association, Los Angeles, California, serves as trustee (the Trustee ) under the Indenture. The Trustee acts on behalf of the Bondholders for the purpose of receiving all moneys required to be paid to the Trustee, to allocate, use and apply the same, to hold, receive and disburse the revenues and other funds held under the Indenture, and otherwise to hold all the offices and perform all the functions and duties provided in the Indenture to be held and performed by the Trustee. Harrell & Company Advisors, LLC, Orange, California, (the Financial Advisor ), advised the Authority and the District as to the financial structure and certain other financial matters relating to the Bonds. Special District Financing & Administration, Escondido, California, Special Tax Consultant, prepared the projections of Special Taxes in Table No. 4 herein. Fees payable to Bond Counsel, Disclosure Counsel and the Financial Advisor are contingent upon the sale and delivery of the Bonds. 3

10 Offering of the Bonds Authority for Issuance. The Bonds are to be issued and secured pursuant to the Indenture authorized by a resolution of the Authority adopted on December 13, The Bonds are also issued in accordance with the laws of the State of California (the State ), and particularly the Marks-Roos Local Bond Pooling Act of 1985, as amended, constituting Article 4 (commencing with Section 6584), of Chapter 5, Division 7, Title 1 of the Government Code of the State (the Bond Law ). Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Best Best & Krieger LLP, San Diego, California, Bond Counsel. It is anticipated that the Bonds will be available, in book-entry form for delivery through the facilities of DTC in New York, New York on or about March 10, Information Concerning this Official Statement This Official Statement speaks only as of its date. The information set forth herein has been obtained by the Authority and the District with the assistance of the Financial Advisor from sources which are believed to be reliable and such information is believed to be accurate and complete but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financial Advisor or the Disclosure Counsel. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be construed as representations of fact. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the Authority since the date hereof. Availability of Legal Documents. The summaries and references contained herein with respect to the Indenture, the Installment Purchase Agreement, the Bonds and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the documents described herein are available for inspection during the period of initial offering of the Bonds at the offices of the Financial Advisor, Harrell & Company Advisors, LLC, 333 City Boulevard West, Suite 1430, Orange, California 92868, telephone (714) Copies of these documents may be obtained after delivery of the Bonds at the corporate trust office of the Trustee, U.S. Bank National Association, Los Angeles, California or from the Sweetwater Union High School District, 1130 Fifth Avenue, Chula Vista, California 91911, telephone (619)

11 General Provisions THE BONDS Repayment of the Bonds. Interest on the Bonds is payable on September 1, 2005, and semiannually thereafter on March 1 and September 1 of each year (each a Interest Payment Date ) at the rates per annum set forth on the inside front cover page hereof. Interest on the Bonds will be computed on the basis of a year consisting of 360 days and twelve 30-day months. Each Bond will be dated the Date of Delivery, and interest thereon will be payable from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on or before a Interest Payment Date and after the close of business on the preceding Record Date and on or before the following Interest Payment Date, in which event interest thereon will be payable from such Interest Payment Date; or (b) it is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Date of Delivery; provided, however, that if, as of the date of authentication of any Bond, interest on any Outstanding Bonds is in default, such interest will be payable from the Interest Payment Date to which interest has previously been paid in full or made available for payment on the Outstanding Bonds. Book-Entry Only System. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. Interest on and principal of the Bonds will be payable when due by wire of the Trustee to DTC which will in turn remit such interest and principal to DTC Participants (as defined herein), which will in turn remit such interest and principal to Beneficial Owners (as defined herein) of the Bonds (see APPENDIX D - BOOK-ENTRY ONLY SYSTEM herein). As long as DTC is the registered owner of the Bonds and DTC s book-entry method is used for the Bonds, the Trustee will send any notices to bond owners only to DTC. Discontinuance of Book-Entry Only System. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered as described in the Indenture. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered as described in the Indenture. In addition, the following provisions shall apply: interest with respect to the Bonds will be payable by check of the Trustee mailed by first class mail on the applicable Interest Payment Date to the Owners thereof provided that in the case of an Owner of $1,000,000 or greater in principal amount of Outstanding Bonds, such payment may, at such Owner s option, be made by wire transfer in immediately available funds to an account in the United States of America in accordance with written instructions provided prior to the applicable Record Date to the Trustee by such Owner. The Owners of the Bonds shown on the Registration Books on the Record Date for the Interest Payment Date will be deemed to be the Owners of the Bonds on said Interest Payment Date for the purpose of the paying of interest. Principal of the Bonds will be payable upon presentation and surrender thereof, at the office of the Trustee in St. Paul, Minnesota. Transfer or Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Indenture, upon surrender of such Bond for cancellation at the corporate trust office of the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the Authority shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds for like aggregate principal amount in authorized denominations and of like maturity. The Trustee will require the Bondholder requesting such transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee is not required to transfer or 5

12 exchange (a) any Bonds or portions thereof during the period established by the Trustee for selection of Bonds for redemption, or (b) any Bonds selected for redemption. Redemption Mandatory Redemption From Net Proceeds of Insurance or Condemnation. The Bonds are subject to mandatory redemption, prorata with the 2005A Senior Bonds, prior to their respective stated maturities, as a whole or in part in the order of maturity as directed by the Authority in a Written Request provided to the Trustee and by lot within each maturity, on any date, in integral multiples of $5,000 from prepaid Installment Payments made by the District from Net Proceeds of casualty insurance or condemnation award relating to the Project, upon the terms and conditions of, and as provided for in the Indenture and the Installment Purchase Agreement, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. There can be no assurance that such proceeds will be adequate to redeem all of the Bonds and the 2005A Senior Bonds. Optional Redemption. The Bonds maturing on or after September 1, 2016 are subject to redemption prior to maturity on any date on or after September 1, 2015, as a whole or in part, in a manner determined by the Authority, from prepayments of Installment Payments made at the option of the District pursuant to the Installment Purchase Agreement at a redemption price equal to the principal amount thereof to be redeemed, without premium, together with accrued interest thereon to the date fixed for redemption. Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 2026 and September 1, 2029 (the Term Bonds ) are also subject to mandatory redemption, in part by lot, on September 1, in each year commencing September 1, 2025 with respect to the Term Bonds maturing September 1, 2026 and commencing September 1, 2027 with respect to the Term Bonds maturing September 1, 2029, from mandatory sinking fund payments at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date fixed for redemption in the aggregate respective principal amounts and on September 1 in the respective years as set forth in the following schedule; provided, however, that if some but not all of the Bonds have been redeemed pursuant to the optional redemption or special mandatory redemption provisions described above, the total amount of sinking fund payments to be made subsequent to such redemption will be reduced in an amount equal to the principal amount of the Term Bonds so redeemed, by reducing each such future sinking fund payment in integral multiples of $5,000 in a manner designated by the Authority. SCHEDULE OF MANDATORY SINKING FUND REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1, 2026 September 1 Principal Year Amount 2025 $725, (maturity) 670,000 SCHEDULE OF MANDATORY SINKING FUND REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1, 2029 September 1 Principal Year Amount 2027 $520, , (maturity) 285,000 6

13 Acceleration Upon Default. All principal and interest may become immediately due and payable without premium, in certain circumstances, upon an Event of Default under the Indenture as more fully described in APPENDIX A SUMMARY OF THE LEGAL DOCUMENTS THE INDENTURE Events of Default and Remedies. Notice of Redemption. When redemption is authorized or required, the Trustee is required to give written notice to the respective Bondholders of any Bonds designated for redemption at their addresses appearing on the bond registration books, to the Securities Depositories, and to at least one Information Service, all as provided in the Indenture, by first class mail, postage prepaid, no less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds or the cessation of accrual of interest from and after the redemption date. Effect of Redemption. Interest on Bonds (or portions thereof) called for redemption will cease to accrue on the date fixed for redemption and such Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture and the Owners of such Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Indenture contains no provisions requiring any publication of notice of redemption, and Bondholders must maintain a current address on file with the Trustee to receive any notices of redemption. Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in an aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same interest rate and maturity. 7

14 Scheduled Debt Service on the Bonds The following is the scheduled Annual Debt Service on the Bonds. Bond Year Ending Principal Interest Annual Debt Service September 1, 2005 $ 380, $ 299, $ 679, September 1, , , ,016, September 1, , , ,037, September 1, , , ,057, September 1, , , ,075, September 1, , , ,093, September 1, , , ,119, September 1, , , ,143, September 1, , , ,136, September 1, , , ,123, September 1, , , ,097, September 1, , , ,085, September 1, , , ,077, September 1, , , ,077, September 1, , , ,071, September 1, , , ,054, September 1, , , ,041, September 1, , , , September 1, , , , September 1, , , , September 1, , , , September 1, , , , September 1, , , , September 1, , , , September 1, , , , Total $15,180, $8,615, $23,795,

15 Aggregate Debt Service The following table summarizes the annual aggregate Installment Payments with respect to the Bonds and all other payments due under the Pledge Agreement on a basis senior to the Installment Payments. Fiscal Year Ending September 1 Senior Payments Due Under the Pledge Agreement (1) 2005B Bonds Subordinate Installment Payments Total Payments Due Under the Pledge Agreement 2005 $ 12,663,459 $ 679,163 $ 13,342, ,974,820 1,016,518 14,991, ,243,810 1,037,518 15,281, ,511,950 1,057,293 15,569, ,787,300 1,075,843 15,863, ,073,203 1,093,168 16,166, ,355,850 1,119,268 16,475, ,657,100 1,143,793 16,800, ,680,626 1,136,743 16,817, ,532,554 1,123,361 16,655, ,308,739 1,097,161 16,405, ,445,514 1,085,306 16,530, ,081,794 1,077,166 16,158, ,891,865 1,077,841 15,969, ,057,065 1,071,881 16,128, ,847,250 1,054,288 15,901, ,655,250 1,041,038 15,696, ,259, ,913 15,256, ,794, ,263 14,761, ,239, ,388 14,151, ,779, ,469 12,626, ,505, ,938 11,264, ,270, ,950 8,848, ,978, ,250 6,427, ,058, ,538 4,356,788 Total $334,654,024 $23,795,052 $358,449,076 (1) Including the 2005A Senior Bonds. 9

16 Estimated Sources and Uses of Funds THE FINANCING PLAN The Trustee will receive the proceeds from the sale of the Bonds and other amounts and will apply them as follows: Sources of Funds Principal Amount of Bonds $15,180, Original Issue Discount (96,150.35) Available Funds $15,083, Uses of Funds 2005B Bonds Acquisition and Construction Fund $13,680, Reserve Account (1) 1,143, Underwriter s Discount 129, Costs of Issuance Fund (2) 130, Total Use of Funds $15,083, (1) (2) An amount equal to the Reserve Requirement (see SOURCES OF PAYMENT FOR THE BONDS - Reserve Account herein). Expenses include fees of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Special Tax Consultant, the Trustee, rating fees, costs of printing the Official Statement, and other costs of issuance of the Bonds. The Project Proceeds of the Bonds deposited in the 2005B Acquisition and Construction Fund, together with other funds of the District, including proceeds of the 2005A Bonds, will be used to acquire the site and complete a portion of the construction of the District s High School No. 13. Construction of High School No. 13 is expected to commence in April 2005 and is expected to be completed by July The facilities will provide 216,767 square feet of classroom, multipurpose rooms, gymnasium, library and administrative offices. It is expected to initially have a student population of 2,500 and be operated on a single track. The estimated cost of land acquisition and construction of High School No. 13 is approximately $125,000,000. A portion of the cost of High School No. 13 will be funded by the State of California. Payment of Installment Payments is not dependent on completion of construction of High School No

17 General SOURCES OF PAYMENT FOR THE BONDS As provided therein, the Bonds will be secured by a first pledge of, security interest in and lien on all of the Installment Payments, interest or other income derived from the investment of the funds held by the Trustee, and the Reserve Fund. The Authority has assigned all of its rights under the Installment Purchase Agreement including its rights to receive Installment Payments from the District and its remedies under the Installment Purchase Agreement to the Trustee for the benefit of the Owners of the Bonds. The Installment Payments are sufficient to pay, when due, the annual principal of and interest on the Bonds. The Bonds are limited obligations of the Authority. The Bonds not constitute an indebtedness of the District 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. Neither the Bonds nor the obligation of the District to pay Installment Payments constitutes an indebtedness of the Authority, the District, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. Installment Payments; Pledge Agreement The District s obligation to make Installment Payments is a special obligation of the District payable solely from and secured by a pledge of Special Taxes under the Pledge Agreement. Such pledge is subordinate to the pledge of Special Taxes to pay (1) lease payments relating to the Y/S School Facilities Financing Authority 1997 Special Tax Revenue Bonds (the 1997 Special Tax Bonds ) (2) lease payments relating to the District s Certificates of Participation, Series 2001 (the 2001 Lease Payments ), (3) lease payments relating to the District s Certificates of Participation, Series 2002 (the 2002 Lease Payments ), (4) lease payments relating to the District s Certificates of Participation, Series 2003 Refinancing (the 2003 Lease Payments ) and (5) installment payments relating to the 2005A Senior Bonds. Collectively, payments with respect to the 1997 Special Tax Bonds, the 2001 Lease Payments, the 2002 Lease Payments, the 2003 Lease Payments and the 2005A Senior Bonds are referred to herein as the Senior Payments due under the Pledge Agreement. The Installment Payments are not secured by, and the Owners of Bonds have no security interest in or mortgage on the property of the District. Default by the District will not result in loss of any property. Should the District default, the Trustee, as assignee of the Authority, may (subject to approval by the Insurer) declare all principal and interest components of the unpaid Installment Payments, together with accrued interest at the rate or rates specified on the respective outstanding Bonds from the immediately preceding Interest Payment Date in which payment was made, to be immediately due and payable, whereupon the same shall become due and payable, and take whatever action at law or in equity may appear necessary or desirable to accelerate the principal components of the remaining Installment Payments, or enforce performance and observance of any obligation, agreement or covenant of the District under the Installment Purchase Agreement. The obligation of the District to pay Installment Payments does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has pledged any form of taxation except for the Special Taxes. The obligation of the District to pay Installment Payments does not constitute a debt or liability of the District, the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. 11

18 Special Taxes The Special Taxes are excepted from the tax rate limitation of California Constitution Article XIIIA pursuant to Section 4 thereof as a special tax authorized by at least a two-thirds vote of the qualified electors as set forth in the Act. Consequently, the Board of Trustees of the District acting as the legislative body of and on behalf of the Community Facilities Districts, has the power and is obligated by the Pledge Agreement to cause the levy and collection of the Special Taxes. The District has covenanted in the Pledge Agreement to levy in each Fiscal Year the Special Taxes in an amount sufficient to pay the Installment Payments and other obligations of the Community Facilities Districts (see Parity Debt below and THE COMMUNITY FACILITIES DISTRICTS Indebtedness of the Community Facilities Districts ). Although the Special Taxes will constitute a lien on parcels of real property within the Community Facilities Districts, they do not constitute a personal indebtedness of the owner(s) of real property within the Community Facilities Districts. There is no assurance that the property owners, or any successors and/or assigns thereto or subsequent purchaser(s) of land within the Community Facilities Districts, will be able to pay the annual Special Taxes or, if able to pay the Special Taxes, that they will do so (see BONDHOLDERS RISKS and THE COMMUNITY FACILITIES DISTRICTS herein). The Special Taxes are required to be collected by the County of San Diego Tax Collector in the same manner and at the same time as regular ad valorem property taxes are collected by the Tax Collector of the County. When received, such Special Taxes will be deposited in the Special Tax Fund for the Community Facilities Districts to be held by the District and transferred by the District to the Trustee as provided in the Pledge Agreement. Parity Debt In addition to the Pledge Agreement the District, on behalf of the Community Facilities Districts may at any time authorize the issuance of additional bonds or other debt payable from the proceeds of the Special Taxes (including Special Taxes collected from future Community Facilities Districts established by the District) ( Parity Debt ) on a parity with the Installment Payments due under the Pledge Agreement for the Bonds, but only subject to certain conditions, which are made conditions precedent to the issuance of such Parity Debt, including without limitation the following: (a) (b) The District on behalf of the Community Facilities Districts shall be in compliance with all agreements, conditions, covenants and terms contained in the Pledge Agreement and in the indenture for the 1997 Special Tax Bonds and required to be observed by it; The School District shall have received a certificate from an Independent Financial Consultant which certifies that, based on the then current development status of the taxable property in the Community Facilities Districts, the maximum amount of Special Taxes that may be levied by the Board of Trustees for the Community Facilities Districts pursuant to the Act and the applicable ordinances and resolutions adopted by the Board of Trustees for each Bond Year, or Bond Year, as applicable, that the Bonds and all Parity Debt will be outstanding is, prior to the termination of the Installment Purchase Agreement pursuant to its terms, at least 1.10 times the amount required to pay the Senior Payments, the Installment Payments and debt service on all outstanding Bonds and Parity Debt following the issuance of the additional Parity Debt. Following the termination of the Installment Purchase Agreement pursuant to its terms or in the event the lease agreements relating to the Senior Payments is in effect but the District does not provide rental interruption insurance for a period of twenty-four months, the foregoing certification must state that, based on the then current development status of the taxable property in the Community Facilities Districts, the maximum amount of Special Taxes that may be levied by the Board of Trustees for the 12

19 Community Facilities Districts pursuant to the Act and the applicable ordinances and resolutions adopted by the Board of Trustees for each Bond Year, or Bond Year, as applicable, that the Bonds and all Parity Debt will be outstanding, less an assumed annual Special Tax delinquency amount, calculated by averaging the Special Tax delinquencies experienced in the Community Facilities Districts for the three (3) years immediately preceding the date of certification, and less one-half (1/2) of the Special Taxes allocable to taxable property in the Community Facilities Districts for which a building permit has been issued in the twelve months immediately preceding the date of certification, is at least 1.20 times the amount required to pay the Senior Payments or the Installment Payments, as applicable, on all outstanding Bonds and Parity Debt following the issuance of the additional Parity Debt; and (c) The interest and principal payment dates with respect to Parity Debt shall be the same as those of the Bonds and the amount in the Reserve Fund with respect to such Parity Debt shall be increased to the amount of the Reserve Fund Requirement taking into account such Parity Debt. It is the intent of the District, on behalf of the Community Facilities Districts to implement and incur future Parity Debt to continue the construction of required school facilities. However, no additional debt payable on a basis senior to the Installment Payments may be issued so long as the Bonds are outstanding, except for debt issued to refinance any currently outstanding Senior Payments, to the extent that the debt service on such refunding issue is not greater than the Senior Payments to be refunded, on an annual basis, and that the maturity is not extended past the existing maturity of such Senior Payments. Reserve Account A Reserve Account has been established under the Indenture to be held by the Trustee to further secure the timely payment of principal and interest on the Bonds. The amount to be maintained in the Reserve Account is an amount equal to the least of maximum annual Installment Payments, 10% of the aggregate principal amount of the Bonds, or 125% of the average annual Installment Payments (the Reserve Requirement ). In the event that the District fails to deposit with the Trustee the full amount required by the Installment Purchase Agreement to pay principal and interest due on the Bonds, the Trustee will withdraw from the Reserve Account, the difference between the amount required to be on deposit and the amount available on such date. Amounts in excess of the Reserve Requirement will be transferred to the Installment Payment Account to be applied as a credit against the next succeeding Installment Payments. The Indenture provides that in lieu of a cash deposit, the District may satisfy all or a portion of the Reserve Fund Requirement by means of a Reserve Facility, which consists of a qualifying letter of credit, surety bond, insurance policy or similar financial undertaking (see APPENDIX A SUMMARY OF THE LEGAL DOCUMENTS - Definitions ) herein. 13

20 THE COMMUNITY FACILITIES DISTRICTS Summary of the Community Facilities District Procedures The Mello-Roos Act provides a method of financing certain public capital facilities and services within defined boundaries. A community facilities district established pursuant to the Mello-Roos Act is a legally constituted governmental entity. Pursuant to the Mello-Roos Act, the Board adopted separate resolutions stating its intent to establish each of the fourteen Community Facilities Districts, to authorize the levy of Special Taxes within the boundaries of the Community Facilities Districts to pay principal of and interest on obligations issued or incurred by the Community Facilities Districts, and to fund some of the acquisition and construction of certain school facilities and public capital improvements directly. Following public hearings conducted pursuant to the provisions of Mello-Roos Act, the Board adopted separate resolutions establishing the Community Facilities Districts and determining the necessity to incur bonded indebtedness to acquire and construct such facilities and improvements within the Community Facilities Districts, and a resolution calling a special election to submit the levy of the Special Tax and incurring the bonded indebtedness to the qualified electors of the Community Facilities Districts. Under the Mello-Roos Act, when less than twelve registered voters reside within the proposed boundaries of a community facilities district, each landowner of lands located within the boundaries of the proposed community facilities district is qualified to vote on the question of incurring such bonded indebtedness. A two-thirds favorable vote of the qualified electors voting on the question is necessary to authorize issuance of the Bonds of a community facilities district to levy and collect special taxes therein to repay bonded indebtedness or other obligations, such as the obligation under the Pledge Agreement, and to pay directly the cost of such facilities. At elections held in Community Facilities Districts the landowners within each of the proposed Community Facilities Districts, by a vote of more than two-thirds of the electors voting, authorized the levy of the Special Taxes to pay the principal and interest on bonds and obligations. Following such elections, the Board adopted ordinances with respect to each Community Facilities District directing the levy of the Special Tax in each of the Community Facilities Districts. The Community Facilities Districts The Community Facilities Districts range from established residential areas which are fully developed and owned by homeowners, to commercial and industrial properties, to raw land owned by developers. However, Special Taxes relied upon to pay Installment Payments will be derived from levies upon parcels categorized as developed property only and development growth after November 1, 2004 is not included in calculating the Special Tax projections. A parcel in any Community Facilities District is considered developed when a building permit is issued. As of November 1, 2004, approximately 90% of these developed properties are no longer owned by a developer and are widely owned. Accordingly, no development information relating to these already developed parcels is included herein. However, the formulas for Rate and Method of Apportionment for Special Taxes for the Community Facilities Districts (the Special Tax Formulas ) contain authorization for a levy of Special Taxes on undeveloped land in the Community Facilities Districts at reduced rates and under certain circumstances, and such taxes could be levied, if necessary, to pay Installment Payments. There are certain risks associated with the taxation of undeveloped land. See the section entitled BONDHOLDERS RISKS. 14

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