$7,500,000* CALIFORNIA COMMUNITY COLLEGE ......The California Community College Financing Authority Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the

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l. NEW ISSUE - BOOK-ENTRY ONLY RATING: Moody’s: “A1”

(See “RATING” herein)

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See “TAX MATTERS” herein with respect to tax consequences relating to the Bonds.

$7,500,000* CALIFORNIA COMMUNITY COLLEGE FINANCING AUTHORITY

LEASE REVENUE BONDS, SERIES 2016A for Gavilan Joint Community College District

Dated: Date of Delivery Due: June 1, as shown on inside cover This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this

issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page not otherwise defined shall have the meanings set forth herein.

The California Community College Financing Authority Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the “Bonds”) will be issued and secured pursuant to a Trust Indenture, dated as of August 1, 2016 (the “Indenture”), by and between the California Community College Financing Authority (the “Authority”) and U.S. Bank National Association (the “Trustee”).

The Bonds constitute a limited, special obligation of the Authority payable solely from certain revenues of the Authority, such revenues consisting of (i) lease payments (the “Lease Payments”) to be made by Gavilan Joint Community College District (“the District”) to the Authority pursuant to a Lease/Purchase Agreement, dated as of August 1, 2016 (the “Lease”), by and between the Authority and the District, for use and possession of certain property and facilities described herein and (ii) other monies, and investment earnings thereon, held in funds or accounts by the Trustee pursuant to the Indenture, as further described herein. The payment of principal of and interest on the Bonds is secured by a pledge of such revenues. The Bonds are being issued to provide funds to: (a) finance certain public capital improvements for the District; (b) purchase an insurance policy for deposit into a debt service reserve fund established for the Bonds; and (c) pay the costs of issuance of the Bonds.

The Bonds will be issued as current interest bonds, such that interest thereon will accrue from the date of delivery and will be payable semiannually on June 1 and December 1 of each year, commencing December 1, 2016 (each, an “Interest Payment Date”). The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds are being issued in fully registered, book-entry form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Payments of principal of and interest on the Bonds will be payable by the Trustee to DTC, which is obligated in turn to remit such principal and interest to the DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds, as more fully described herein.

The Bonds are subject to redemption prior to maturity as further described herein.* The Authority has applied for municipal bond insurance for the scheduled payment of principal of and interest on the Bonds when due which, if

purchased, would be issued concurrently with the delivery of the Bonds.

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON, ANY PROPERTY OF THE AUTHORITY OR ITS MEMBER COMMUNITY COLLEGE DISTRICTS OR OF THE RESPECTIVE INCOME OR RECEIPTS THEREOF, EXCEPT THE REVENUES OF THE AUTHORITY AS DESCRIBED HEREIN. NEITHER THE STATE OF CALIFORNIA NOR THE AUTHORITY SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF THE BONDS, OR THE INTEREST THEREON, EXCEPT FROM REVENUES OF THE AUTHORITY AS DESCRIBED HEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE OF THE BONDS.

MATURITY SCHEDULE*

(see inside front cover)

The Bonds will be offered when, as, and if issued and received by the Underwriter, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. Certain legal matters will be passed upon for the Authority and the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California. Certain matters will be passed on for the Underwriter by Norton Rose Fulbright US LLP, Los Angeles, California. It is anticipated that the Bonds in book-entry form only will be available for delivery through the DTC book-entry system in New York, New York, on or about ______________, 2016.

Dated: _____________, 2016 ________________ * Preliminary, subject to change.

________________________________ ∗ Preliminary, subject to change. (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services (“CGS”), managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. None of the Underwriter, the Financial Advisor or the District is responsible for the selection, uses or correctness of the CUSIP numbers set forth herein. CUSIP numbers have been assigned by an independent company not affiliated with the District, the Financial Advisor or the Underwriter and are included solely for the convenience of the registered owners of the applicable Certificates. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Certificates as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Certificates.

MATURITY SCHEDULE*


LEASE REVENUE BONDS, SERIES 2016A for

GAVILAN JOINT COMMUNITY COLLEGE DISTRICT

Base CUSIP(1): 13012E

$_____________ Serial Bonds

Maturity Principal Interest (June 1) Amount Rate Yield CUSIP(1)

CALIFORNIA COMMUNITY COLLEGE FINANCING AUTHORITY

Governing Board

Dr. Lawrence Galizio, Executive Director and Board Member Elaine Reodica, Secretary and Board Member

Edwin Eng, Board Member, State Center Community College District Ron Perez, Board Member, Palomar Community College District

Andrew Suleski, Board Member, Butte-Glenn Community College District

PROFESSIONAL SERVICES

Program Sponsor

Community College League of California Sacramento, California

Bond Counsel and Disclosure Counsel

Stradling Yocca Carlson & Rauth, a Professional Corporation San Francisco, California

Financial Advisor

Dale Scott & Company Inc. San Francisco, California

Trustee U.S. Bank National Association

San Francisco, California

No dealer, broker, salesperson or other person has been authorized by the Authority or the Underwriter to give any information or to make any representations other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority 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 an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts.

The Underwriter has provided the following sentence for inclusion in this Official Statement.

“The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information.”

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 since the date hereof.

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 DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE 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 CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

The District maintains a website. However, the information presented on such website is not incorporated into this Official Statement by any reference, and should not be relied upon in making investment decisions with respect to the Bonds.

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TABLE OF CONTENTS PAGE

INTRODUCTION ........................................................................................................................................................ 1!Purpose .................................................................................................................................................................... 1!Security and Sources of Payment for the Bonds ..................................................................................................... 1!The Authority ........................................................................................................................................................... 2!Gavilan Joint Community College District ............................................................................................................. 2!Debt Service Reserve Fund ..................................................................................................................................... 2!Description of the Bonds ......................................................................................................................................... 3!Forward-Looking Statements .................................................................................................................................. 4!Bond Insurance ........................................................................................................................................................ 4!Tax Matters .............................................................................................................................................................. 4!Offering and Delivery of the Bonds ........................................................................................................................ 4!Bond Owners’ Risks ................................................................................................................................................ 4!Continuing Disclosure ............................................................................................................................................. 5!Other Matters ........................................................................................................................................................... 5!

THE PROJECT ............................................................................................................................................................ 5!THE BONDS ................................................................................................................................................................. 5!

General ..................................................................................................................................................................... 5!Redemption .............................................................................................................................................................. 6!Additional Bonds ..................................................................................................................................................... 8!

SECURITY FOR THE BONDS .................................................................................................................................. 8!Payment of the Bonds .............................................................................................................................................. 8!Debt Service Reserve Fund ..................................................................................................................................... 8!Bond Insurance ........................................................................................................................................................ 9!

LEASE PAYMENTS .................................................................................................................................................... 9!General Provisions ................................................................................................................................................... 9!District Obligation to Pay ...................................................................................................................................... 10!Covenant to Budget and Appropriate .................................................................................................................... 10!Abatement .............................................................................................................................................................. 10!Insurance ................................................................................................................................................................ 11!Assignment ............................................................................................................................................................ 11!Removal or Substitution ........................................................................................................................................ 11!Default and Remedies ............................................................................................................................................ 12!

THE LEASED PROPERTY ...................................................................................................................................... 12!RISK FACTORS ......................................................................................................................................................... 13!

Lease Payments Not District Debt ......................................................................................................................... 13!Abatement Risk with Respect to Lease Payments ................................................................................................. 13!Self-Insurance ........................................................................................................................................................ 13!No Acceleration Upon Default .............................................................................................................................. 13!Absence of Earthquake Insurance ......................................................................................................................... 14!Limitations on Remedies ....................................................................................................................................... 14!

BOND PAYMENT SCHEDULE ............................................................................................................................... 15!ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................. 16!THE AUTHORITY .................................................................................................................................................... 16!FUNDING OF COMMUNITY COLLEGE DISTRICT IN CALIFORNIA ........................................................ 16!

Major Revenues ..................................................................................................................................................... 16!

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Tax Shifts and Triple Flip ...................................................................................................................................... 18!Budget Procedure ................................................................................................................................................... 19!Minimum Funding Guarantees for California Community College Districts

Under Propositions 98 and 111 .......................................................................................................................... 19!State Dissolution of Redevelopment Agencies ...................................................................................................... 21!State Assistance ..................................................................................................................................................... 22!Ad Valorem Property Taxation .............................................................................................................................. 24!Teeter Plan ............................................................................................................................................................. 25!

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ............................................................................... 25!

Article XIIIA of the California Constitution ......................................................................................................... 25!Legislation Implementing Article XIIIA ............................................................................................................... 26!Unitary Property .................................................................................................................................................... 27!Article XIIIB of the California Constitution ......................................................................................................... 27!Article XIIIC and Article XIIID of the California Constitution ............................................................................ 28!Proposition 26 ........................................................................................................................................................ 28!Propositions 98 and 111 ......................................................................................................................................... 29!Jarvis v. Connell .................................................................................................................................................... 31!Proposition 1A and Proposition 22 ........................................................................................................................ 31!Proposition 30 ........................................................................................................................................................ 32!Proposition 2 .......................................................................................................................................................... 32!Future Initiatives .................................................................................................................................................... 33!

TAX MATTERS ......................................................................................................................................................... 34!CERTAIN LEGAL MATTERS ................................................................................................................................ 35!

Absence of Litigation ............................................................................................................................................ 35!Continuing Disclosure ........................................................................................................................................... 36!Enhanced Information Reporting Requirements ................................................................................................... 36!

RATING ...................................................................................................................................................................... 36!UNDERWRITING ...................................................................................................................................................... 37!MISCELLANEOUS ................................................................................................................................................... 38!

APPENDIX A - FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT ................................................................... A-1

APPENDIX B - THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT ...................................... B-1

APPENDIX C - GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITIES OF GILROY, HOLLISTER AND MORGAN HILL AND SAN BENITO AND SANTA CLARA COUNTIES, CALIFORNIA ............................................................................. C-1

APPENDIX D - SANTA CLARA COUNTY COMMINGLED INVESTMENT POOL .................................................. D-1

APPENDIX E - PROPOSED FORM OF BOND COUNSEL OPINION FOR THE BONDS .......................................... E-1

APPENDIX F - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS .......................................................................... F-1

APPENDIX G - FORM OF CONTINUING DISCLOSURE CERTIFICATE .................................................................. G-1

APPENDIX H - BOOK-ENTRY ONLY SYSTEM ........................................................................................................... H-1

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OFFICIAL STATEMENT


LEASE REVENUE BONDS, SERIES 2016A for Gavilan Joint Community College District

INTRODUCTION

This Official Statement, which includes the cover page, inside cover page and appendices hereto, sets forth certain information concerning the issuance and sale by the California Community College Financing Authority (the “Authority”) of its Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the “Bonds”) in an aggregate principal amount of $7,500,000.*

This Introduction is qualified in its entirety by reference to the more detailed information included and referred to elsewhere in this Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Terms used in this Official Statement and not otherwise defined herein shall have the respective meanings set forth in “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Definitions” attached hereto.

Purpose

The Bonds are being issued pursuant to a Trust Indenture, dated as of August 1, 2016 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”), to provide funds to: (a) finance certain public capital improvements for the Gavilan Joint Community College District (the “District”), as defined in Section 6585(g) of the Act (as defined below), as further described herein (see “THE PROJECT” herein); (b) purchase an insurance policy for deposit into a debt service reserve fund established for the Bonds; and (c) pay the costs of issuance of the Bonds.

The Bonds are being issued pursuant to the Constitution and the laws of the State of California (the “State”), principally the Marks-Roos Local Bond Pooling Act of 1985, consisting of Article 4 of Chapter 5 of Division 7 of Title 1 of the State of California Government Code (commencing with Section 6584) (the “Act”).

Security and Sources of Payment for the Bonds

The Bonds are limited obligations of the Authority payable solely from certain revenues of the Authority, consisting of (i) lease payments (the “Lease Payments”) to be made by the District to the Authority pursuant to a Lease/Purchase Agreement, dated as of August 1, 2016 (the “Lease”), by and between the Authority and the District for use and possession of certain property and facilities described herein and (ii) other monies, and investment earnings thereon, held in funds or accounts by the Trustee pursuant to the Indenture, as further described herein. See “SECURITY FOR THE BONDS – Payments of the Bonds” herein.

General Provisions Regarding Security and Sources of Payment. Under the Lease, the District has agreed to pay Lease Payments to the Authority as rental for the use and possession of certain facilities of the District (the “Leased Property”). See “THE LEASED PROPERTY” herein. The Lease Payments are payable from any source of legally available funds but are subject to abatement as described herein. See “LEASE PAYMENTS – Abatement” herein. ___________________________ * Preliminary, subject to change.

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Pursuant to an Assignment Agreement, dated as of August 1, 2016 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority will assign to the Trustee, for the benefit of the registered owners (the “Owners”) of the Bonds, substantially all of its rights under the Lease and the Site Lease, dated as of August 1, 2016 (the “Site Lease”), by and between the District and the Authority, including the Authority’s rights to receive Lease Payments and prepayments from the District under the Lease and any rights that may be necessary to enforce payment of such Lease Payments and prepayments. All rights assigned by the Authority with respect to the Bonds pursuant to the Assignment Agreement shall be administered by the Trustee in accordance with the provisions of the Indenture for the equal and proportionate benefit of all Owners of such Bonds.

Limited Obligation. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON, ANY PROPERTY OF THE AUTHORITY OR ITS MEMBER COMMUNITY COLLEGE DISTRICTS OR ANY OF THE RESPECTIVE INCOME OR RECEIPTS THEREOF, EXCEPT FOR THE REVENUES OF THE AUTHORITY DESCRIBED HEREIN. NEITHER THE STATE OF CALIFORNIA NOR THE AUTHORITY SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF THE BONDS, OR THE INTEREST THEREON, EXCEPT FROM REVENUES OF THE AUTHORITY AS DESCRIBED HEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE OF THE BONDS.

The Authority

The Authority is a joint exercise of powers authority organized and operating pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California. The Authority is composed of community college districts pursuant to a joint exercise of powers agreement dated as of May 18, 1995, as amended from time to time to the date hereof. The Authority was established under the sponsorship of the Community College League of California to facilitate capital facility financings by California community college districts. See “THE AUTHORITY” herein.

Gavilan Joint Community College District

The District is located in the counties of Santa Clara (the “County”) and San Benito (“San Benito County” and together with the County, the “Counties”), California. The District was established in 1919. The District covers approximately 2,700 square miles including nearly all of San Benito County and the southern part of Santa Clara County. The District is approximately 35 miles south of San Jose and 80 miles south of San Francisco. The District currently maintains one comprehensive community college in Gilroy, Gavilan College, with satellite centers in Hollister and Morgan Hill. Gavilan College is fully accredited by the Accrediting Commission for Community and Junior Colleges (the “ACCJC”). For additional information relating to the District, see “Appendix A – FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT” attached hereto.

Debt Service Reserve Fund

A debt service reserve fund (the “Reserve Fund”) is established for the Bonds under the Indenture. Upon issuance of the Bonds, the District expects to deposit into the Reserve Fund a surety

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bond, municipal bond insurance policy, letter of credit or other comparable credit facility (each, a “Reserve Facility”) with an amount available thereunder equal to the Reserve Requirement (defined herein). The full amount available in the Reserve Fund may be used by the Trustee to pay the principal of and interest on the Bonds in the event that amounts on deposit in the debt service accounts therefor are insufficient. See “SECURITY FOR THE BONDS – Debt Service Reserve Fund” herein.

Description of the Bonds

Denominations, Form and Registration. The Bonds are being issued in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds will be executed and delivered as fully registered certificates, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of interests in the Bonds (the “Beneficial Owners”) in the amounts set forth on the inside cover page hereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants, as further described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See “Appendix H – BOOK-ENTRY ONLY SYSTEM” attached hereto. In the event that the book-entry-only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture.

So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the “Owners,” “Bond Owners” or “Holders” of the Bonds (other than under the captions “INTRODUCTION – Tax Matters” and “TAX MATTERS,” and in Appendix E) will mean Cede & Co. and will not mean the Beneficial Owners of the Bonds.

Payments. The Bonds are being dated as of their date of delivery and will mature on June 1 in the years and amounts set forth on the inside cover page hereof. The Bonds will be issued as current interest bonds, such that the Bonds will bear periodic interest payable on June 1 and December 1 of each year, commencing December 1, 2016 (each, an “Interest Payment Date”). The Bonds will bear interest at the rates set forth on the inside cover page hereof from their date of delivery until their respective dates of maturity or prior redemption. Principal, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry-only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal, premium, if any, and interest by the Trustee, all as described herein. See “Appendix H – BOOK-ENTRY ONLY SYSTEM” attached hereto.

For a more complete description of the Bonds, the Lease, the Indenture and other basic documentation pursuant to which the Bonds are being issued, see “THE BONDS,” “SECURITY FOR THE BONDS,” and “LEASE PAYMENTS” herein and “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” attached hereto. The summaries and descriptions in this Official Statement of the Indenture, the Lease, the Site Lease, the Assignment Agreement, and other agreements relating to the Bonds, are qualified in their entirety by the form thereof and the information with respect thereto included in such documents. All capitalized terms used in this Official Statement (unless otherwise defined herein) which are defined in the Indenture or the Lease shall have the same meanings assigned to such terms as set forth therein. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Definitions” attached hereto.

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Forward-Looking Statements

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “intend,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information regarding the District in Appendices A and B attached hereto.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

Bond Insurance

The Authority has applied for municipal bond insurance for the scheduled payment of principal of and interest on the Bonds when due which, if purchased, would be issued concurrently with the delivery of the Bonds. See “SECURITY FOR THE BONDS – Bond Insurance” herein.

Tax Matters

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See “TAX MATTERS” herein.

Offering and Delivery of the Bonds

The Bonds are offered when, as and if authenticated, delivered and received by the Underwriter (defined herein), subject to approval as to their legality by Bond Counsel and the satisfaction of certain other conditions. It is anticipated that the Bonds will be available in book-entry form for delivery through DTC in New York, New York, on or about _________, 2016.

Bond Owners’ Risks

Certain events could affect the ability of the District to make Lease Payments when due. See “RISK FACTORS” herein for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds.

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Continuing Disclosure

The District has covenanted for the benefit of Bond Owners and Beneficial Owners to provide certain financial information and operating data relating to the District not later than nine months after the end of the District’s fiscal year (presently ending June 30), commencing with the report for the 2015-16 Fiscal Year (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events. The annual report and notices of material events will be filed with the Municipal Securities Rulemaking Board. The information to be contained in the annual report or the notices of material events is set forth in “Appendix G – FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”).

Other Matters

This Official Statement speaks only as of its date, and the information and expression of opinions contained 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 or the District since the date hereof. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more repositories. The summaries of and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and all references herein are qualified in their entirety by reference to document, statute, report or instrument.

Copies of the Lease and the Indenture will be available upon request from U.S. Bank National Association, as Trustee.

THE PROJECT

The Project includes funding for the construction and improvement of the Coyote Valley Education Center, where 15 acres of the total 55-acre site is being developed with five modular buildings that will serve as classrooms, laboratories, athletic facilities, administrative offices and other support facilities serving approximately 500 students. This portion of the Project is to be funded with approximately $4 million in proceeds from the sale of the Bonds and is expected to be completed by February 1, 2017. A swimming pool renovation plus a number of gymnasium and sports fields projects are to be funded with approximately $2.2 million in proceeds from the sale of the Bonds and is expected to be completed by Spring 2018. The Project also includes funding for seismic upgrades to the District’s Student Center, expected to be completed by February 2017 and to be funded with approximately $700,000 in proceeds from the sale of the Bonds.

THE BONDS

General

The Bonds will mature on June 1 in the years and amounts set forth on the inside cover page hereof. The Bonds will be issued in the aggregate principal amount of $7,500,000.* DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered Bonds in the name of Cede & Co., as nominee of DTC, as registered owner of the Bonds. For a more complete description of the Book-Entry System, see “Appendix H – BOOK-ENTRY ONLY SYSTEM” attached hereto.

___________________________ * Preliminary, subject to change.

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The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds will be dated their date of delivery and interest thereon will be payable semiannually on each Interest Payment Date, commencing December 1, 2016, at the rates per annum set forth on the inside cover page hereof. Interest on the Bonds will be payable to the registered owner thereof from the Interest Payment Date next preceding the date of authentication thereof, unless (i) it is authenticated after the close of business on 15th day of the month immediately preceding Interest Payment Date (a “Record Date”) and before the close of business on the immediately following Interest Payment Date, in which event interest thereon will be payable from such Interest Payment Date, or (ii) it is authenticated prior to the close of business on or before November 15, 2016, in which event interest thereon will be payable from the date of delivery. Interest on the Bonds will be computed on the basis of a 360-day year comprising twelve 30-day months.

The principal of, premium, if any, and interest on the Bonds shall be payable in lawful money of the United States of America. Principal of and premium, if any, on the Bonds shall be payable at maturity or redemption upon the surrender thereof at the principal office of the Trustee. Payment of interest on the Bonds shall be made on each Interest Payment Date to the Owners thereof as of the Trustee’s close of business on the Record Date corresponding to such Interest Payment Date by check mailed to such Owners on the Interest Payment Date at their respective addresses as they appear on the registration books maintained by the Trustee or at such other addresses as are furnished to the Trustee in writing by such Owners for such purpose. Upon the request of any Owner of Bonds aggregating $1,000,000 or more in principal amount, such interest shall be payable by wire transfer in immediately available funds to an account in any bank located in the continental United States designated by such Owner.

Redemption

Extraordinary Redemption. The Bonds are subject to extraordinary redemption in whole or in part prior to their respective stated maturities, at any time upon damage to or condemnation of a Leased Property, from net proceeds of casualty insurance or condemnation award, at a redemption price equal to the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the redemption date of such Bonds, without premium.

Optional Redemption.* The Bonds maturing on or after June 1, 2027 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part, on any date on or after June 1, 2026 at a redemption price equal to the principal amount of the Bonds selected for redemption, together with interest accrued thereon to the date of redemption, without premium.

Special Optional Redemption.* The Bonds maturing on and after June 1, 2022 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from proceeds of local general obligation bonds, in whole or in part, on any date on or after June 1, 2021 at a redemption price equal to the principal amount of the Bonds selected for redemption, together with interest accrued thereon to the date of redemption, without premium.

Mandatory Sinking Fund Redemption. * The Term Bonds maturing on June 1, 20__ are subject to redemption prior to maturity from mandatory sinking fund payments on June 1 of each year, on and after June 1, 20__, at a redemption price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption, without premium. The principal amount represented by such Term Bonds to be so redeemed and the dates therefor and the final principal payment date is as indicated in the following table:

___________________________ * Preliminary, subject to change.

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Date (June 1) Principal Amount

TOTAL

In the event the Trustee redeems Term Bonds in part, but not in whole, as described under “Extraordinary Redemption”, “Optional Redemption” or “Special Optional Redemption” above, the amount of such Bonds to be redeemed from a sinking fund redemption in each subsequent year shall be reduced pro rata to reflect such optional redemption.

Notice of Redemption. Notice of redemption will be mailed by the Trustee in the name of the Authority, not less than 30 nor more than 60 days prior to the redemption date, to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee and one or more Information Services. So long as DTC is acting as Securities Depository for the Bonds, notice of redemption will be mailed to DTC, not the Beneficial Owners of the Bonds.

Each notice of redemption shall state the date of notice, the date of issue of the Bonds, the complete official name of the Bonds (including Series designation, interest rate and maturity date), the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), CUSIP numbers, if any, and, if less than all of any maturity is to be redeemed, the distinctive certificate numbers of the Bonds to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on such date there will become due and payable on each of such Bonds the redemption price thereof or of such specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered to the Trustee. Any defect in the notice or the mailing will not affect the validity of the redemption of any Bond.

“Information Services” means Financial Information, Inc.’s “Daily Called Bond Service,” 1 Cragwood Road, 2nd Floor, South Plainfield, New Jersey 07080, Attention: Editor; Mergent Inc., 585 Kingsley Park Drive, Fort Mill, South Carolina 29715, Attention: Called Bond Department; and Standard and Poor’s J.J. Kenny Information Services’ “Called Bond Record,” 55 Water Street, 45th Floor, New York, New York 10041.

“Securities Depository” means The Depository Trust Company, 55 Water Street, New York, New York 10041.

Selection of Bonds for Redemption. Whenever provision is made in the Indenture for redemption of less than all Outstanding Bonds, the Trustee, upon written direction from the Authority, shall select Bonds for redemption as so directed and if not so directed, in inverse order of maturity. Whenever provision is made in the Indenture for the redemption of less than all the Bonds of a particular maturity, the particular Bonds to be called for redemption shall be selected by the Trustee from all Outstanding Bonds of that maturity which are subject to such redemption by lot upon direction of the Authority and in any manner which the Trustee deems to be fair.

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Rescission of Notice of Redemption. With respect to any notice of redemption of Bonds, unless upon the giving of such notice such Bonds shall be deemed to have been defeased within the meaning of the Indenture, such notice will state that such redemption will be conditional upon the receipt by the Trustee (or such other financial institution as the Authority may select as escrow agent), on or prior to the date fixed for such redemption, of the moneys necessary and sufficient to pay the principal, premium, if any, and interest on such Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect, the Bonds will not be subject to redemption on such date and the Bonds will not be required to be redeemed on such date. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made and the Trustee will, within a reasonable time thereafter, give notice to the persons to whom and in the manner in which the notice of redemption was given, that such moneys were not so received. The Lessee will also have the right to rescind any notice of redemption, by written notice to the Trustee, on or prior to the date fixed for such redemption. The Trustee will distribute a notice of such rescission in the same manner as the notice of redemption was originally provided.

Additional Bonds

Under the terms of the Indenture, the Authority is authorized to sell Additional Bonds (as defined in Appendix A) secured by Lease Payments for use and occupancy of the Property. Such Additional Bonds would be payable from legally available moneys of the District and be subject to abatement. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Trust Indenture – Additional Bonds” attached hereto.

SECURITY FOR THE BONDS

Payment of the Bonds

The Indenture provides that the Bonds are payable solely from, and secured by (a) all amounts payable by the District pursuant to the Lease, including the Lease Payments, as well as extensions and renewals of the term thereof, if any, including therein all amounts realized upon the enforcement of the Lease and all payments to be made thereunder (including prepayments); (b) any proceeds of Bonds originally deposited with the Trustee and all moneys deposited and held from time to time by the Trustee in the funds, accounts and sub-accounts established under the Indenture; (c) investment income with respect to any moneys held by the Trustee in the funds, accounts and sub-accounts established under the Indenture; and (d) any insurance proceeds or condemnation awards received by or payable to the Trustee with respect to property leased pursuant to the Lease, including rental interruption insurance (collectively, the “Revenues”), including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive and make receipt for any Revenues whether payable pursuant to the Lease or otherwise, to bring actions and proceedings under the Lease or for the enforcement thereof, and to do any and all things which the Authority is or may become entitled to do under the Lease.

Debt Service Reserve Fund

A Reserve Fund is established for the Bonds under the Indenture. Upon issuance of the Bonds, the District expects to deposit into the Reserve Fund a Reserve Facility with an amount available thereunder equal to the Reserve Requirement. The term “Reserve Requirement” means, with respect to the Bonds, the least of (i) the maximum aggregate annual principal and interest payments payable with respect to the Bonds, (ii) 125% of the average annual aggregate principal and interest payments payable with respect to the Bonds or (iii) 10% of the face amount of the Bonds (less original issue discount if in excess of two percent (2%) of the stated redemption amount at maturity).

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The Reserve Fund will be available to pay principal of and interest on the Bonds to the extent of any deficiency in the debt service accounts therefor, and, only to the extent of moneys on deposit in such Reserve Fund, for the other uses described in “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Trust Indenture – Debt Service Reserve Fund” attached hereto.

Under the Indenture, the Authority is authorized to satisfy the Reserve Requirement with a Reserve Facility. Any amounts paid by the provider of any such Reserve Facility shall be deposited in the Reserve Fund. The Authority may substitute moneys for all or part of the amount available to be drawn under any such Reserve Facility so long as, at the time of such substitution, the amount on deposit in the Reserve Fund, together with the amount available under such Reserve Facility (taking into account any reduction in the amount available under a Reserve Facility to be made in connection with said substitution) and the amounts available under any other Reserve Facility deposited into such Reserve Fund, shall be at least equal to the Reserve Requirement and provided that any draws on any such Reserve Facility have been fully reimbursed.

Bond Insurance

The Authority has applied for municipal bond insurance for the scheduled payment of principal of and interest on the Bonds when due which, if purchased, would be issued concurrently with the delivery of the Bonds.

LEASE PAYMENTS

General Provisions

Lease Payments are required to be made by the District under the Lease on or before May 15 and November 15 of year for the use and possession of the Leased Property for the period commencing as of the date of delivery of the Bonds and terminating on the date provided for in the Lease. The Lease Payments are expected to equal the principal and interest due on the Bonds. See “BOND PAYMENT SCHEDULE” herein. The District has also covenanted under the Lease to pay Lease Payments in amounts required by the Authority for the payment of costs and expenses incurred by the Authority in connection with the Leased Property, including without limitation, the fees of the Authority charged to the District, and other expenses charged to the District by the Trustee or the Authority as provided in the Indenture.

The District has agreed and determined that the total rental under the Lease will represent the fair rental value of the Leased Property. Lease Payments shall be paid from any source of legally available funds of the District, and, so long as the Leased Property is available for the District’s use, the District has covenanted to take such action as may be necessary to include all Lease Payments due under the Lease in the District’s budget, to maintain such items to the extent unpaid for that fiscal year in its budget, and to make the necessary appropriations and supplemental appropriations to the extent necessary, for all Lease Payments due from the District. See “LEASE PAYMENTS – Covenant to Budget and Appropriate” herein.

FOR INFORMATION REGARDING THE DISTRICT, INCLUDING FINANCIAL INFORMATION, SEE THE APPROPRIATE APPENDICES ATTACHED HERETO. SEE ALSO “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” HEREIN.

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The District’s obligation to pay Lease Payments is subject to abatement. See “SECURITY FOR THE BONDS – Abatement” herein. However, during periods of abatement, any moneys in the Debt Service Fund or the Reserve Fund, are available to pay the Lease Payments.

District Obligation to Pay

The District has agreed to pay to the Authority, as rental for the use and possession of the Leased Property, the Lease Payments on the dates when due and in the amounts sufficient to pay the principal of and interest on the Bonds.

Notwithstanding any dispute between the District and the Authority, the District must make all Lease Payments when due without deduction or offset of any kind and cannot withhold any such payments pending final resolution of such dispute. The Lease is a “net-net-net lease,” and the District agrees that the rents will be an absolute net return to the Authority free and clear of any expenses, charges or set-offs whatsoever.

Covenant to Budget and Appropriate

Pursuant to the Lease, the District covenants to take such action as may be necessary to include all Lease Payments in its budgets and to maintain such Lease Payments to the extent unpaid for that fiscal year in its budgets, and to make the necessary appropriations and supplemental appropriations to the extent necessary, for all such Lease Payments.

Such covenants described above are deemed to be, and shall be, ministerial duties imposed by law, and it is the duty of each and every public official of the District to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the District to carry out and perform the covenants made by the District in the Lease.

Abatement

Lease Payments are paid by the District in the rental payment period for and in consideration of the right of use and occupancy of, and continued quiet use and enjoyment of the Leased Property during such period for which said rental is to be paid.

The Lease Payments shall be abated in whole or in part during any period during which by reason of damage or destruction (other than by condemnation) there is substantial interference with the use and possession of the Leased Property by the District. The extent of such abatement shall be in an amount equal to the aggregate principal amount of Lease Payments remaining under the Lease, less the fair rental value of the Leased Property not damaged or destroyed on the date of such abatement (provided that if such amount is a negative number then the amount of such abatement shall be $0); provided, however, that in the event such damage or destruction results in redemption of Bonds pursuant to the Indenture, the remaining Lease Payments (including credits to be applied thereto as provided in the Indenture) will be sufficient to pay all of the principal and interest on the remaining Outstanding Bonds. Such abatement shall not result to the extent moneys are held by the Trustee under the Indenture which are eligible to be credited toward the District’s Lease Payments under the terms of the Indenture, and Net Proceeds of insurance and rental interruption insurance (plus unabated Lease Payments) are sufficient to make Lease Payments when and as due, it having been declared pursuant to the Indenture that such moneys and Net Proceeds constitute special funds for the payment of the Lease Payments. Subject to the provisions described in the preceding sentence, such abatement or adjustment, if any, will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction, if any.

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Insurance

The Leased Property of the District will be insured to the extent set forth in the Lease. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Lease/Purchase Agreement – Fire and Extended Coverage Insurance” and “– Rental Interruption Insurance” attached hereto. The Lease requires the District to procure or cause to be procured insurance against loss or damage to any part of the Leased Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. The extended coverage insurance will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, sprinkler damage, boiler explosion and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to 100% of the replacement cost of the Leased Property or the Bonds then Outstanding, whichever is greater (subject to a deductible clause of not to exceed the lesser of 10% of such amount or $250,000). Pursuant to the Lease, the District may maintain such insurance as part of or in conjunction with any other fire and extended coverage insurance carried or required to be carried by the District and may self-insure for such risks in accordance with the terms of the Lease only under certain conditions. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – The Lease/Purchase Agreement – Net Proceeds of Insurance; Form of Policies; Retaining of Insurance Consultant” attached hereto.

The Lease requires the District to maintain rental interruption insurance to cover loss, total or partial, of the use of any part of the Leased Property as the result of any of the hazards covered by its insurance coverage required by the Lease and the resulting loss of rental income to the Trustee, as assignee of the Authority, in an amount sufficient to pay the maximum remaining principal and interest portions of the Lease Payments due under such Lease during any 24-month period.

The District is not required to maintain flood or earthquake insurance on the Leased Property under the Lease.

Assignment

Pursuant to the Assignment Agreement, the Authority assigns to the Trustee for the benefit of the owners of the Bonds issued under the Indenture, all of the Authority’s rights under the Lease including, without limitation, (1) the right to receive and collect all of the Lease Payments and prepayments from the District under the Lease or the Indenture, as applicable, (2) the right to receive and collect any proceeds of any insurance maintained thereunder, or any condemnation award rendered with respect to a Leased Property, or of any lease or sale of such Leased Property in the event of a default by the District under the Lease, (3) the right to take all actions and give all consents under the Lease, including without limitation, regarding subleases, regarding amendments, and regarding defaults, (4) the right to exercise such rights and remedies conferred on the Authority pursuant to the Lease as may be necessary or convenient (i) to enforce payment of Lease Payments, prepayments and any other amounts required to be deposited in the funds and accounts established under the Indenture, or (ii) otherwise to protect the interests of the Authority in the event of a default by the District under the Lease, and (5) the right of the Authority to receive rental in excess of Lease Payments as compensation for releasing the Leased Property upon events of default under the Lease, as provided in the Lease.

Removal or Substitution

Upon compliance with the conditions discussed in “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS,” attached hereto, the District may amend or change the Leased Property at any time by delivering an amended description of the Leased Property to the Trustee and the Authority. The District reserves the right at any time to remove all or any portion of the Leased Property or to substitute

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other public facilities, equipment and/or real property owned by the District for all or any portion of the Leased Property.

Default and Remedies

Upon an Event of Default described below, the District will be deemed to be in default under the Lease, and the Trustee may exercise any and all remedies available pursuant to law or granted pursuant to the Lease. Upon any such default, including a failure to pay Lease Payments, the Trustee as assignee of the Authority may either (1) terminate the Lease and recover certain damages or (2) continue to collect rent from the District on an annual basis by seeking a separate judgment for that year’s defaulted Lease Payments and/or reenter the Leased Property and relet it. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ––Lease/Purchase Agreement – Events of Default and Remedies” attached hereto. In the event of default, there is no remedy of acceleration of the District’s total Lease Payments due over the term of the Lease, and the Trustee is not empowered to sell Leased Property and use the proceeds of such sale to redeem the Bonds or pay debt service thereon.

Events of Default under the Lease include (i) the failure of the District to pay any Lease Payment under the Lease when the same becomes due and payable, (ii) the failure of the District to observe and perform any covenant, condition or agreement of the Lease or the Site Lease to be kept or performed by the District after notice and the elapse of a 30-day grace period, and (iii) the filing by the District of a voluntary petition in bankruptcy or failure by the District to lift any execution, garnishment or attachment or the filing of an involuntary petition in bankruptcy against the District which has not been withdrawn within 30 days or insolvency of the District, all as more particularly described in “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Lease/Purchase Agreement – Events of Default and Remedies” attached hereto.

Events of Default under the Indenture include (i) the failure of the District to pay the interest on the Bonds when the same becomes due and payable, (ii) the failure of the District to pay any portion of the principal of the Bonds when the same becomes due and payable, (iii) an Event of Bankruptcy (as defined in the Indenture) occurs, (iv) the failure of the Authority in due and punctual performance of any covenant, condition, agreement or provision contained in the Bonds or the Indenture to be kept or performed by the Authority after notice and the elapse of a 30-day grace period, and (v) an event of default under the Lease, all as more particularly described in “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Trust Indenture – Events of Default and Remedies” attached hereto.

THE LEASED PROPERTY

The Lease will be secured by the Gavilan College Coyote Valley Educational Center, a 55-acre site consisting of five modular buildings and 31,200 square feet of classrooms, laboratories, athletic facilities, administrative offices and other support facilities. The Leased Property is located at 650 Bailey Avenue, San Jose, California 95141. The land was purchased by the District for $19.2 million in October 2006 and the District estimates that the fair market value of the modular buildings is approximately $6.5 million. The District also expects that, once the Project is completed, the insured value of all structures on the property will exceed the current fair market value, and the Leased Property will have a remaining useful life expectancy greater than the term of the Bonds.

Pursuant to the Lease, the District has agreed and determined that the Lease Payments required to be made under the Lease represent the fair rental value of the Leased Property. Under the terms of the Lease, the District may substitute other property for the Leased Property or any portion thereof, provided

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that certain conditions set forth in the Lease are met. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Lease/Purchase Agreement – Removal or Substitution” attached hereto.

RISK FACTORS

The following factors, which represent material risk factors that have been identified at this time, should be considered along with all other information in this Official Statement by potential investors in evaluating the Bonds. There can be no assurance made that other risk factors will not become evident at any future time. The following factors are not presented in a priority reflective of their importance or significance to investors.

Lease Payments Not District Debt

None of the full faith and credit of the District, the State of California or any agency or department thereof has been pledged to the payment of the Lease Payments or any other payments due under the Lease. In the event that the District’s revenue sources are less than its total obligations, the District could choose to fund other services before making Lease Payments and other payments due under the Lease. The same result could occur if, because of California Constitutional limits on expenditures, the District is not permitted to appropriate and spend all of its available revenues.

Abatement Risk with Respect to Lease Payments

During any period in which, by reason of material damage or destruction (other than by total condemnation), there is substantial interference with the use and possession by the District of any portion of the Leased Property, Lease Payments due under the Lease with respect to such Leased Property will be abated proportionately, and the District waives any and all rights to terminate the Lease by virtue of any such interference and the Lease shall continue in full force and effect. The method for calculating the amount of abatement is described in “LEASE PAYMENTS – Abatement” herein.

Self-Insurance

Pursuant to the Lease, the District is permitted to self-insure for casualty and standard comprehensive public entity liability so long as it provides to the Trustee and the Authority, at least annually, a certificate of an Insurance Consultant (as defined in the Lease) to the effect that the Lessee’s general insurance reserves are adequate to provide the required amount of coverage. See “Appendix F – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Lease/Purchase Agreement” attached hereto. No assurance can be given that such self-insurance at the time of any casualty or loss will be adequate to cover any claims that might arise.

The District is not required under the Lease to maintain flood or earthquake insurance on the Leased Property.

No Acceleration Upon Default

In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease and the Trustee is not empowered to sell the Leased Property and use the proceeds of such sale to prepay the Bonds or pay debt service thereon. Any suit for money damages or repossession of any Leased Property would be subject to limitations on legal remedies against public entities in the State of California.

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Absence of Earthquake Insurance

Much of California is seismically active, with numerous faults that could be earthquake sources. The Property is located in a seismically active region of California, within an Alquist-Priolo earthquake fault zone and within five miles of the Central Calaveras Section of the Calaveras Fault. The occurrence of severe seismic activity could result in substantial damage to the Property. The District is not obligated under the Lease to procure and maintain, or cause to be procured and maintained, earthquake insurance on the Property being leased, and does not anticipate doing so. Thus, if seismic activity caused significant damage to the Property, the value of such property could be adversely affected. The District is not able to predict whether or to what extent such damage might occur.

Public school construction in the state of California, including the school facilities constructed on the Property, are entitled and approved through the California Division of State Architect (“DSA”), which reviews building plans and calculations based on three sets of criteria: Seismic and Engineering; Fire, Life, Safety; and Access. DSA applies the California building code standards and requires that certain buildings are compliant with the Field Act for Public Schools set forth in Sections 17280 & 81130 et seq of the California Education Code (the “Field Act”). The Field Act sets forth structural design standards to enable school buildings meet a higher threshold of seismic safety, ensuring safety for students and building occupants in the event of an earthquake.

Limitations on Remedies

In addition to the limitations on remedies contained in the Indenture and the Lease, the rights and remedies provided in the Indenture and the Lease may be limited by and are subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, to the application of equitable principles and to the exercise of judicial discretion in appropriate cases.

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BOND PAYMENT SCHEDULE

Payments of principal and interest made to the Owners of the Bonds in any year is comprised of Revenues received by the Trustee, such Revenues consisting primarily of the Lease Payments made by the District. Lease Payments are required to be made by the District under the Lease on or before May 15 and November 15 of each year for the use and possession of the Leased Property for the period commencing as of the Date of Delivery of the Bonds and terminating as provided in the Lease.

The scheduled annual principal and interest payments on the Bonds, for year ending June 1 are as shown on the following table:

Year Ending (June 1)

Principal Component

Interest Component(1)

Total

Total

________________ (1) Interest payments on the Bonds will be made semiannually on June 1 and December 1, commencing on December 1, 2016.

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ESTIMATED SOURCES AND USES OF FUNDS

The proceeds to be received from the sale of the Bonds will be deposited with the Trustee. The estimated sources and uses of such funds are as follows:

Sources

Total Par Amount of Bonds Plus Original Issue Premium TOTAL SOURCES Uses Costs of Issuance(1) Deposit to Project Account Deposit to Interest Payment Account TOTAL USES

(1) Includes Underwriter’s discount, Trustee’s fees, legal and financial advisory fees, printing and delivery costs, Policy or

Reserve Facility premiums (if any), and other miscellaneous expenses.

THE AUTHORITY

The Authority is a public entity organized pursuant to a Joint Exercise of Powers Agreement entered into pursuant to the Act. The Community College League of California sponsored the formation of the Authority for the purpose of funding cashflow and capital improvements for its member community college districts within the State pursuant to the Act.

Pursuant to the Act, the Authority is authorized to issue bonds for the purpose of financing, refinancing or providing reimbursement for costs incurred in connection with the construction, expansion, remodeling, renovation, furnishing, equipping or acquisition of public capital improvements of public entities such as the District. The Act provides for the issuance of lease revenue bonds of joint exercise of powers authorities, such as the Authority, to be repaid from the proceeds of certain public obligations, such as the Lease. The intent of the California legislature, as stated in the Act, is to assist in the reduction of local borrowing costs, help accelerate the construction, repair, and maintenance of public capital improvements and promote greater use of existing and new financial instruments and mechanisms such as bond pooling by local public entities.

FUNDING OF COMMUNITY COLLEGE DISTRICT IN CALIFORNIA

Major Revenues

General. California community college districts (other than Basic Aid Districts, as described below) receive a majority of their funding from the State, and the balance from local and federal sources. State funds include general apportionment, categorical funds, capital construction, the lottery (which generally is less than 3 percent), and other minor sources. Local funds include property taxes, student fees, and miscellaneous sources.

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A bill passed by the State’s legislature (“SB 361”), and signed by the Governor on September 29, 2006, established the present system of funding for community college districts. This system includes allocation of state general apportionment revenues to community college districts based on criteria developed by the Board of Governors in accordance with prescribed statewide minimum requirements. In establishing these minimum requirements, the Board of Governors was required to acknowledge community college districts’ need to receive an annual allocation based on the number of colleges and comprehensive centers in each respective district, plus funding received based on the number of credit and noncredit full-time equivalent students (“FTES”) in each district.

SB 361 also specified that, commencing with the 2006-07 fiscal year the minimum funding per FTES would be: (a) not less than $4,367 per credit FTES; (b) at a uniform rate of $2,626 per noncredit FTES; and (c) set at $3,092 per FTES for a new instructional category of “career development and college preparation” (“CDCP”) enhanced non-credit rate. Each such minimum funding rate is subject to cost of living adjustments (a “COLA”), if any, funded through the State budgeting legislation in each fiscal year. Pursuant to SB 361, the Chancellor of the California Community Colleges (the “Chancellor”) developed criteria for one-time grants for districts that would have received more funding under the prior system or a then-proposed rural college access grant, than under the current system. See also “Appendix A – FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT – Full-Time Equivalent Students,” attached hereto.

One unit of FTES is equivalent to 525 student contact hours, which is determined based on a State formula of one student multiplied by 15 weekly contact hours multiplied by 35 weeks. Accordingly, the number of FTES in the District may not equal the number of students enrolled in the District.

In each fiscal year, the State budget will establish an enrollment cap on the maximum number of FTES, known as the “funded” FTES, for which a community college district will receive a revenue allocation, as determined by the program-based model. A district’s enrollment cap is based on the previous fiscal year’s reported FTES, plus the growth allowance provided for by the State budget, if any. All student hours in excess of the enrollment cap are considered “unfunded” FTES.

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The following table shows the District’s FTES figures for the last five fiscal years, along with the projected figures for fiscal year 2016-17:

FULL TIME EQUIVALENT STUDENTS(1) Gavilan Joint Community College District

Fiscal Years 2011-12 through 2016-17

Year

Funded FTES

Unfunded FTES(2)

Total FTES

2011-12 4,979.35 199.54 5,178.89 2012-13 5,052.84 92.72 5,145.56 2013-14 5,175.69 47.14 5,222.83 2014-15 5,253.38 -- 5,253.38 2015-16 5,179.14 -- 5,179.14 2016-17(3) 5,282.72 -- 5,282.72

(1) One FTES is equivalent to 525 student contract hours, which is determined based on a State formula of one student multiplied by 15 weekly contact hours multiplied by 35 weeks. Accordingly, the number of FTES in the District may not equal the number of students enrolled in the District. Reflects resident FTES counts only. Non-resident FTES are generally excluded from State funding formula calculations. (2) In each fiscal year, the State budget will establish an enrollment cap on the maximum number of FTES, known as the “funded” FTES, for which a community college district will receive a revenue allocation, as determined by the program-based model. A district’s enrollment cap is based on the previous fiscal year’s reported FTES, plus the growth allowance provided for by the State budget, if any. All student hours in excess of the enrollment cap are considered “unfunded” FTES. (3) Budgeted. Source: Gavilan Joint Community College District.

The major local revenue source is local property taxes that are collected from within District boundaries, with student enrollment fees accounting for the most of the remainder. A small part of a community college district’s budget is from local sources other than property taxes and student enrollment fees, such as interest income, donations, educational foundation contributions and sales of property. Every community college district receives the same amount of lottery funds per pupil from the State, however, these are not categorical funds as they are not for particular programs or students. The initiative authorizing the lottery does require the funds to be used for instructional purposes, and prohibits their use for capital purposes.

“Basic Aid” community college districts are those districts whose local property tax and student enrollment fee collections exceed the revenue allocation determined by the program based model. Basic aid districts do not receive any general apportionment funding from the State (though they are currently entitled to the minimum amount of funding derived from taxes levied pursuant to Proposition 30, in an amount equal to $100 per unit of FTES). See also “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Proposition 30.” The current law in California allows these districts to keep the excess funds without penalty. The implication for Basic Aid districts is that the legislatively determined annual COLAs and other politically determined factors are less significant in determining such districts primary funding sources. Rather, property tax growth and the local economy become the determining factors. The District is not a Basic Aid district.

Tax Shifts and Triple Flip

Assembly Bill No. 1755 (“AB 1755”), introduced March 10, 2003 and substantially amended June 23, 2003, requires the shifting of property taxes between redevelopment agencies, school districts and community college districts. On July 29, 2003, the Assembly amended Senate Bill No. 1045 to incorporate all of the provisions of AB 1755, except that the Assembly reduced the amount of the required Education Revenue Augmentation Fund (“ERAF”) shift to $135 million. Legislation commonly referred to as the “Triple Flip” was approved by the voters on March 2, 2004, as part of a bond initiative formally known as the “California Economic Recovery Act.” This act authorized the issuance

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of $15 billion in bonds to finance the 2002-03 and 2003-04 State budget deficits, which are payable from a fund established by the redirection of tax revenues through the “Triple Flip.” Under the “Triple Flip,” one-quarter of local governments’ one percent share of the sales tax imposed on taxable transactions within their jurisdiction is redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation redirects property taxes in the ERAF to local government. Because the ERAF moneys were previously earmarked for community colleges, the legislation provides for community colleges to receive other state general fund revenues.

Budget Procedure

On or before September 15, the Board of Trustees of the District is required under Section 58305 of the California Code of Regulations, Title V, to adopt a balanced budget. Each September, every State agency, including the Chancellor’s Office of the California Community Colleges, submits to the Department of Finance (“DOF”) proposals for changes in the State budget. These proposals are submitted in the form of Budget Change Proposals (“BCPs”), involving analyses of needs, proposed solutions and expected outcomes. Thereafter, the DOF makes recommendations to the governor, and by January 10 a proposed State budget is presented by the governor to the legislature. The Governor’s Budget is then analyzed and discussed in committees and hearings begin in the State Assembly and Senate. In May, based on the debate, analysis and changes in the economic forecasts, the governor issues a revised budget with changes he or she can support. The law requires the legislature to submit its approved budget by June 15, and by June 30 the governor should announce his or her line item reductions and sign the State budget. In response to growing concern for accountability and with enabling legislation (AB 2910, Chapter 1486, Statutes of 1986), the Board of Governors and the Chancellor’s Office have established expectations for sound district fiscal management and a process for monitoring and evaluating the financial condition to ensure the financial health of California’s community college districts. In accordance with statutory and regulatory provisions, the Chancellor has been given the responsibility to identify districts at risk and, when necessary, the authority to intervene to bring about improvement in their financial condition. To stabilize a district’s financial condition, the Chancellor may, as a last resort, seek an appropriation for an emergency apportionment.

The monitoring and evaluation process is designed to provide early detection and amelioration that will stabilize the financial condition of a district before an emergency apportionment is necessary. This is accomplished by (1) assessing the financial condition of districts through the use of various information sources and (2) taking appropriate and timely follow-up action to bring about improvement in a district’s financial condition, as needed. A variety of instruments and sources of information are used to provide a composite of each district’s financial condition, including quarterly financial status reports, annual financial and budget reports, attendance reports, annual district audit reports, district input and other financial records. In assessing each district’s financial condition, the Chancellor will pay special attention to each district’s general fund balance, spending pattern, and full-time equivalent student patterns. Those districts with greater financial difficulty will receive follow-up visits from the Chancellor’s Office where financial solutions to the district’s problems will be addressed and implemented.

Minimum Funding Guarantees for California Community College Districts Under Propositions 98 and 111

General. In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual K-14 funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition 111 (Senate Constitutional Amendment 1), adopted in May 1990, among other things, changed some earlier school funding

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provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding “test” to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the annual COLA for the minimum guarantee for annual K-14 funding would be the change in California’s per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIII B).

Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level of K-14 funding. Under implementing legislation for Proposition 98 (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is 1989-90. Each year, each segment is entitled to the greater of the amounts separately computed for each under Test 1 or 2. Should the calculated amount under Proposition 98 guarantee (K-14 education aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with 1992-93. In those years, community colleges received less than was required from the statutory split.

Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in 1986-87. Initially, that share was just over 40 percent. Because of the major shifts of property tax from local government to community colleges and K-12 which began in 1992-93 and increased in 1993-94, the percentage dropped to 33.0%.

Test 2 provides that K-14 education will receive as a minimum, its prior-year total funding (including State general fund and local revenues) adjusted for enrollment growth and per-capita personal income COLA.

A third formula, established pursuant to Proposition 111 as “Test 3,” provides an alternative calculation of the funding base in years in which State per-capita general fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrollment and COLA where the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to one-half of one percent of the prior-year funding level as a funding supplement.

In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 formula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income.

The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 98, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the annual growth rate in non-Proposition 98 per-capita appropriations exceeds the annual growth rate in per-pupil total spending.

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State Dissolution of Redevelopment Agencies

On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos (“Matosantos”), finding ABx1 26, a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all Redevelopment Agencies in California ceased to exist as a matter of law on February 1, 2012.

ABx1 26 was modified by Assembly Bill No. 1484 (Chapter 26, Statutes of 2011-12) (“AB 1484”), which, together with ABx1 26, is referred to herein as the “Dissolution Act.” The Dissolution Act provides that all rights, powers, duties and obligations of a redevelopment agency under the California Community Redevelopment Law that have not been repealed, restricted or revised pursuant to ABx1 26 will be vested in a successor agency, generally the county or city that authorized the creation of the redevelopment agency (each, a “Successor Agency”). All property tax revenues that would have been allocated to a redevelopment agency, less the corresponding county auditor-controller’s cost to administer the allocation of property tax revenues, are now allocated to a corresponding Redevelopment Property Tax Trust Fund (“Trust Fund”), to be used for the payment of pass-through payments to local taxing entities, and thereafter to bonds of the former redevelopment agency and any “enforceable obligations” of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines “enforceable obligations” to include bonds, loans, legally required payments, judgments or settlements, legal binding and enforceable obligations, and certain other obligations.

Among the various types of enforceable obligations, the first priority for payment is tax allocation bonds issued by the former redevelopment agency; second is revenue bonds, which may have been issued by the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to make scheduled debt service payments; third is administrative costs of the Successor Agency, equal to at least $250,000 in any year, unless the oversight board reduces such amount for any fiscal year or a lesser amount is agreed to by the Successor Agency; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, will be allocated as residual distributions to local taxing entities in the same proportions as other tax revenues. Moreover, all unencumbered cash and other assets of former redevelopment agencies will also be allocated to local taxing entities in the same proportions as tax revenues. Notwithstanding the foregoing portion of this paragraph, the order of payment is subject to modification in the event a Successor Agency timely reports to the Controller and the Department of Finance that application of the foregoing will leave the Successor Agency with amounts insufficient to make scheduled payments on enforceable obligations. If the county auditor-controller verifies that the Successor Agency will have insufficient amounts to make scheduled payments on enforceable obligations, it shall report its findings to the Controller. If the Controller agrees there are insufficient funds to pay scheduled payments on enforceable obligations, the amount of such deficiency shall be deducted from the amount remaining to be distributed to taxing agencies, as described as the fourth distribution above, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreement pursuant to Health and Safety Code Section 33401 for payments from a redevelopment agency under which the payments were to be subordinated to certain obligations of the redevelopment agency, such subordination provisions shall continue to be given effect.

As noted above, the Dissolution Act expressly provides for continuation of pass-through payments to local taxing entities. Per statute, 100% of contractual and statutory two percent pass-throughs, and 56.7% of statutory pass-throughs authorized under the Community Redevelopment Law Reform Act of 1993 (AB 1290, Chapter 942, Statutes of 1993) (“AB 1290”), are restricted to educational facilities without offset against revenue limit apportionments by the State. Only 43.3% of AB 1290 pass-throughs are offset against State aid so long as the affected local taxing entity uses the moneys received

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for land acquisition, facility construction, reconstruction, or remodeling, or deferred maintenance as provided under Education Code Section 42238(h).

ABx1 26 states that in the future, pass-throughs shall be made in the amount “which would have been received . . . had the redevelopment agency existed at that time,” and that the county auditor-controller shall “determine the amount of property taxes that would have been allocated to each redevelopment agency had the redevelopment agency not been dissolved pursuant to the operation of ABx1 26 using current assessed values . . . and pursuant to statutory pass-through formulas and contractual agreements with other taxing agencies.”

Successor Agencies continue to operate until all enforceable obligations have been satisfied and all remaining assets of the Successor Agency have been disposed of. AB 1484 provides that once the debt of the Successor Agency is paid off and remaining assets have been disposed of, the Successor Agency shall terminate its existence and all pass-through payment obligations shall cease.

The District can make no representations as to the extent to which its base apportionments from the State may be offset by the future receipt of residual distributions or from unencumbered cash and assets of former redevelopment agencies any other surplus property tax revenues pursuant to the Dissolution Act. See also “Appendix A – FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT – Redevelopment Revenue,” attached hereto.

State Assistance

California community college districts’ principal funding formulas and revenue sources are derived from the budget of the State of California. The following information concerning the State of California’s budgets has been obtained from publicly available information which the Authority, the District and the Financial Advisor believe to be reliable; however, none of the Authority, the District, the Financial Advisor or the Underwriter take any responsibility as to the accuracy or completeness thereof and have not independently verified such information.

2016-17 Budget. On June 28, 2016, the Governor signed into the law the State budget for fiscal year 2016-17 (the “2016-17 Budget”). The following information is drawn from the Department of Finance’s summary of the 2016-17 Budget.

The 2016-17 Budget projects, for fiscal year 2015-16, total general fund revenues and transfers of $117 billion and total expenditures of $115.6 billion. The State is projected to end the 2015-16 fiscal year with total available reserves of $7.3 billion, including $3.9 billion in the traditional general fund reserve and $3.4 billion in the BSA. For fiscal year 2016-17, the 2016-17 Budget assumes total general fund revenues of $120.3 billion and authorizes expenditures of $122.5 billion. The State is projected to end the 2016-17 fiscal year with total available reserves of $8.5 billion, including $1.8 billion in the traditional general fund reserve and $6.7 billion in the BSA.

For fiscal year 2016-17, the 2016-17 Budget sets the minimum funding guarantee at $71.9 billion, an increase of $3.5 billion over the revised level from the prior fiscal year. Significant features with respect to community college district funding include the following:

•! Base Allocations – An increase of $114.3 million to base allocations to support 2% growth in student enrollment. The 2016-17 Budget also provides $75 million to increase base allocations in recognition of increased operating expenses including in the areas of facilities, employee and retirement benefits and professional development.

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•! Local Property Tax Adjustments – Funding levels reflect decreases of $198.4 million in Proposition 98 funding in fiscal year 2016-17 for community college districts, as a result of higher offsetting property tax receipts. The 2016-17 Budget’s funding levels also reflect an increase of $31.7 million in Proposition 98 funding, allocable to fiscal year 2015-16, to address an anticipated shortfall in redevelopment agency property taxes for community college apportionments.

•! Career Technical Education (CTE) – $200 million in Proposition 98 funding to expand access to workforce-aligned CTE through existing regional adult education consortia composed of school districts, community college districts and other stakeholders. The 2016-17 Budget also provides $48 million to support the Career Pathways Trust Program, which provides grant awards to community college districts to develop, enhance and expand career technical education programs that build upon existing regional capacity to meet labor demands.

•! Student Success – $30 million in one-time funding for grants that support basic skills instruction aimed at improving students’ transition to college-level courses. The 2016-17 Budget also provides $15 million in one-time Proposition 98 grant funding to support coordinated student outreach by local educational agencies and community college districts aimed at increasing college preparation, access, and success.

•! Innovation Awards - $25 million in Proposition 98 funding for awards to community college districts that develop innovations in curriculum and instruction, prior learning assessments and access to financial aid.

•! On-line Education – $20 million in one-time Proposition 98 funding to support the development of online courses available through the Online Course Exchange, a program which allows students to enroll in online courses across participating community colleges without requiring students to complete separate application and matriculation processes.

•! Telecommunications and Technology – An increase of $15 million in Proposition 98 funding, including $5 million in ongoing funding, to expand broadband capacity across community college campuses.

•! Zero-Textbook-Cost-Degrees – An increase of $5 million in Proposition 98 funding to support the creation of degree, certificate and credentialing programs that use only freely accessible, openly licensed educational resources.

•! Deferred Maintenance and Instructional Equipment –$184.6 million in one-time Proposition 98 funding for deferred facility maintenance, instructional equipment, or specified water conservation projects.

•! Mandates - $105.5 million in one-time Proposition 98 funding to reduce the existing backlog of unpaid reimbursement claims to community college districts for the cost of State-mandated programs. The funding would be provided to local educational agencies on a per-student basis, and would be available to be used at local discretion.

•! Proposition 39 - Passed by voters in November 2012, Proposition 39 increases State corporate tax revenues and requires that, for a five-year period starting in fiscal year 2013-14, and requires that a portion of these additional revenues be used allocated to local education agencies to improve energy efficiency and expand the use of alternative energy in public buildings. The 2016-17 Budget allocates $49.3 million to support community college energy efficiency projects and clean energy job development programs, an increase of $10.5 million from the prior-year level.

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Future Actions. The District cannot predict what actions will be taken in the future by the State legislature and the Governor to address changing State revenues and expenditures. The District also cannot predict the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently impair the State’s ability to fund schools. State budget shortfalls in future fiscal years may also have an adverse financial impact on the financial condition of the District.

Ad Valorem Property Taxation

The District uses the services of the Counties for the assessment and collection of ad valorem taxes. Taxes are levied for each fiscal year on taxable real and personal property which is located in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” Unsecured property comprises certain property not attached to land such a personal property or business property. Boats and airplanes are examples of such property. Unsecured property is assessed on the “unsecured roll.” A supplemental roll is developed when property changes hands or new construction is completed. Each county levies and collects all property taxes for property falling within that county’s taxing boundaries.

The valuation of secured property is established as of January 1 and is subsequently equalized in August. Property taxes on the secured roll are due in two installments, November 1 and February 1 of the fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10 respectively, and a 10% penalty attaches to any delinquent installment plus a minimum $10 cost on the second installment, plus any additional amount determined by the county treasurer-tax collector. Property on the secured roll with delinquent taxes is declared tax-defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a minimum $15 redemption fee and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is then subject to sale by the tax-collecting authority of the county.

Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent if they are not paid by August 31. In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue beginning November 1 of the fiscal year, and a lien may be recorded against the assessee. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the assessee; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on specific property of the assessee; (3) filing a certificate of delinquency for record in the county recorder’s office in order to obtain a lien on specified property of the assessee; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

State law exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of the exemptions.

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All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions.

Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies, including community college districts, will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year.

For information regarding the assessed valuation of taxable property with the District, see “Appendix A – FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT – Assessed Valuation,” attached hereto.

Teeter Plan

Each of the Boards of Supervisors of Santa Clara County and San Benito County have implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the Counties apportion secured property taxes on an accrual basis when due (irrespective of actual collections) to their local political subdivisions, including the District, for which the Counties act as the tax-levying or tax-collecting agency.

The Teeter Plan is applicable to all tax levies for which the Counties act as the tax-levying or tax-collecting agency, or for which the Counties treasuries are the legal depository of the tax collections. As adopted by the Counties, the Teeter Plan excludes Mello-Roos Community Facilities Districts and special assessment districts which provide for accelerated judicial foreclosure of property for which assessments are delinquent.

The ad valorem property tax to be levied to pay the interest on and principal of the Bonds will be subject to the Teeter Plan, beginning in the first year of such levy. The District will receive 100% of the ad valorem property tax levied to pay the Bonds irrespective of actual delinquencies in the collection of the tax by each county.

The Teeter Plan is to remain in effect for each county, respectively, unless the Board of Supervisors of the county orders its discontinuance or unless, prior to the commencement of any fiscal year of the Counties (which commence on July 1), either of the Boards of Supervisors receives a petition for its discontinuance joined in by a resolution adopted by at least two-thirds of the participating revenue districts in the county. In the event a Board of Supervisors is to order discontinuance of the Teeter Plan subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the District) for which the county acts as the tax-levying or tax-collecting agency.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Article XIIIA of the California Constitution

Article XIIIA (“Article XIIIA”) of the State Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 bill

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under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment,” subject to exemptions in certain circumstances of property transfer or reconstruction. Determined in this manner, the full cash value is also referred to as the “base year value.” The full cash value is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XIIIA has been amended to allow for temporary reductions of assessed value in instances where the fair market value of real property falls below the adjusted base year value described above. Proposition 8—approved by the voters in November of 1978—provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value exceeds the base year value. Reductions in assessed value could result in a corresponding increase in the annual tax rate levied by the Counties to pay debt service on the District’s general obligation bonds.

Article XIIIA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (a) on any indebtedness approved by the voters prior to July 1, 1978, or (b), as the result of an amendment approved by State voters on June 3, 1986, on any bonded indebtedness approved by two-thirds or more of the votes cast by the voters for the acquisition or improvement of real property on or after July 1, 1978, or (c) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% or more of the votes cast on the proposition, but only if certain accountability measures are included in the proposition. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any state taxes for the purpose of increasing tax revenues.

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the relevant county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA.

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Unitary Property

Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. So long as the District is not a basic aid district, taxes lost through any reduction in assessed valuation will be compensated by the State as equalization aid under the State’s school financing formula. See “FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA – Major Revenues” herein.

Article XIIIB of the California Constitution

Article XIIIB (“Article XIIIB”) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school districts, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. As amended, Article XIIIB defines:

(a) “change in the cost of living” with respect to school districts to mean the percentage change in California per capita income from the preceding year, and

(b) “change in population” with respect to a school district to mean the percentage change in the average daily attendance (“ADA”) of the school district from the preceding fiscal year.

For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the 1986-87 fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended.

The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.

Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service such as the Bonds, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the State legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years.

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Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution. See “– Propositions 98 and 111” herein.

Article XIIIC and Article XIIID of the California Constitution

On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the “Right to Vote on Taxes Act.” Proposition 218 added to the California Constitution Articles XIIIC and XIIID (respectively, “Article XIIIC” and “Article XIIID”), which contain a number of provisions affecting the ability of local agencies, including community districts, to levy and collect both existing and future taxes, assessments, fees and charges.

According to the “Title and Summary” of Proposition 218 prepared by the California Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as community college districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

The District does not impose any taxes, assessments, or property-related fees or charges which are subject to the provisions of Proposition 218. It does, however, receive a portion of the basic 1% ad valorem property tax levied and collected by the Counties pursuant to Article XIIIA of the California Constitution. The provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District.

Proposition 26

On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge

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imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.

Propositions 98 and 111

On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changed State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as “K-14 school districts”) at a level equal to the greater of (a) the same percentage of State general fund revenues as the percentage appropriated to such districts in 1986-87, and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period.

The Accountability Act also changed how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount are instead of being returned to taxpayers, is transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year is automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which can be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.

Since the Accountability Act is unclear in some details, there can be no assurances that the Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s Budget.

On June 5, 1990, the voters of California approved Proposition 111 (Senate Constitutional Amendment No. 1) called the “Traffic Congestion Relief and Spending Limit Act of 1990” (“Proposition 111”) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation.

The most significant provisions of Proposition 111 are summarized as follows:

a. Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the “change in the cost of living” is now measured by the change in California per capita personal income. The definition of

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“change in population” specifies that a portion of the State’s spending limit is to be adjusted to reflect changes in school attendance.

b. Treatment of Excess Tax Revenues. “Excess” tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools’ minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts’ base expenditures for calculating their entitlement for State aid in the next year, and the State’s appropriations limit is not to be increased by this amount.

c. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for “qualified capital outlay projects” as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, 1990. These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which was expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

d. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Proposition 111 had been in effect.

e. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (“Test 1”) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (“Test 2”). Under Proposition 111, schools will receive the greater of (1) Test 1, (2) Test 2, or (3) a third test (“Test 3”), which will replace Test 2 in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income. Under the Test 3, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 will become a “credit” (also referred to as a “maintenance factor”) to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.

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Jarvis v. Connell

On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court of Appeal held that either a final budget bill, an emergency appropriation, a self-executing authorization pursuant to state statutes (such as continuing appropriations) or the California Constitution or a federal mandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to amounts budgeted by the District as being received from the State. To the extent the holding in such case would apply to State payments reflected in the District’s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of such payments to the District if such required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a federal mandate. On May 1, 2003, the California Supreme Court upheld the holding of the Court of Appeal, stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act.

Proposition 1A and Proposition 22

On November 2, 2004, California voters approved Proposition 1A, which amends the State constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State can not (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Proposition 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, approved by the voters of the State on November 2, 2010, prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies and eliminates the State’s authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State’s authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borrow or change the distribution of state fuel tax revenues, and to use vehicle license fee revenues to reimburse local governments for state mandated costs. Proposition 22 impacts resources in the State’s general fund and transportation funds, the State’s main funding source for schools and community colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 submitted by the Legislative Analyst’s Office (the “LAO”) on July 15, 2010, the expected reduction in resources available for the State to spend on these other programs as a consequence of the passage of Proposition 22 was expected to be approximately $1 billion in fiscal year 2010-11, with an estimated immediate fiscal effect equal to approximately 1 percent of the State’s total general fund spending. The longer-term effect of Proposition 22, according to the LAO analysis, will be an increase in the State’s general fund costs by approximately $1 billion annually for several decades.

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Proposition 30

On November 6, 2012, State voters of the State of California approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding Initiative Constitutional Amendment (also known as “Proposition 30”), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017, for storage, use, or other consumption in the State. This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $680,000 for joint filers).

The revenues generated from the temporary tax increases will be included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See “– Propositions 98 and 111” herein. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per FTES. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.

Proposition 2

On November 4, 2014, voters approved the Rainy Day Budget Stabilization Fund Act (also known as “Proposition 2”). Proposition 2 is a legislatively-referred constitutional amendment which makes certain changes to State budgeting practices, including substantially revising the conditions under which transfers are made to and from the State’s Budget Stabilization Account (the “BSA”) established by the California Balanced Budget Act of 2004 (also known as Proposition 58).

Under Proposition 2, and beginning in fiscal year 2015-16 and each fiscal year thereafter, the State will generally be required to annually transfer to the BSA an amount equal to 1.5% of estimated State general fund revenues (the “Annual BSA Transfer”). Supplemental transfers to the BSA (a “Supplemental BSA Transfer”) are also required in any fiscal year in which the estimated State general fund revenues that are allocable to capital gains taxes exceed 8% of the total estimated general fund tax revenues. Such excess capital gains taxes—net of any portion thereof owed to K-14 school districts pursuant to Proposition 98—will be transferred to the BSA. Proposition 2 also increases the maximum size of the BSA to an amount equal to 10% of estimated State general fund revenues for any given fiscal year. In any fiscal year in which a required transfer to the BSA would result in an amount in excess of the

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10% threshold, Proposition 2 requires such excess to be expended on State infrastructure, including deferred maintenance.

For the first 15-year period ending with the 2029-30 fiscal year, Proposition 2 provides that half of any required transfer to the BSA, either annual or supplemental, must be appropriated to reduce certain State liabilities, including making certain payments owed to K-14 school districts, repaying State interfund borrowing, reimbursing local governments for State mandated services, and reducing or prefunding accrued liabilities associated with State-level pension and retirement benefits. Following the initial 15-year period, the Governor and the Legislature are given discretion to apply up to half of any required transfer to the BSA to the reduction of such State liabilities. Any amount not applied towards such reduction must be transferred to the BSA or applied to infrastructure, as described above.

Proposition 2 changes the conditions under which the Governor and the Legislature may draw upon or reduce transfers to the BSA. The Governor does not retain unilateral discretion to suspend transfers to the BSA, nor does the Legislature retain discretion to transfer funds from the BSA for any reason, as previously provided by law. Rather, the Governor must declare a “budget emergency,” defined as an emergency within the meaning of Article XIIIB of the Constitution or a determination that estimated resources are inadequate to fund State general fund expenditures, for the current or ensuing fiscal year, at a level equal to the highest level of State spending within the three immediately preceding fiscal years. Any such declaration must be followed by a legislative bill providing for a reduction or transfer. Draws on the BSA are limited to the amount necessary to address the budget emergency, and no draw in any fiscal year may exceed 50% of the funds on deposit in the BSA unless a budget emergency was declared in the preceding fiscal year.

Proposition 2 also requires the creation of the Public School System Stabilization Account (the “PSSSA”) into which transfers will be made in any fiscal year in which a Supplemental BSA Transfer is required (as described above). Such transfer will be equal to the portion of capital gains taxes above the 8% threshold that would otherwise be paid to K-14 school districts as part of the minimum funding guarantee. A transfer to the PSSSA will only be made if certain additional conditions are met, as follows: (i) the minimum funding guarantee was not suspended in the immediately preceding fiscal year, (ii) the operative Proposition 98 formula for the fiscal year in which a PSSSA transfer might be made is “Test 1,” (iii) no maintenance factor obligation is being created in the budgetary legislation for the fiscal year in which a PSSSA transfer might be made, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the minimum funding guarantee for the fiscal year in which a PSSSA transfer might be made is higher than the immediately preceding fiscal year, as adjusted for ADA growth and cost of living. Proposition 2 caps the size of the PSSSA at 10% of the estimated minimum guarantee in any fiscal year, and any excess funds must be paid to K-14 school districts. Reductions to any required transfer to the PSSSA, or draws on the PSSSA, are subject to the same budget emergency requirements described above. However, Proposition 2 also mandates draws on the PSSSA in any fiscal year in which the estimated minimum funding guarantee is less than the prior year’s funding level, as adjusted for ADA growth and cost of living.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 22, 26, 30, and 98 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.

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TAX MATTERS

In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of corporations.

The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the applicable Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements.

The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value.

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SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE INTEREST ON THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.

A copy of the proposed form of opinion of Bond Counsel for the Bonds is attached hereto as Appendix E.

CERTAIN LEGAL MATTERS

The Bonds will be offered when, as, and if issued and received by the Underwriter, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel. Certain legal matters will be passed upon for the Authority and the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California. Certain matters will be passed upon for the Underwriter by Norton Rose Fulbright US LLP, Los Angeles, California.

Absence of Litigation

There is no litigation now pending or threatened to restrain or enjoin the issuance and delivery of the Bonds, or the execution and delivery by the Authority of the Indenture, the Site Lease or the Lease or

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in any way questioning or affecting the validity of the Authority proceedings for the authorization, sale, issuance or delivery of the Bonds.

The Authority is not aware of any litigation pending or threatened questioning the existence or powers of the Authority or the ability of the District to make the Lease Payments.

Although the District is subject to a number of lawsuits in the ordinary conduct of its affairs, in the opinion of the District, there are no claims or actions, threatened or pending which, if determined against the District, either individually or in the aggregate, would have a material adverse effect on the financial condition of the District and thereby affect the ability of the District to make Lease Payments.

Continuing Disclosure

Current Undertaking. In connection with the issuance of the Bonds, the District has covenanted for the benefit of the Owners and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District (the “Annual Reports”) by not later than nine months following the end of the District’s fiscal year (which currently ends June 30), commencing with the report for the 2015-16 fiscal year, and to provide notices of the occurrence of certain Listed Events. The Annual Reports and notices of Listed Events will be filed by the District in accordance with the requirements of S.E.C. Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Reports or the notices of Listed Events is included in “Appendix G – FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. These covenants have been made in order to assist the Underwriter in complying with the Rule.

Prior Undertakings. Within the past five years, the District has failed to file in a timely manner notices of certain listed events. The District has retained Dale Scott & Company Inc. as its dissemination agent to assist with preparing and filing annual reports and material event notices required pursuant to its existing continuing disclosure obligations.

Enhanced Information Reporting Requirements

On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”). Under Section 6049 of the Internal Revenue Code of 1986, as amended by TIPRA, interest paid on tax-exempt obligations will be subject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any bondholder who fails to file an accurate Form W-9 or who meets certain other criteria. The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes.

RATING

Moody’s has assigned a rating of “A1” to the Bonds. Such rating reflects only the views of such organization and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same, at the following address: Moody’s Investors Service, 7 World Trade Center at 250 Greenwich, New York, New York 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that the rating will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by the rating agencies if, in the judgment of the rating agency,

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circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the ratings obtained may have an adverse effect on the market price of the Bonds.

The District has covenanted in a Continuing Disclosure Certificate to file on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website (“EMMA”) notices of any ratings changes on the Bonds. See “Appendix G - FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from the rating agency prior to such information being provided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the rating agency and its website and official media outlets for the most current rating changes with respect to the Bonds after the initial issuance of the Bonds.

UNDERWRITING

Morgan Stanley & Co. LLC (the “Underwriter”) has agreed, pursuant to a contract of purchase by and between the Authority and the Underwriter, to purchase all of the Bonds for a purchase price of $______________ (consisting of the principal amount of the Bonds of $___________, plus original issue premium of $_____________, less Underwriter’s discount of $__________).

The purchase contract related to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by bond counsel and certain other conditions. The initial offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than such initial offering prices. The offering prices may be changed from time to time by the Underwriter.

Underwriter Disclosures. The Underwriter has provided the following information for inclusion in this Official Statement; however, neither the Authority nor the District guarantees the accuracy or completeness of the following information, and the inclusion thereof should be construed as a representation of the Authority or the District.

Morgan Stanley, parent company of Morgan Stanley & Co. LLC, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

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MISCELLANEOUS

References are made herein to certain documents and reports which are brief summaries thereof and do not purport to be complete or definitive. Reference is made to such documents and reports for a full and complete statement of the contents thereof.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority, the District or the Underwriter and the purchasers or owners of any of the Bonds.

The execution and delivery of this Official Statement has been duly authorized by the Authority.

CALIFORNIA COMMUNITY COLLEGE FINANCING AUTHORITY

By: Executive Director

APPROVED:


By: Superintendent/President

A-1

APPENDIX A

FINANCIAL AND DEMOGRAPHIC INFORMATION REGARDING GAVILAN JOINT COMMUNITY COLLEGE DISTRICT

Introduction

The District is located in Santa Clara and San Benito Counties. The District was established in 1919. The District covers approximately 2,700 square miles including nearly all of San Benito County and the southern part of Santa Clara County. The District is approximately 35 miles south of San Jose and 80 miles south of San Francisco. Gavilan College is fully accredited by the Accrediting Commission for Community and Junior Colleges (“ACCJC”). The District’s budgeted full time equivalent enrollment for fiscal year 2016-17 is 5,282.72. The District has a 2015-16 total assessed valuation of $27,428,775,672.

Administration

The District is governed by a seven-member Board of Trustees (the “Board of Trustees”), each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between three and four available positions. The District’s administrative and financial staff includes a Superintendent/President and Vice President of Administrative Services. Dr. Kathleen Rose is the Superintendent/President. Current members of the Board, together with their office and the date their term expires, as well as brief biographies of the Superintendent/President and Vice President, Administrative Services are provided below:

Board Member Office Term Expires

Laura Perry President November 2018 Mark Dover Vice President November 2016

Lois Locci, Ed.D. Clerk November 2018 Tom Breen Member November 2016

Jonathan Brusco Member November 2016 Kent Child Member November 2018 Walt Glines Member November 2018

Dr. Kathleen A. Rose, Superintendent/President. Dr. Rose was appointed to this position in June 2016. Dr. Rose has been serving the California Community College system since 2002, with the past seven years as the Executive Vice President and Chief Instruction Officer at Gavilan College. Prior to coming to Gavilan, Dr. Rose was the Vice President of Instruction and the Dean of Fine Arts, Language Arts and Social Sciences at Hartnell College in Salinas. Before returning to service with the community colleges, Dr. Rose was the Associate Dean and Campus Director at Chapman University for twenty years, where she administered undergraduate and graduate programs in Arizona and California at military and community locations. In addition, Dr. Rose has taught as a part time faculty member for the past thirty years at the undergraduate and graduate level in psychology and organizational leadership at a number of colleges and universities. Dr. Rose has a Bachelor of Arts Degree in English and Elementary Education from SUNY Geneseo, an M.Ed. in Counseling and Guidance from the University of Arizona and an Ed.D. with a major in Educational Leadership and a minor in Higher Education from the University of Arizona. Dr. Rose also has a National Counselor Certification and has worked as an agency counselor and as a private therapist.

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Frederick E. Harris, Vice President of Administrative Services. Mr. Harris was appointed to this position in June 2014. Prior to his appointment, he served 17 years in the State Chancellor’s Office, his last position as Assistant Vice Chancellor, College Finance and Facilities Planning; and 11 years prior as a lead staff consultant with the California Senate Budget and Fiscal Review Committee. Mr. Harris has a Bachelor of Arts Degree in Liberal Arts from Raymond College, University of the Pacific in Stockton, California.

Full-Time Equivalent Students

The following table provides a 6-year history of growth in full time equivalent students (“FTES”) for the District for fiscal years 2011-12 through 2016-17.

FULL TIME EQUIVALENT STUDENTS(1) Gavilan Joint Community College District


Year

Funded FTES

Unfunded FTES(2)

Total FTES

2011-12 4,979.35 199.54 5,178.89 2012-13 5,052.84 92.72 5,145.56 2013-14 5,175.69 47.14 5,222.83 2014-15 5,253.38 -- 5,253.38 2015-16 5,179.14 -- 5,179.14 2016-17(3) 5,282.72 -- 5,282.72

(1) One FTES is equivalent to 525 student contract hours, which is determined based on a State formula of one student multiplied by 15 weekly contact hours multiplied by 35 weeks. Accordingly, the number of FTES in the District may not equal the number of students enrolled in the District. Reflects resident FTES counts only. Non-resident FTES are generally excluded from State funding formula calculations. (2) In each fiscal year, the State budget will establish an enrollment cap on the maximum number of FTES, known as the “funded” FTES, for which a community college district will receive a revenue allocation, as determined by the program-based model. A district’s enrollment cap is based on the previous fiscal year’s reported FTES, plus the growth allowance provided for by the State budget, if any. All student hours in excess of the enrollment cap are considered “unfunded” FTES. (3) Budgeted. Source: Gavilan Joint Community College District.

Labor Relations

The District employs 84 full-time certificated professionals and 148 full-time classified employees and managers. In addition, the District employs 270 part-time faculty and staff. These employees are represented by two bargaining units as noted below:

LABOR RELATIONS ORGANIZATIONS Gavilan Joint Community College District

Labor Organization Number of Employees

in Organization Contract

Expiration Date Gavilan College Faculty Association 354 June 30, 2016(1) California School Employees Association 123 June 30, 2016(1)

(1)! Members of these bargaining unit are working under the terms of the expired contracts.

Source: Gavilan Joint Community College District.

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Retirement Programs

The information set forth below regarding the STRS and PERS programs, other than the information provided by the District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by any of the District, the Authority, the Financial Advisor or the Underwriter.

STRS. All full-time certificated employees, as well as certain classified employees, are members of the State Teachers’ Retirement System (“STRS”). STRS provides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program (the “STRS Defined Benefit Program”). The STRS Defined Benefit Program is funded through a combination of investment earnings and statutorily set contributions from three sources: employees, employers, and the State. Benefit provisions and contribution amounts are established by State statutes, as legislatively amended from time to time.

Prior to fiscal year 2014-15, and unlike typical defined benefit programs, none of the employee, employer nor State contribution rates to the STRS Defined Benefit Program varied annually to make up funding shortfalls or assess credits for actuarial surpluses. In recent years, the combined employer, employee and State contributions to the STRS Defined Benefit Program have not been sufficient to pay actuarially required amounts. As a result, and due to significant investment losses, the unfunded actuarial liability of the STRS Defined Benefit Program has increased significantly in recent fiscal years. In September 2013, STRS projected that the STRS Defined Benefit Program would be depleted in 31 years assuming existing contribution rates continued, and other significant actuarial assumptions were realized. In an effort to reduce the unfunded actuarial liability of the STRS Defined Benefit Program, the State recently passed the legislation described below to increase contribution rates.

Prior to July 1, 2014, K-14 school districts were required by such statutes to contribute 8.25% of eligible salary expenditures, while participants contributed 8% of their respective salaries. On June 24, 2014, the Governor signed AB 1469 (“AB 1469”) into law as a part of the State’s fiscal year 2014-15 budget. AB 1469 seeks to fully fund the unfunded actuarial obligation with respect to service credited to members of the STRS Defined Benefit Program before July 1, 2014 (the “2014 Liability”), within 32 years, by increasing member, K-14 school district and State contributions to STRS. Commencing July 1, 2014, the employee contribution rate will increase over a three-year phase-in period in accordance with the following schedule:

MEMBER CONTRIBUTION RATES STRS (Defined Benefit Program)

Effective Date

STRS Members Hired Prior to January 1, 2013

STRS Members Hired After January 1, 2013

July 1, 2014 8.150% 8.150% July 1, 2015 9.200 8.560 July 1, 2016 10.250 9.205

____________________ Source: AB 1469.

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Pursuant to AB 1469, K-14 school districts’ contribution rate will increase over a seven-year phase-in period in accordance with the following schedule:

K-14 SCHOOL DISTRICT CONTRIBUTION RATES STRS (Defined Benefit Program)

Effective Date K-14 school districts

July 1, 2014 8.88% July 1, 2015 10.73 July 1, 2016 12.58 July 1, 2017 14.43 July 1, 2018 16.28 July 1, 2019 18.13 July 1, 2020 19.10

____________________ Source: AB 1469.

Based upon the recommendation from its actuary, for fiscal year 2021-22 and each fiscal year thereafter the STRS Teachers’ Retirement Board (the “STRS Board”), is required to increase or decrease the K-14 school districts’ contribution rate to reflect the contribution required to eliminate the remaining 2014 Liability by June 30, 2046; provided that the rate cannot change in any fiscal year by more than 1% of creditable compensation upon which members’ contributions to the STRS Defined Benefit Program are based; and provided further that such contribution rate cannot exceed a maximum of 20.25%. In addition to the increased contribution rates discussed above, AB 1469 also requires the STRS Board to report to the State Legislature every five years (commencing with a report due on or before July 1, 2019) on the fiscal health of the STRS Defined Benefit Program and the unfunded actuarial obligation with respect to service credited to members of that program before July 1, 2014. The reports are also required to identify adjustments required in contribution rates for K-14 school districts and the State in order to eliminate the 2014 Liability.

The District’s contributions to STRS were $932,362 in fiscal year 2012-13, $924,715 in fiscal year 2013-14, $1,014,998 in fiscal year 2014-15 and $1,232,873 in fiscal year 2015-16. The District has budgeted $1,407,622 for its contribution to STRS for fiscal year 2016-17.

The State also contributes to STRS, currently in an amount equal to 4.891% of teacher payroll for fiscal year 2015-16. The State’s contribution reflects a base contribution rate of 2.017%, and a supplemental contribution rate that will vary from year to year based on statutory criteria. Pursuant to AB 1469, the State contribution rate will increase over a three year period to a total of 6.328% in fiscal year 2016-17. Based upon the recommendation from its actuary, for fiscal year 2017-18 and each fiscal year thereafter, the STRS Board is required, with certain limitations, to increase or decrease the State’s contribution rates to reflect the contribution required to eliminate the unfunded actuarial accrued liability attributed to benefits in effect before July 1, 1990. In addition, the State is currently required to make an annual general fund contribution up to 2.5% of the fiscal year covered STRS member payroll to the Supplemental Benefit Protection Account (the “SBPA”), which was established by statute to provide supplemental payments to beneficiaries whose purchasing power has fallen below 85% of the purchasing power of their initial allowance.

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PERS. Classified employees working four or more hours per day are members of the Public Employees’ Retirement System (“PERS”). PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by the State statutes, as legislatively amended from time to time. PERS operates a number of retirement plans including the Public Employees Retirement Fund (“PERF”). PERF is a multiple-employer defined benefit retirement plan. In addition to the State, employer participants at June 30, 2014 included 1,580 public agencies and 1,513 K-14 school districts. PERS acts as the common investment and administrative agent for the member agencies. The State and K-14 school districts (for “classified employees,” which generally consist of school employees other than teachers) are required by law to participate in PERF. Employees participating in PERF generally become fully vested in their retirement benefits earned to date after five years of credited service. One of the plans operated by PERS is for K-14 school districts throughout the State (the “Schools Pool”).

Contributions by employers to the Schools Pool are based upon an actuarial rate determined annually and contributions by plan members vary based upon their date of hire. The District is currently required to contribute to PERS at an actuarially determined rate, which is 11.847% of eligible salary expenditures for fiscal year 2015-16 and 13.888% in fiscal year 2016-17. Participants enrolled in PERS prior to January 1, 2013 contribute 7% of their respective salaries, while participants enrolled after January 1, 2013 contribute at an actuarially determined rate, which is 6% of their respective salaries for fiscal year 2015-16 and fiscal year 2016-17. See “—California Public Employees’ Pension Reform Act of 2013” herein.

The District’s contributions to PERS were $878,835 in fiscal year 2012-13, $889,267 in fiscal year 2013-14, $959,947 in fiscal year 2014-15 and $982,754 in fiscal year 2015-16. The District has budgeted $1,044,961 for its contribution to PERS for fiscal year 2016-17.

State Pension Trusts. Each of STRS and PERS issues a separate comprehensive financial report that includes financial statements and required supplemental information. Copies of such financial reports may be obtained from each of STRS and PERS as follows: (i) STRS, P.O. Box 15275, Sacramento, California 95851-0275; (ii) PERS, P.O. Box 942703, Sacramento, California 94229-2703. Moreover, each of STRS and PERS maintains a website, as follows: (i) STRS: www.calstrs.com; (ii) PERS: www.calpers.ca.gov. However, the information presented in such financial reports or on such websites is not incorporated into this Official Statement by any reference.

Both STRS and PERS have substantial statewide unfunded liabilities. The amount of these unfunded liabilities will vary depending on actuarial assumptions, returns on investments, salary scales and participant contributions. The following table summarizes information regarding the actuarially-determined accrued liability for both STRS and PERS. Actuarial assessments are “forward-looking” information that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

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FUNDED STATUS STRS (Defined Benefit Program) and PERS

(Dollar Amounts in Millions) (1)


STRS

Fiscal Year

Accrued Liability

Value of Trust Assets

(MVA)(2)

Unfunded Liability

(MVA)(2)(3)


(AVA)(4)

Unfunded Liability

(AVA)(4) 2010-11 $208,405 $147,140 $68,365 $143,930 $64,475 2011-12 215,189 143,118 80,354 144,232 70,957 2012-13 222,281 157,176 74,374 148,614 73,667 2013-14 231,213 179,749 61,807 158,495 72,718 2014-15 241,753 180,633 72,626 165,553 76,200

PERS

Fiscal Year

Accrued Liability


(MVA)(2)

Unfunded Liability

(MVA)(2)


(AVA)(4)

Unfunded Liability

(AVA)(4) 2010-11 $58,358 $45,901 $12,457 $51,547 $6,811 2011-12 59,439 44,854 14,585 53,791 5,648 2012-13 61,487 49,482 12,005 56,250 5,237 2013-14 65,600 56,838 8,761 --(5) --(5) 2014-15(6) 73,325 56,814 16,511 --(5) --(5)

(1)! Amounts may not add due to rounding. (2)! Reflects market value of assets. (3)! Excludes assets allocated to the SBPA reserve. (4)! Reflects actuarial value of assets. (5)! Effective for the June 30, 2014 actuarial valuation, PERS no longer uses an actuarial value of assets. (6)! On April 19, 2016, the PERS Finance & Administration Committee approved the K-14 school district contribution rate for

fiscal year 2016-17 and released certain actuarial information to be incorporated into the June 30, 2015 actuarial valuation to be released in summer 2016.

Source: PERS Schools Pool Actuarial Valuation; STRS Defined Benefit Program Actuarial Valuation.

The STRS Board has sole authority to determine the actuarial assumptions and methods used for the valuation of the STRS Defined Benefit Program. The following are certain of the actuarial assumptions adopted by the STRS Board with respect to the STRS Defined Benefit Program Actuarial Valuation for fiscal year 2014-15: measurement of accruing costs by the “Entry Age Normal Actuarial Cost Method,” 7.50% investment rate of return (net of investment and administrative expenses), 4.50% interest on member accounts, 3.75% projected wage growth, and 3.00% projected inflation. According to the STRS Defined Benefit Program Actuarial Valuation, as of June 30, 2015, the future revenue from contributions and appropriations for the STRS Defined Benefit Program was projected to be sufficient to finance its obligations. This finding reflects the scheduled contribution increases specified in AB 1469 and is based on the valuation assumptions and the valuation policy adopted by the STRS Board.

In recent years, the PERS Board of Administration (the “PERS Board”) has taken several steps, as described below, intended to reduce the amount of the unfunded accrued actuarial liability of its plans, including the Schools Pool.

On March 14, 2012, the PERS Board voted to lower the PERS’ rate of expected price inflation and its investment rate of return (net of administrative expenses) (the “PERS Discount Rate”) from 7.75% to 7.5%. As one consequence of such decrease, the annual contribution amounts paid by PERS member

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public agencies, including the District, have been increased by 1 to 2% for miscellaneous plans and by 2 to 3% for safety plans beginning in fiscal year 2013-14. On February 18, 2014, the PERS Board voted to keep the PERS Discount Rate unchanged at 7.5%. On November 17, 2015, the PERS Board voted to reduce the PERS Discount Rate to 6.5% over a period of 20 years. This change could result in increased contributions over time from both employers and employees.

On April 17, 2013, the PERS Board approved new actuarial policies aimed at returning PERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year fixed amortization period for gains and losses, a five-year increase of public agency contribution rates, including the contribution rate at the onset of such amortization period, and a five year reduction of public agency contribution rates at the end of such amortization period. The new actuarial policies were first included in the June 30, 2014 actuarial valuation and were implemented with respect to the State, K-14 school districts and all other public agencies in fiscal year 2015-16.

Also, on February 20, 2014, the PERS Board approved new demographic assumptions reflecting (i) expected longer life spans of public agency employees and related increases in costs for the PERS system and (ii) trends of higher rates of retirement for certain public agency employee classes, including police officers and firefighters. The new actuarial assumptions will first be reflected in the Schools Pool in the June 30, 2015 actuarial valuation. The increase in liability due to the new assumptions will be amortized over 20 years with increases phased in over five years, beginning with the contribution requirement for fiscal year 2016-17. The new demographic assumptions affect the State, K-14 school districts and all other public agencies.

The District can make no representations regarding the future program liabilities of STRS, or whether the District will be required to make additional contributions to STRS in the future above those amounts required under AB 1469. The District can also provide no assurances that the District’s required contributions to PERS will not increase in the future.

California Public Employees’ Pension Reform Act of 2013. On September 12, 2012, the Governor signed into law the California Public Employees’ Pension Reform Act of 2013 (the “Reform Act”), which makes changes to both STRS and PERS, most substantially affecting new employees hired after January 1, 2013 (the “Implementation Date”). For STRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an employee is entitled to for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. Similarly, for non-safety PERS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and increases the eligibility requirement for the maximum age factor of 2.5% to age 67. Among the other changes to PERS and STRS, the Reform Act also: (i) requires all new participants enrolled in PERS and STRS after the Implementation Date to contribute at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary, (ii) requires STRS and PERS to determine the final compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date (previously 12 months for STRS members who retire with 25 years of service), and (iii) caps “pensionable compensation” for new participants enrolled after the Implementation Date at 100% of the federal Social Security contribution (to be adjusted annually based on changes to the Consumer Price Index for all Urban Consumers) and benefit base for members participating in Social Security or 120% for members not participating in social security (to be adjusted annually based on changes to the Consumer Price Index for all Urban Consumers), while excluding previously allowed forms of compensation under the formula such as payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off.

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GASB Statement Nos. 67 and 68. On June 25, 2012, GASB approved Statements Nos. 67 and

68 (“Statements”) with respect to pension accounting and financial reporting standards for state and local governments and pension plans. The new Statements, No. 67 and No. 68, replace GASB Statement No. 27 and most of Statements No. 25 and No. 50. The changes impact the accounting treatment of pension plans in which state and local governments participate. Major changes include: (1) the inclusion of unfunded pension liabilities on the government’s balance sheet (currently, such unfunded liabilities are typically included as notes to the government’s financial statements); (2) more components of full pension costs being shown as expenses regardless of actual contribution levels; (3) lower actuarial discount rates being required to be used for underfunded plans in certain cases for purposes of the financial statements; (4) closed amortization periods for unfunded liabilities being required to be used for certain purposes of the financial statements; and (5) the difference between expected and actual investment returns being recognized over a closed five-year smoothing period. In addition, according to GASB, Statement No. 68 means that, for pensions within the scope of the Statement, a cost-sharing employer that does not have a special funding situation is required to recognize a net pension liability, deferred outflows of resources, deferred inflows of resources related to pensions and pension expense based on its proportionate share of the net pension liability for benefits provided through the pension plan. Because the accounting standards do not require changes in funding policies, the full extent of the effect of the new standards on the District is not known at this time. The reporting requirements for pension plans took effect for the fiscal year beginning July 1, 2013 and the reporting requirements for government employers, including the District, took effect for the fiscal year beginning July 1, 2014.

For more information, see “APPENDIX B – THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note 8” attached hereto.

Other Retirement Plans. The District has also adopted the Accumulated Program for Part-Time and Limited Service Employees (“APPLE”), a defined contribution plan covered under Internal Revenue Code Section 401(a). APPLE participants include all individuals who have worked for the District on or after January 1, 1992, provided that they are not covered by the STRS or PERS Plans. Participants make tax deferred contributions to APPLE equal to 7.5% of total compensation, and these contributions are allocated to accounts in the name of each participant. The District is not required to make contributions to APPLE. Participant account balances are full vested and non-forfeitable, and are paid in a single distribution upon retirement or other termination.

Post-Employment Health Care Benefits

Plan Description. The District provides postemployment health care benefits for retired employees in accordance with negotiated contracts with various bargaining units of the District. The District’s postemployment health care benefit plan (the “Plan”) is a single-employer defined benefit plan administered by the District. Eligibility requirements vary by employee classification, although all participants must have a minimum service of 10 years and have reached the ages of 55. Membership of the Plan, as of June 30, 2016, consisted of approximately 48 retirees and beneficiaries currently receiving benefits and approximately 210 active plan members.

Funding Policy. The District currently funds the Plan on a “pay-as-you-go” basis to cover the cost of current insurance premiums, with additional amounts to prefund the District’s accrued liability (discussed below) as determined by the Board. For fiscal year 2014-15, the District contributed $458,024 towards the Plan, all of which was used for current premiums. For fiscal year 2015-16, the District budgeted a contribution of $495,697 for current premiums and a deposit of approximately $500,000 in the Trust (as defined below). For fiscal year 2016-17, the District has budgeted a contribution of $315,000 for current premiums and expects to deposit approximately $840,000 in the Trust (as defined below). The

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District has established an irrevocable trust (the “Trust”) to begin funding the Plan. As of June 30, 2016, the District had set aside approximately $6,170,919 in the Trust.

Actuarial Report. The District commissioned an actuarial study by Nyhart dated as of September 14, 2015, with respect to its liability in connection with such post-employment health care benefits. As of July 1, 2014, the actuarial accrued liability for benefits was $7,564,417, and the actuarial value of assets was $5,091,482, resulting in an unfunded actuarial accrued liability (UAAL) of $2,472,935. The annual required contribution (the “ARC”) necessary to fund such benefits for fiscal year 2014-2015, was $480,936. The ARC is composed of the value of future benefits earned by current employees during each fiscal year (the “Normal Cost”), and the amount necessary to amortize the AAL. Collectively, the ARC is the amount that would be necessary to fund both the Normal Cost and the AAL in accordance with the Governmental Accounting Standards Board Statements Nos. 43 and 45.

Net OPEB Obligation. As of June 30, 2015, the District recognized a net OPEB asset (the “Net OPEB Asset”) of $193,213 with respect to its accrued liability for the Plan. The Net OPEB Asset is based on the District’s contributions towards the ARC during fiscal year 2014-15, plus interest on the prior year’s Net OPEB Obligation and minus any adjustments to reflect the amortization thereof. For more information see “Appendix B – THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – “Note 9” and “– Required Supplementary Information” attached hereto.

Insurance

The District is exposed to various risks of loss related to torts, property liability, health benefits, errors, omissions and natural disasters. These risks are addressed through a combination of participation in public entity risk pools, commercial insurance, and self-insurance. The District is partially self-insured for the first ten thousand dollars ($10,000) of its general liability and property coverage.

The District is a member of the Bay Area Community College District (“BACCD”) public entity pool and the Northern California Community College Pool (“NCCCP”) public entity risk pool. The District pays annual premiums for its property liability, health and worker’s compensation coverage. The relationship between the District and each joint powers authority (“JPA”) is such that it is not a component unit of the District for financial reporting purposes. The JPAs have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in the District’s financial statements; however, transactions between the JPAs and the District are included. Audited financial statements are available from the respective entities.

There are certain claims pending against the District. In the opinion of District administration, the related liability, if any, will not materially affect the financial position of the District. No settlements exceeded insurance coverage during the last three years.

See also “Appendix B – THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note 11”

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Redevelopment Revenue

The District receives pass-through tax increment revenue (the “Pass-Through Revenues”) from the former redevelopment agencies within the District’s boundaries. The Pass-Through Revenues received by the District are deposited into the District’s capital projects fund, and are used for facilities improvements. The Pass-Through Revenues do not offset the State apportionment received by the District. The amount of Pass-Through Revenues received by the District from fiscal years 2011-12 through 2015-16, as well as a projection for fiscal year 2016-17, are shown in the following table.

PASS-THROUGH REVENUES Fiscal Years 2011-12 through 2016-17

Gavilan Joint Community College District

Fiscal Year

Pass-Through Revenues

2011-12 $54,300 2012-13 478,058 2013-14 1,524,334 2014-15 322,926 2015-16(1) 323,000 2016-17(2) 323,000

____________________ (1) Unaudited. (2) Projected. Source: Gavilan Joint Community College District.

The District, however, can make no representations that Pass-Through Revenues will continue to be received by the District in amounts consistent with prior years, or as currently projected. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Proposition 1A and Proposition 22” herein.

Accounting Practices

The accounting policies of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California Community College Budget and Accounting Manual. This manual, according to Section 84030 of the California Education Code, is to be followed by all California community college districts. The Governmental Accounting Standards Board (“GASB”) has released Statement No. 34, which makes changes in the annual financial statements for all governmental agencies in the United States, especially in recording of fixed assets and their depreciation, and in the way the report itself is formatted. These requirements became effective on May 15, 2002 for the District, as well as for any other governmental agency with annual revenues of between $10 million and $100 million. Revenues are recognized in the period in which they become both measurable and available to finance expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is incurred.

District Budgeting

The table on the following page shows the District’s general fund budgets for fiscal years 2012-13 through 2016-17, unaudited actual results for fiscal years 2012-13 through 2014-15, and projected results for fiscal year 2015-16.

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GENERAL FUND BUDGETING Gavilan Joint Community College District


Fiscal Year 2012-13

Fiscal Year 2013-14

Fiscal Year 2014-15

Fiscal Year 2015-16

Fiscal Year 2016-17

REVENUES:

Budgeted(1)

Unaudited(1)

Budgeted(1)

Unaudited(1)

Budgeted(1)

Unaudited(1)

Budgeted(1) Projected(2)

Budgeted(3)

Federal $2,758,332 $3,094,790 $3,384,857 $3,209,915 $3,915,933 $3,785,927 $4,645,445 $5,067,278 $3,119,284 State 13,757,167 12,387,406 15,573,868 15,111,674 17,036,283 16,116,604 19,266,456 21,956,669 21,815,760 Local 16,789,054 20,745,311 16,403,335 18,069,646 16,145,912 18,942,790 19,942,435 19,972,036 21,026,012 TOTAL REVENUES 33,304,553 36,227,507 35,362,060 36,391,235 37,098,128 38,845,321 43,854,336 46,995,983 45,961,056 EXPENDITURES: Academic Salaries 12,765,523 14,468,212 14,015,083 13,305,455 13,396,680 13,842,107 15,455,582 15,673,512 15,212,024 Classified Salaries 7,469,783 7,581,907 7,422,900 7,444,233 7,573,478 7,723,756 8,549,416 8,685,875 8,658,507 Employee Benefits 7,859,142 7,479,137 7,540,493 7,264,458 7,559,206 7,527,228 8,990,675 8,592,090 9,401,566 Supplies and Materials 907,693 704,102 865,308 697,204 758,584 700,810 878,394 1,081,140 980,964 Other Operating Expenditures and

Services 6,442,975 4,917,400

4,790,570 6,376,838

6,458,391 7,041,232

8,039,037

9,454,327

9,238,477 Capital Outlay 740,600 629,370 665,651 743,958 834,324 989,915 1,236,525 1,348,797 1,325,979 TOTAL EXPENDITURES 36,185,716 35,780,128 35,300,005 35,832,146 36,580,663 37,825,048 43,149,629 44,835,741 44,817,517 EXCESS (DEFICIENCY) OF

REVENUE OVER EXPENDITURES (2,881,163) 447,379

62,055 559,089

517,465 1,020,273

704,707 2,160,242 1,143,539 Other Financing Sources (Uses) 3,837,700 1,595,686 2,130,120 1,474,025 1,510,814 1,552,455 1,593,499 1,539,216 1,523,606

OTHER OUTGO 2,564,530 2,244,312 2,192,175 2,275,000 2,190,165 2,447,488 2,190,960 2,551,642 2,667,145 NET INCREASE (DECREASE) IN

FUND BALANCES (1,607,993) (201,247)

-- (241,886)

(161,886) 125,240

107,246

1,147,816

-- BEGINNING FUND BALANCE 3,151,671 3,151,671 2,950,424 2,950,424 2,708,538 2,708,538 2,833,778 2,833,778 3,981,594 ENDING FUND BALANCE $1,543,678 $2,950,424 $2,950,424 $2,708,538 $2,546,652 $2,833,778 $2,941,024 $3,981,594 $3,981,594

(1) Budgeted figures for fiscal years 2012-13 through 2015-16, and unaudited figures for fiscal years 2012-13 through 2014-15, are drawn from the District’s CCFS-311 Reports filed with the Chancellor’s Office. For audited statements of revenues, expenditures and changes in fund balances for the District’s governmental funds for fiscal years 2009-10 through 2013-14, see “GAVILAN JOINT COMMUNITY COLLEGE DISTRICT — Comparative Financial Statements” herein. (2) As of January 12, 2016. (3) As of the District’s Tentative Adopted Budget for fiscal year 2015-16 approved by the Board on June 14, 2016. Source: Gavilan Joint Community College District.

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Comparative Financial Statements

The following table reflects the District’s audited revenues, expenditures and change in net assets, from fiscal years 2010-11 through 2014-15.

GAVILAN JOINT COMMUNITY COLLEGE DISTRICT Statement of Total Revenues and Expenditures and Change in Net Assets


Audited Actuals 2010-11





OPERATING REVENUES: Tuition and Fees $4,544,923 $4,282,836 $4,141,559 $5,098,373 $5,086,365 Less: Scholarship discount and allowance (2,796,196) (2,278,593) (1,758,150) (2,786,086) (2,860,671) Net tuition and fees 1,748,727 2,004,243 2,383,409 2,312,287 2,225,694 Grants and Contracts, noncapital:

Federal 4,930,741 4,790,024 4,167,530 3,875,116 10,234,018 State 3,842,171 3,882,710 3,376,397 4,455,354 6,339,531 Local 1,029,141 785,328 920,073 612,901 374,660

TOTAL OPERATING REVENUES 11,550,780 11,462,305 10,847,409 11,255,658 19,173,903 OPERATING EXPENSES Salaries 20,664,045 20,998,750 20,990,522 21,023,008 21,799,271 Employee Benefits 6,570,997 7,680,771 7,903,150 7,641,283 8,144,366 Supplies, materials, and other operating expenses and services 16,771,461 6,527,146 7,086,310 9,683,921 8,613,750

Student Aid -- 9,435,357 7,432,289 7,022,058 7,027,974 Depreciation 1,828,968 1,995,568 1,931,989 1,943,827 1,980,847

TOTAL OPERATING EXPENSES 45,835,471 46,637,592 45,344,260 47,314,097 47,566,208 OPERATING LOSS (34,284,691) (35,175,287) (34,496,851) (36,058,439) (28,392,305) NON-OPERATING REVENUES (EXPENSES) State apportionments, noncapital 13,245,041 10,776,786 9,011,513 11,034,851 5,690,727 Education protection account -- -- -- -- 5,055,410 Local property taxes, levied for general purposes 12,892,542 13,154,729 15,211,371 14,400,623 15,803,259 State taxes and other revenues 151,262 152,339 150,875 156,512 149,113 Pell Grants 6,343,768 6,645,503 5,968,633 6,023,026 -- Investment income 132,092 262,526 241,796 160,389 -- Interest expense on capital related debt (3,586,786) (4,921,650) (4,840,354) (3,167,331) -- Interest income, noncapital -- -- -- -- 41,551 Other non-operating revenues and expenses 571,612 2,235,717 2,239,569 802,454 498,818

TOTAL NON-OPERATING REVENUES (EXPENSES) 29,749,531 28,305,950 27,983,403 29,410,524 27,238,878

INCOME (LOSS) BEFORE OTHER REVENUES AND EXPENSES (4,535,160) (6,869,337) (6,513,448) (6,647,915) (1,153,427)

OTHER REVENUES AND EXPENSES State revenues, capital 71,085 33,589 491,609 109,713 61,701 State grants and contracts, capital -- -- -- -- 4,388,880 Local property taxes and revenues, capital 4,543,335 4,897,828 5,737,514 5,940,516 6,249,279 Interest income, capital -- -- -- -- 113,415 Interest expense on capital assets-related debt, net -- -- -- -- (4,738,288) TOTAL OTHER REVENUES AND EXPENSES 4,614,420 4,931,417 6,229,123 6,050,229 6,074,987

CHANGE IN NET ASSETS 79,260 (1,937,920) (284,325) (597,686) 4,921,560 NET ASSETS, BEGINNING OF YEAR, RESTATED 18,539,300 18,618,560 16,680,640 15,128,887(1) (12,721,605)(2) NET ASSETS, END OF YEAR $18,618,560 $16,680,640 $16,396,315 $14,531,201 $(7,800,045)

(1)! Pursuant to Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities, effective for fiscal

year end June 30, 2014, the net assets for the beginning of the year were restated by $(1,267,428) because bond issuance costs were no longer capitalized.

(2)! Restates the beginning net position (restated to recognize the net pension liability, net of related deferred outflows of resources) as a result of the implementation of GASB Statement No. 68. See “- Retirement Programs – GASB Statement Nos. 67 and 68” herein.

Source: Gavilan Joint Community College District.

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District Debt Structure

Short-Term Debt. Currently, the District has no short-term debt obligations.

Long-Term Debt. A schedule of changes in general long-term debt for the fiscal year ended June 30, 2015 is shown below:

Balance July 1, 2014 Additions Deductions

Balance June 30, 2015

General Obligation Bonds $100,410,000 -- $(1,190,000) $99,220,000 Premiums 3,206,784 -- (261,417) 2,945,367 Compensated Absences 698,621 $12,416 -- 711,037 OPEB Liability 1,093,523 495,697 (1,396,007) 193,213 Net Pension Liability(1) 29,074,262 1,998,427 (8,221,571) 22,851,118

Total Long-Term Obligations $134,483,190 $2,506,540 $11,068,995 $125,920,735

(1)! Reflects the aggregate of the District’s proportionate share of the net pension liabilities for the STRS and PERS programs. For fiscal year ending June 30, 2015. See also “– Retirement Programs – GASB Statement Nos. 67 and 68” herein and “APPENDIX B – THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note 8” attached hereto. Source: Gavilan Joint Community College District.

General Obligation Bonds. On June 22, 2004, the District issued its General Obligation Bonds, Election of 2004, Series A in the aggregate principal amount of $29,170,000 (the “Series A Bonds”). Also on June 22, 2004, the District issued its General Obligation Bonds, Election of 2004, Series B in the aggregate principal amount of $830,000 (the “Series B Bonds”). The Series B Bonds were retired through regularly scheduled debt service payments. On January 10, 2008, the District issued its General Obligation Bonds, Election of 2004, Series C in the aggregate principal amount of $50,000,000 (the “Series C Bonds”). On May 12, 2011, the District issued its General Obligation Bonds, Election of 2004, Series D in the aggregate principal amount of $28,000,000 (the “Series D Bonds”). On April 3, 2012, the District issued its 2012 General Obligation Refunding Bonds, Series A in the aggregate principal amount of $12,120,000 (the “2012 Refunding Bonds”) and on April 19, 2012, the District issued its 2012 General Obligation Refunding Bonds, Series B (the “2012 B Refunding Bonds”) in the aggregate principal amount of $11,800,000 to partially refund the Series A Bonds. On August 20, 2015, the District issued its 2015 General Obligation Refunding Bonds (the “2015 Refunding Bonds”) in the aggregate principal amount of $42,320,000.

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The annual requirements to amortize the District’s general obligation bonds, assuming no optional redemptions are made, are as follows:

GENERAL OBLIGATION BOND DEBT SERVICE Gavilan Joint Community College District

Year Ending

August 1

Series A Bonds

Series C Bonds

Series D Bonds

2012 Refunding Bonds

2012 B Refunding Bonds

2015 Refunding Bonds

Total Debt Service

2016 $ 52,756.26 $717,000.00 $1,624,375.00 $1,114,750.00 $666,550.00 $2,095,262.78 $6,270,694.04 2017 56,881.26 795,600.00 1,660,975.00 1,372,650.00 485,950.00 2,087,150.00 6,459,206.26 2018 60,756.26 -- 1,695,975.00 1,415,150.00 478,850.00 2,832,150.00 6,482,881.26 2019 59,181.26 -- 1,734,375.00 1,537,750.00 481,850.00 2,884,800.00 6,697,956.26 2020 62,606.26 -- 1,770,975.00 1,623,000.00 483,700.00 2,972,000.00 6,912,281.26 2021 65,768.76 -- 1,810,775.00 1,711,250.00 485,400.00 3,055,000.00 7,128,193.76 2022 68,618.76 -- 1,853,575.00 1,807,000.00 481,950.00 3,141,500.00 7,352,643.76 2023 71,200.00 -- 1,894,175.00 1,904,500.00 483,500.00 3,236,000.00 7,589,375.00 2024 73,700.00 -- 1,933,425.00 1,958,250.00 484,900.00 3,377,750.00 7,828,025.00 2025 75,950.00 -- 1,974,675.00 -- 2,601,150.00 3,419,000.00 8,070,775.00 2026 82,650.00 -- 2,022,675.00 -- 2,708,187.50 3,514,250.00 8,327,762.50 2027 83,800.00 -- 2,066,925.00 -- 2,825,000.00 3,615,500.00 8,591,225.00 2028 89,675.00 -- 2,113,975.00 -- 2,942,950.00 3,717,000.00 8,863,600.00 2029 -- -- 2,156,350.00 -- -- 7,143,250.00 9,299,600.00 2030 -- -- 2,204,050.00 -- -- 7,377,500.00 9,581,550.00 2031 -- -- 2,251,525.00 -- -- 7,625,500.00 9,877,025.00 2032 -- -- 2,298,500.00 -- -- 7,880,250.00 10,178,750.00 2033 -- -- 6,941,800.00 -- -- -- 6,941,800.00 2034 -- -- 6,939,275.00 -- -- -- 6,939,275.00 2035 -- -- 6,942,487.50 -- -- -- 6,942,487.50

Total $903,543.82 $1,512,600.00 $53,890,862.50 $14,444,300.00 $15,609,937.50 $69,973,862.78 $156,335,106.60 _______________ Source: Gavilan Joint Community College District.

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Statement of Direct and Overlapping Debt

Set forth on the following page is a direct and overlapping debt report (the “Debt Report”), prepared by California Municipal Statistics, Inc. for debt issued as of July 1, 2016. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The table shows the percentage of each overlapping entity’s assessed value located within the boundaries of the District. The table also shows the corresponding portion of the overlapping entity’s existing debt payable from property taxes levied within the District. The total amount of debt for each overlapping entity is not given in the table.

The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.


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STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT Gavilan Joint Community College District

2015-16 Assessed Valuation: $27,428,775,672 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 7/1/16 Santa Clara County 5.381% $42,648,999 Gavilan Joint Community College District 100.000 94,635,000(1) Aromas-San Juan Unified School District 61.359 9,450,449 Gilroy Unified School District 100.000 186,307,495 Morgan Hill Unified School District 100.000 84,709,012 Los Gatos Joint Union High School District 0.014 9,845 San Benito Union High School District 100.000 30,000,000 Hollister School District 100.000 16,315,000 Loma Prieta Joint Union School District 0.282 10,885 North County Joint Union School District 100.000 2,999,906 City of Gilroy 100.000 30,335,000 City of San Jose 1.076 4,111,235 San Benito Health Care District 100.000 29,000,000 Santa Clara Valley Water District Benefit Assessment District 5.381 5,330,419 City Community Facilities Districts 100.000 21,485,000 City and Special District 1915 Act Bonds (Estimate) 100.000 12,015,700 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $569,363,945 OVERLAPPING GENERAL FUND DEBT: Santa Clara County General Fund Obligations 5.381% $36,767,088 Santa Clara County Pension Obligation Bonds 5.381 19,754,638 Santa Clara County Board of Education Certificates of Participation 5.381 343,308 Gilroy Unified School District Certificates of Participation 100.000 29,625,000 Morgan Hill Unified School District Certificates of Participation 100.000 13,505,000 Los Gatos Joint Union High School District Certificates of Participation 0.014 876 Loma Prieta Joint Union School District Certificates of Participation 0.282 1,442 City of Gilroy Certificates of Participation 100.000 42,515,000 City of Morgan Hill General Fund Obligations 100.000 9,025,000 City of San Jose General Fund Obligations 1.076 6,727,636 Santa Clara County Vector Control District Certificates of Participation 5.381 155,511 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $158,420,499 Less: Santa Clara County supported obligations 19,700,142 TOTAL NET OVERLAPPING GENERAL FUND DEBT $138,720,357 OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): $116,060,000 GROSS COMBINED TOTAL DEBT $843,844,444(2) NET COMBINED TOTAL DEBT $824,144,302 (1) Excludes Bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to 2015-16 Assessed Valuation: Direct Debt ($94,635,000) ...............................................................0.35% Total Direct and Overlapping Tax and Assessment Debt ..................2.08% Gross Combined Total Debt ..............................................................3.08% Net Combined Total Debt ..................................................................3.00% Ratios to Redevelopment Incremental Valuation ($3,476,970,554): Total Overlapping Tax Increment Debt .............................................3.34% _____________________ Source: California Municipal Statistics, Inc.

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Assessed Valuations

The assessed valuation of property in the District is established by the tax assessing authority for the county in which such property is located, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution. For a discussion of how properties currently are assessed and re-assessed, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” herein. Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institutions, are exempt from property taxation and do not appear on the tax rolls.

Property within the District has a total assessed valuation for fiscal year 2015-16 of $27,428,775,672. Shown in the following table are the assessed valuations for the District for the period 2001-01 through 2015-16.


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The table below provides historical assessed values of the property in the District’s taxing area.

ASSESSED VALUATIONS Gavilan Joint Community College District


Secured Utility Unsecured Total Before

Rdv. Increment

Santa Clara County Portion

2000-01 $8,890,904,144 $7,241,827 $483,726,039 $9,381,872,010 2001-02 10,167,409,869 12,874,402 703,523,612 10,883,807,883 2002-03 11,191,162,873 7,643,765 777,952,688 11,976,759,326 2003-04 12,172,133,511 228,343,389 650,618,856 13,051,095,756 2004-05 13,092,979,103 289,065,077 542,360,709 13,924,404,889 2005-06 14,591,732,690 466,841,245 592,960,726 15,651,534,661 2006-07 16,126,866,404 424,943,174 569,644,295 17,121,453,873 2007-08 17,649,044,532 413,164,988 613,051,393 18,675,260,913 2008-09 18,289,190,588 420,929,586 688,911,714 19,399,031,888 2009-10 17,417,419,510 446,029,586 658,037,479 18,521,486,575 2010-11 16,430,593,849 452,229,586 596,151,860 17,478,975,295 2011-12 16,386,564,076 408,778,242 641,737,612 17,437,079,930 2012-13 16,396,382,411 359,578,242 630,629,594 17,386,590,247 2013-14 17,450,668,852 308,478,242 616,225,715 18,375,372,809 2014-15 18,806,029,802 237,610,163 641,852,776 19,685,492,741 2015-16 19,960,722,926 259,145,141 660,391,861 20,880,259,928

San Benito County Portion

2000-01 $3,401,807,853 $3,915,739 $166,309,737 $3,572,033,329 2001-02 --(1) --(1) --(1) 4,032,285,275 2002-03 --(1) --(1) --(1) 4,389,844,673 2003-04 --(1) --(1) --(1) 4,710,218,177 2004-05 --(1) --(1) 187,731,723 5,136,687,360 2005-06 --(1) --(1) --(1) 5,521,115,475 2006-07 --(1) --(1) 204,987,277 6,188,712,551 2007-08 --(1) --(1) 206,063,604 6,580,221,129 2008-09 6,168,167,516 469,270 248,859,639 6,417,496,425 2009-10 5,600,991,259 469,270 260,174,365 5,861,634,894 2010-11 5,324,358,542 469,270 249,511,759 5,574,339,571 2011-12 5,191,165,821 469,270 256,367,913 5,448,003,004 2012-13 5,080,289,339 321,570 274,263,207 5,354,874,116 2013-14 5,371,622,551 321,570 316,424,794 5,688,368,915 2014-15 5,779,859,234 321,570 354,917,408 6,135,098,212 2015-16 6,194,661,650 321,570 353,532,524 6,548,515,744

Total Assessed Valuation 2000-01 $12,292,711,997 $11,157,566 $650,035,776 $12,953,905,339 2001-02 --(1) --(1) --(1) 14,916,093,158 2002-03 --(1) --(1) --(1) 16,366,603,999 2003-04 --(1) --(1) --(1) 17,761,313,933 2004-05 --(1) --(1) 730,092,432 19,061,092,249 2005-06 --(1) --(1) --(1) 21,172,650,136 2006-07 --(1) --(1) 774,631,572 23,310,166,424 2007-08 --(1) --(1) 819,114,997 25,255,482,042 2008-09 24,457,358,104 421,398,856 937,771,353 25,816,528,313 2009-10 23,018,410,769 446,498,856 918,211,844 24,383,121,469 2010-11 21,754,952,391 452,698,856 845,663,619 23,053,314,866 2011-12 21,577,729,897 409,247,512 898,105,525 22,885,082,934 2012-13 21,476,671,750 359,899,812 904,892,801 22,741,464,363 2013-14 22,822,291,403 308,799,812 932,650,509 24,063,741,724 2014-15 24,585,889,036 237,931,733 996,770,184 25,820,590,953 2015-16 26,155,384,576 259,466,711 1,013,924,385 27,428,775,672

(1) Breakdown not available. Source: California Municipal Statistics, Inc.

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Economic and other factors beyond the District’s control, such as general market decline in property values, disruption in financial markets that may reduce availability of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or manmade disaster, such as earthquake, drought, flood or toxic contamination, could cause a reduction in the assessed value of taxable property within the District. Any such reduction would result in a corresponding increase in the annual tax rate levied by the Counties to pay the debt service with respect to the Bonds. See “SECURITY FOR THE BONDS” herein.

Drought. On January 17, 2014, the State Governor (the “Governor”) declared a state-wide Drought State of Emergency. As of such date, the State faced water shortfalls due to the driest year in recorded State history; the State’s rivers and reservoirs were below their record low levels, and manual and electronic readings recorded the water content of snowpack at the highest elevations in the State (chiefly in the Sierra Nevada mountain range) at about 20% of normal average for the winter season. As part of his State of Emergency declaration, the Governor directed State officials to assist agricultural producers and communities that may be economically impacted by dry conditions. Following the Governor’s declaration, the California State Water Resources Control Board (the “Water Board”) issued a statewide notice of water shortages and potential future curtailment of water right diversions. On April 1, 2015, the Governor issued an executive order mandating certain temporary conservation measures, which were implemented by means of an emergency regulation adopted by the Water Board on May 5, 2015. The temporary conservation measures have been extended and amended by subsequent executive orders of the Governor and Water Board regulations. Most recently, on May 9, 2016, the Governor issued an executive order ordering the Department of Water Resources, the Water Board and the California Public Utilities Commission to update and extend temporary water restrictions through end of January 2017, and to take actions to transition to permanent, long-term improvements in water use. Following the Governor’s executive order, on May 18, 2016, the Water Board adopted a localized “stress test” approach of water conservation, under which local urban water agencies are required to ensure a three-year supply of water assuming three years of drought conditions. Agencies that project a water shortage at the end of the three-year period under the stress test are required to implement conservation measures through January 2017 equal to the percentage of water shortage projected.

The District cannot make any representation regarding the effects that the current drought has had, or, if it should continue, may have on the value of taxable property within the District, or to what extent the drought could cause disruptions to economic activity within the boundaries of the District.

Appeals and Adjustments of Assessed Valuations

Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. County assessors may independently reduce assessed values as well based upon the above factors or reductions in the fair market value of the taxable property. In most cases, an appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. Such reductions are subject to yearly reappraisals and may be adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the California Constitution” herein.

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A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.

The District does not have information regarding pending appeals of assessed valuation of property within the District. No assurance can be given that property tax appeals in the future will not significantly reduce the assessed valuation of property within the District.

Tax Levies, Collections and Delinquencies

Taxes are levied for each fiscal year on taxable real and personal property which is situated in the District as of the preceding January 1. A supplemental tax is levied when property changes hands or new construction is completed.

A 10% penalty attaches to any delinquent payment for secured roll taxes. In addition, property on the secured roll with respect to which taxes are delinquent becomes tax-defaulted. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty (i.e., interest) to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to auction sale by the tax-collecting authority of the relevant county.

In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue beginning November 1 of the fiscal year, and a lien is recorded against the assessee. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on specific property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office in order to obtain a lien on specified property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

The Counties levy (except for levies to support prior voter-approved indebtedness) and collect all property taxes for property falling within the Counties’ taxing boundaries. See “FUNDING OF COMMUNITY COLLEGE DISTRICT’S IN CALIFORNIA – Teeter Plan.”

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The annual secured tax levies and delinquencies in the County for fiscal years 2006-07 through 2014-15 are shown below.

SECURED TAX CHARGES AND DELINQUENCIES Gavilan Joint Community College District

2006-07 through 2014-15

Secured Amt. Del. % Del. Tax Charge (1) June 30 June 30 2006-07 $1,983,058.39 $77,167.06 3.89% 2007-08 2,523,760.02 158,447.87 6.28 2008-09 2,515,522.43 162,901.79 6.48 2009-10 2,833,870.07 129,515.92 4.57 2010-11 3,301,178.38 108,985.94 3.30 2011-12 3,556,323.56 87,189.70 2.45 2012-13 Not available Not available 1.76 2013-14 4,354,539.47 56,520.12 1.30 2014-15 4,499,024.73 53,340.20 1.19 (1) General Obligation Bond Debt Service Levy. Source: California Municipal Statistics, Inc.

Largest Property Owners

The following table lists the 20 largest local secured taxpayers in the District in terms of their 2015-16 secured assessed valuations.

LARGEST LOCAL SECURED TAXPAYERS Gavilan Joint Community College District

Fiscal Year 2015-16

2015-16 % of Property Owner Primary Land Use Assessed Valuation Total (1)

1. Simon Property Group Outlet Stores $201,180,862 0.77% 2. International Business Machines Corp. Industrial 106,567,858 0.41 3. Excel Gilroy LLC Commercial 72,005,285 0.28 4. Olam West Coast Inc. Industrial 71,933,753 0.28 5. Natural Selection Foods LLC Industrial 68,706,611 0.26 6. Morgan Hill Retail Venture LP Commercial 60,057,988 0.23 7. Inland Western Retail / Inland Western Gilroy LLC Commercial 48,619,795 0.19 8. Wal Mart Real Estate Business Trust Commercial 41,935,452 0.16 9. Cordevalle LP Golf Course 41,608,867 0.16 10. Llagas LLC Land Holdings 41,178,161 0.16 11. JTJ Apartment Investors LLC Apartments 40,596,745 0.16 12. Target Corporation Commercial 40,092,277 0.15 13. Westwood Drive Fee Owner LLC Apartments 39,170,653 0.15 14. K&S Market Inc. Commercial 38,927,760 0.15 15. Standard Pacific Corp. Residential Development 35,201,755 0.13 16. Christopher Ranch LLC Agricultural 32,597,241 0.12 17. ROIC STV LLC Commercial 32,377,678 0.12 18. Meritage Homes of California Inc. Residential Development 31,993,572 0.12 19. KB Home So Bay Inc. Residential Development 30,564,120 0.12 20. Kirby Canyon Holdings LLC Landfill 30,066,083 0.11 $1,105,382,516 4.23% (1) 2015-16 Local Secured Assessed Valuation: $26,155,384,576. Source: California Municipal Statistics, Inc.

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B-1

APPENDIX B

THE 2014-15 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT


GAVILAN JOINT COMMUNITY

COLLEGE DISTRICT

GILROY, CALIFORNIA

FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT

YEAR ENDED JUNE 30, 2015


TABLE OF CONTENTS YEAR ENDED JUNE 30, 2015

PAGE INTRODUCTION Organization 1

FINANCIAL SECTION

INDEPENDENT AUDITOR'S REPORT 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 5 BASIC FINANCIAL STATEMENTS:

Statement of Net Position 13 Statement of Revenues, Expenses, and Changes in Net Position 14 Statement of Cash Flows 15 Statement of Fiduciary Net Position 17 Statement of Changes in Fiduciary Net Position 18 Notes to the Financial Statements 19

REQUIRED SUPPLEMENTARY INFORMATION SECTION

Schedule of Funding Progress for Other Postemployment Benefits 43 Schedule of the District’s Proportionate Share of the Net Pension Liability 44 Schedule of the District’s Contributions 45

SUPPLEMENTARY INFORMATION SECTION

Schedule of Expenditures of Federal Awards 46 Schedule of State Financial Assistance 47 Schedule of Workload Measures for State General Apportionment Annual (Actual) Attendance 48 Reconciliation of ECS 84362 (50 Percent Law) Calculation 49 Reconciliation of Education Protection Account Expenditures to District

Accounting Records 51 Reconciliation of Annual Financial and Budget Report (CCFS-311) With Audited Financial Statements 52 Notes to Supplementary Information 53

ADDITIONAL INFORMATION SECTION

Combining Statements of Fund Balance/Net Position by Fund – Unaudited 55 Combining Statements of Revenues, Expenditures/Expenses, and Changes in

Fund Balance/Net Position by Fund – Unaudited 57


TABLE OF CONTENTS YEAR ENDED JUNE 30, 2015

PAGE OTHER INDEPENDENT AUDITOR'S REPORTS

Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 59

Report on Compliance for Each Major Program

and on Internal Control Over Compliance Required by OMB Circular A-133 61

Report on Compliance with Applicable Requirements in

Accordance with the Contracted District Audit Manual 64 FINDINGS AND RECOMMENDATIONS SECTION

Schedule of Audit Findings and Questioned Costs 66 Status of Prior Year Findings and Recommendations 75


ORGANIZATION YEAR ENDED JUNE 30, 2015

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DESCRIPTION OF DISTRICT The District was established on July 1, 1963. The District’s operations cover virtually all of San Benito County and the Southern part of Santa Clara County, which includes the Morgan Hill Unified School District, the Gilroy Unified School District, and the San Benito County Joint Union High School District. There were no changes in the boundaries of the District during the current year. The District's college is accredited by the Western Association of Schools and Colleges. The Board of Trustees and District Administration for the fiscal year ended June 30, 2015, were composed of the following members:

BOARD OF TRUSTEES Name Office Term Expires Walter Glines President 2018

Laura Perry, Esq. Vice President 2018

Mark Dover Clerk 2016

Tom Breen, Esq. Trustee 2016

Jonathan Brusco Trustee 2016

Kent Child Trustee 2018

Lois Locci, Ed.D. Trustee 2018

Gabriel Sawyer Student Trustee 2015 ADMINISTRATION Dr. Steven Kinsella ................................................................................................. Superintendent/President

Dr. Kathleen Rose ................................................... Executive Vice President & Chief Instructional Officer

Kathleen Moberg .................................................................................... Vice President of Student Services

Frederick E. Harris ....................................................................... Vice President of Administrative Services

Sherrean Carr ........................................................................................ Dean of Career Technical Education

Frances Lozano ........................................................................................ Dean of Liberal Arts and Sciences

Ron Hannon ............................................................................................. Dean of Kinesiology and Athletics

Frances Lopez ........................................................................... Associate Dean, Disability Resource Center

Randy Brown ......................... Interim Associate Dean, Community Development and Grants Management

Anne Ratto ............................................................................ Associate Dean, EOPS, CalWORKs, & CARE

Wade W. Ellis, CPA ....................................................................................... Director of Business Services

FINANCIAL SECTION

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INDEPENDENT AUDITOR'S REPORT Board of Trustees Gavilan Joint Community College District Gilroy, California Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the aggregate remaining fund information of the Gavilan Joint Community College District (the District) as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, as listed in the table of contents. Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Contracted District Audit Manual, issued by the California Community Colleges Chancellor’s Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Board of Trustees Gavilan Joint Community College District Page 2

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Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate remaining fund information of the Gavilan Joint Community College District, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 2 to the financial statements, in 2015 the District adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Schedule of Funding Progress for Other Postemployment Benefits, the Schedule of the District’s Proportionate Share of the Net Pension Liability, and the Schedule of the District’s Contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The Supplementary Information and Additional Information sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Supplementary Information section is required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the Contracted District Audit Manual, issued by the California Community Colleges Chancellor’s Office. The Supplementary Information section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements


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themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information section is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Additional Information section is presented at the request of District management and has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2015, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance. GILBERT ASSOCIATES, INC. Sacramento, California December 22, 2015


MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2015

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USING THIS ANNUAL REPORT The purpose of this annual report is to provide readers with information about the activities, programs and financial condition of Gavilan Joint Community College District (the District) as of June 30, 2015. The report consists of three basic financial statements: the Statement of Net Position, Statement of Revenues, Expenses and Change in Net Position, and Statement of Cash Flows, and provides information about the District as a whole. This section of the annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year that ended on June 30, 2015. Please read it in conjunction with the District's financial statements, which immediately follow this section. Responsibility for the completeness and accuracy of this information rests with the District management. DISTRICT BACKGROUND The District was originally established in 1919 as San Benito County Junior College. It operated under this title until 1963, when a new community college district was formed that included both San Benito and southern Santa Clara Counties. Successful passage of a local bond in 1966 provided the needed funds to construct the present campus at Santa Teresa Boulevard and Castro Valley Road in Gilroy, California. In the fall of 2014, Gavilan College celebrated its 95th year of operation as a community college. Gavilan College is one of 113 California Community Colleges that are organized into 72 districts which are political subdivisions authorized by the Constitution of the State of California. A seven-member board of trustees governs the Gavilan Joint Community College District. The voters of the communities served by the district elect board members to office. The Board of Trustees is responsible for the overall direction and control of the district so that it best meets the needs of the community it serves. The district operates instructional sites in Hollister and Morgan Hill to augment their course offerings at the main (Gilroy) campus. Gavilan College is a comprehensive public community college offering a wide range of services, including programs of continuing study in liberal arts, pre-professional, business, vocational and technical fields. Courses are offered in the day, evening and on weekends. In FY 14/15, Gavilan College served an estimated 5,559 students for fall semester, 5,431 students for spring semester and 2,114 for summer session. Gavilan College employs 207 full time permanent employees and approximately 270 part time faculty and staff employees each semester. The main campus in Gilroy rests against the foothills that form the western boundary of the Santa Clara Valley. The district is 35 miles south of San Jose, 80 miles south of San Francisco, and 40 miles northeast of the Monterey Coast. The main campus was initially master-planned to accommodate an enrollment of 5,000 students and rests on a 150-acre site that has been carefully planned to take advantage of the beautiful, natural and tranquil setting. Gavilan College offers a lower division college program that prepares students for transfer to a four-year college or university. The college also offers a variety of technical, occupational and pre-professional courses of study that lead to employment. As of May 2015, students can choose among 145 degrees and certificates, including 19 Associate Degrees for Transfer (ADTs) which provide a direct pathway for students to transfer with junior standing into the California State University system.



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Gavilan Joint Community College District serves residents of the Gilroy Unified, Morgan Hill Unified, Aromas-San Juan Unified, and San Benito Joint Union High School Districts. The 201 total service area populations are approximately 177,445 (US Census Data). The district is comprised of approximately 2,700 square miles in southern Santa Clara County and a large portion of San Benito County. OVERVIEW OF THE FINANCIAL STATEMENTS The District's financial statements are presented in accordance with Governmental Accounting Standards Board Statements (GASB) Codification Section (Cod. Sec.) 2200.101, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments and Cod. Sec. 2200.190-.191, Basic Financial Statements - and Management Discussion and Analysis - for Public College and Universities. These statements allow for the presentation of financial activity and results of operations which focuses on the District as a whole. The entity-wide financial statements present the overall results of operations whereby all of the District's activities are consolidated into one total versus the traditional presentation by fund type. The focus of the Statement of Net Position is designed to be similar to the bottom line results of the District. This statement combines and consolidates current financial resources with capital assets and long-term obligations. The Statement of Revenues, Expenses and Change in Net Position focuses on the costs of the District's operational activities with revenues and expenses categorized as operating and non-operating, and expenses are reported by natural classification. The Statement of Cash Flows provides an analysis of the sources and uses of cash within the operations of the District. The California Community Colleges System's Office has recommended that all State community colleges follow the Business Type Activity (BTA) model for financial statement reporting purposes. FINANCIAL HIGHLIGHTS OF THE PAST YEAR The fiscal year ending June 30, 2015, continued to provide the District with the opportunity to reallocate and reduce resources through employee attrition in order to reduce the structural imbalance that occurred when the state suddenly reduced funding in the prior fiscal year. The Budget and actual results from general fund operations shows a small deficit but it is anticipated that increased funding from the State in FY 14/15 and beyond will allow the District to bring the budget back into balance by FY 15/16 while still maintaining a 10% reserve. Over the year the college has made progress on all of its strategic initiatives with resources allocated to a number of improvements in achieving the goals of the Strategic Plan and the Educational Master Plan. The Board of Trustees, faculty, managers and professional support staff of the District have outlined primary values through a strategic planning update process. The product of this process is the updated five-year Strategic Plan 2015/16 – 2019/20. The District uses an integrated planning and funding that includes all planning campus and District-wide efforts. Individual plans feed requests into the resource process with items identified as strategic priorities receiving first dollar allocations.



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Consistent allocation of financial resources to strategic plan initiatives has resulted in improved learning and working environment at the District. The schedules of classes at all sites are arranged so that students are able to further their goals by access to a wide range of courses at the sites. Satellite operations in Morgan Hill still need to be enhanced if the District is going to adequately meet the needs for educational services in the communities of San Benito County and Morgan Hill/Greater Coyote Valley. In response to current and possible continued state budget issues, the District has repositioned itself to a smaller but adequately supported program. This matches program costs with available resources. This also offers the District the opportunity to manage program growth efficiently as additional resources are available. The District has been concentrating on achieving maximum Full Time Equivalent Students (FTES) to obtain earned growth revenue funds when available. In FY 11-12, the District had a workload reduction via reduced funding for total FTES. The change occurred just a month before the end of the year and resulted in a permanent reduction of on-going revenue of $1.8 million. This state-imposed workload reduction was caused by the economic situation of the state. In addition to the workload reduction of $1.8 million, the District also experienced a one-time deficit coefficient of $600,000 for a total reduction of $2.4 million for that fiscal year. The District absorbed this $2.4 million deficit using its reserves. At the end of the FY 11-12 the college had 200 unfunded FTES, 93 unfunded FTES in FY 12/13, 47 unfunded FTES in FY 13/14 and zero unfunded FTES in FY 14/15. THE DISTRICT AS A WHOLE Net Position The District’s net position was ($7.8 million) deficit and $14.6 million for the fiscal years ended June 30, 2015 and June 30, 2014, respectively. Of this amount, ($26.9 million) and ($3.7) million were unrestricted as of June 30, 2015 and 2014, respectively. The implementation of GASB Statements No. 68 and 71 required a restatement of net pension liabilities, creating a negative unrestricted net position. Restricted net position is reported separately to show legal constraints from debt covenants and enabling legislation that limit the District Board’s ability to use that net position for day-to-day operations. Our analysis below, focuses on the net position (Table 1) and change in net position (Table 2) of the District’s governmental activities. Noted in the current year is a decrease in assets resulting largely due to the fact that the District held no tax revenue anticipation notes (TRAN) at June 30, 2015. In the prior year, assets included $3 million in cash from the issuance of TRANs. The college had to use TRANs during the year in order to pay for operating costs but had repaid the proceeds by the end of the fiscal year. The State has eliminated the amount of deferrals for apportionment payments.



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Table 1 GAVILAN JOINT CCD Net Position

Governmental Activities as of June 30 for the Fiscal Year

2015

2014, restated* Change

Current and other assets $ 34,974,893 $ 37,785,770 $ (2,810,877) Capital assets 92,060,984 86,605,291 5,455,693

Total Assets 127,035,877 124,391,061 2,644,816 Deferred outflows of resources 4,116,120 2,406,063 1,710,057

Total Assets and Deferred Outflows 131,151,997 126,797,124 4,354,873 Current liabilities 8,994,263 8,928,563 (65,770) Noncurrent liabilities 123,528,281 103,307,977 20,220,304

Total Liabilities 135,522,544 112,236,540 20,286,004

Deferred inflows of resources 6,429,498 6,429,498

Total Liabilities and Deferred Inflows 138,952,042 112,236,540 26,715,502 Net position

Net investment in capital assets 15,092,420 14,467,998 624,422 Restricted 3,991,820 3,748,322 243,498 Unrestricted (26,884,285 ) (3,655,736) (23,228,549)

Total Net Position $ (7,800,045 ) $ 14,560,584 $ (22,360,629) *Restatements for corrections of errors were included in Table 1. The actual and pro forma effect of the change in accounting principles for the implementation of GASBs 68 and 71 were not included in Table 1. This data is not readily available as actuary studies for measurement dates prior to June 30, 2014, were not prepared in accordance with GASB 68. Change in Net Position The results of this year’s operations for the District as a whole are reported in the Statement of Revenues, Expenses and Change in Net Position. Table 2 takes the information from the Statement and rearranges them slightly so you can see our total revenues for the year. State revenues moderately increased due to a cost of living adjustment (COLA) of .85% on computational revenue and increased funding for certain State-funded categorical programs such as EOPS, CalWORKs, and SSSP.



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Table 2 GAVILAN JOINT CCD Change in Net Position

Governmental Activities for the Fiscal Year

2015

2014, restated* Change

Revenues Operating revenues:

Tuition and fees $ 2,225,694 $ 2,312,287 $ (86,593) Grants and contracts - Federal 10,234,018 9,898,142 335,876 Grants and contracts - State and local 6,714,191 4,589,429 2,124,762

Non-operating revenues: State apportionment 5,752,428 7,065,092 (1,312,664) Education protection account 5,055,410 4,079,472 975,938 Property taxes 22,052,538 20,341,139 1,711,399 State grants and contracts, capital 4,388,880 478,826 3,910,054 State taxes and other revenue 149,113 156,512 (7,399) Other revenues 653,784 1,503,438 (849,654)

Total Revenues 57,226,056 50,424,337 6,801,719

Expenses Salaries 21,799,271 21,023,008 776,263 Employee benefits 8,144,366 8,975,909 (831,543) Supplies, materials and other operating

expenses and services 8,613,750 7,557,825 1,055,925

Student aid 7,027,974 7,022,058 5,916 Depreciation 1,980,847 1,943,827 37,020 Other non-operating expenses 4,738,288 4,470,013 268,275

Total Expenses 52,304,496 50,992,640 1,311,856

Change in Net Position $ 4,921,560 $ (568,303) $ 5,489,863 *Restatements for corrections of errors were included in Table 2. The actual and pro forma effect of the change in accounting principles for the implementation of GASBs 68 and 71 were not included in Table 2. This data is not readily available as actuary studies for measurement dates prior to June 30, 2014, were not prepared in accordance with GASB 68.



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Governmental Activities As reported in the Statement of Revenues, Expenses and Change in Net Position, the cost of all of our governmental activities this year was $52 million. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $22 million because the cost was paid by those who benefited from the programs or by other governments and organizations who subsidized certain programs with grants and contributions. We paid for the remaining "public benefit" portion of our governmental activities with other revenues, including interest and general entitlements. General Fund Budgetary Highlights Over the course of the year, the District revises its budget as it attempts to deal with unexpected changes in revenues and expenditures. The final amendment to the 2014-15 budget was adopted on September 9, 2014.

CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2015, the District had $92 million in a broad range of capital assets, including land, buildings, and furniture and equipment. This amount represents a net increase (including additions, deductions and depreciation) of $5.5 million from last year, predominately due to ongoing Measure E and State Capital Outlay projects, offset by depreciation. Table 3 GAVILAN JOINT CCD Capital Assets at Year-end

Fixed Assets for the Fiscal Year

2015 2014, restated Change

Land $ 28,074,857 $ 28,074,857 Work in Progress 9,887,921 3,242,871 $ 6,645,050 Land Improvements 1,352,730 921,512 431,218 Building and Improvements 70,226,464 70,280,050 (53,586) Equipment and vehicles 7,515,619 7,137,995 377,624

Total 117,057,591 109,657,285 7,400,306

Less Accumulated Depreciation (24,996,607) (23,051,994 ) 1,944,613

Net Total $ 92,060,984 $ 86,605,291 $ 5,455,693 The District is in the construction phase for bond renovation projects. A few capital projects are planned to continue through the 2015-16 year and beyond.



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Long-Term Liabilities At the end of this year, the District had $126 million in long-term obligations outstanding. The long-term obligations consisted of: Table 4 GAVILAN JOINT CCD Long-Term Liabilities at Year-end

Long-Term Liabilities for the Fiscal Year

2015 2014, restated Change

General obligation bonds $ 99,220,000 $ 100,410,000 $ (1,190,000) Premiums 2,945,367 3,206,784 (261,417) Compensated absences 711,037 698,621 12,416 OPEB liability 193,213 1,093,523 (900,310) Net pension liability 22,851,118 29,074,262 (6,223,144)

Total $ 125,920,735 $ 134,483,190 $ (8,562,455) More detailed information regarding our long-term liabilities, including debt repayment schedules, may be found in the Notes to the Basic Financial Statements. SIGNIFICANT ACCOMPLISHMENTS OF FISCAL YEAR 2014/15 ARE NOTED BELOW: In fiscal year 2012-2013 the District absorbed a large reduction in unrestricted revenues that necessitated use of funds set aside for retired employee medical benefit costs. These funds were set aside for just this type of a situation and will be reconstituted as funds become available. In FY 14/15 the District was able to contribute approximately $900,310 to the OPEB trust. Balancing the structural difference between expenditures and revenues continued as a high priority throughout the year. The structural shortage has been narrowed substantially since FY 12/13 with a structurally balanced budget expected in FY 15/16. On March 2, 2004, the electorate within the District’s geographic boundaries approved a general obligation bond known as Measure E. The value of the Bond is for $108 million. The bond proceeds are being utilized by the District to plan, design and construct a number of projects, primarily in the areas of infrastructure development and upgrades along with modernization of existing District facilities including technology upgrades. A few projects remain with delays caused by the extraordinarily long term period that is required in order to obtain all environmental clearances.



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ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES In considering the District Budget for the 2014-15 year, the District Board and management used the following criteria for estimating unrestricted general fund revenues: The State’s economy continued to improve in Budget Years 13/14 and 14/15. As the State releases funds that have exceeded initial projections, the colleges across the state can expect slight increases. At Gavilan College there was an overall increase in unrestricted general fund revenue of 9.6% for the FY 14/15 year. Additional increases in Student Success Initiative and funding for programs that provide services to students who meet certain eligibility criteria have helped reduce the pressure on the unrestricted general fund as those resources were restored as the economy improved. For FY 14/15 and beyond, additional increases in revenues is expected. The State’s economy is yielding revenues larger than what was anticipated when the FY 14/15 budget was prepared. A portion of those funds will eventually work their way down to the California community colleges. In short, the economy is strong and is generating large increases in revenues in excess of planned amounts. The challenge now is for colleges to be allocated the surplus funds in a manner that allows action plans generated through the planning process to be implemented. CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District’s finances and to show the District’s accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the Director of Business Services, at Gavilan Joint Community College District, 5055 Santa Teresa Blvd, Gilroy, California, 95020, or e-mail at [email protected].

ASSETS:Current assets:

Cash and cash equivalents 3,200,640$ Receivables, net 3,518,157Prepaid expenses 95,530

Total current assets 6,814,327 Noncurrent assets:

Restricted cash and cash equivalents 27,642,496Lease receivable 518,070Depreciable capital assets, net 54,098,206Nondepreciable capital assets 37,962,778

Total noncurrent assets 120,221,550 Total assets 127,035,877

DEFERRED OUTFLOWS OF RESOURCES:Deferred amount on refunding 2,141,175 Deferred outflows of resources related to pensions 1,974,945

Total deferred outflows 4,116,120

LIABILITIES:Current liabilities:

Accounts payable 1,726,064Accrued payroll 339,023Accrued interest payable 1,981,094Unearned revenue 2,555,628Long-term liabilities due within one year 2,392,454

Total current liabilities 8,994,263 Noncurrent liabilities:

Other postemployment benefits liability 193,213Net pension liability 22,851,118Bonds payable 100,483,950

Total noncurrent liabilities 123,528,281 Total liabilities 132,522,544

DEFERRED INFLOWS OF RESOURCES:Deferred inflows of resources related to pensions 6,429,498

NET POSITION (DEFICIT):Net investment in capital assets 15,092,420 Restricted for:

Debt service 3,935,863 Capital projects 55,891 Other special purposes 66

Unrestricted (26,884,285)

Total net deficit (7,800,045)$


STATEMENT OF NET POSITIONJUNE 30, 2015

The accompanying notes are an integral part of these financial statements. 13

OPERATING REVENUES: Tuition and fees (gross) 5,086,365$ Less: scholarship discounts and allowances (2,860,671)

Net tuition and fees 2,225,694 Grants and contracts, noncapital:

Federal 10,234,018State 6,339,531Local 374,660

TOTAL OPERATING REVENUES 19,173,903

OPERATING EXPENSES: Salaries 21,799,271Employee benefits 8,144,366Supplies, materials, and other operating expenses and services 8,613,750Student financial aid and scholarships 7,027,974Depreciation 1,980,847

TOTAL OPERATING EXPENSES 47,566,208

OPERATING LOSS (28,392,305)

NON-OPERATING REVENUES: State apportionments, noncapital 5,690,727Education protection account 5,055,410Local property taxes, noncapital 15,803,259State taxes and other revenues 149,113Interest income, noncapital 41,551Other non-operating revenues 498,818

TOTAL NON-OPERATING REVENUES 27,238,878

LOSS BEFORE CAPITAL ACTIVITY (1,153,427)

CAPITAL REVENUES (EXPENSES): State apportionments, capital 61,701State grants and contracts, capital 4,388,880Local property taxes and revenues, capital 6,249,279 Interest income, capital 113,415Interest expense on capital asset-related debt, net (4,738,288)

TOTAL CAPITAL REVENUES (EXPENSES) 6,074,987

INCREASE IN NET POSITION 4,921,560

NET DEFICIT -- BEGINNING OF YEAR, AS RESTATED (Note 2) (12,721,605)

NET DEFICIT -- END OF YEAR (7,800,045)$


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITIONYEAR ENDED JUNE 30, 2015


CASH FLOWS FROM OPERATING ACTIVITIES:Tuition and fees 2,188,650$ Federal grants and contracts 10,182,589 State grants and contracts 6,247,204 Local grants and contracts 799,899 Payments to suppliers (9,448,388) Payments to/on behalf of employees (30,309,291) Payments to/on behalf of students (7,231,804)

Net cash used by operating activities (27,571,141)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:State apportionments, noncapital 13,058,360 Local property taxes, noncapital 15,803,259 State taxes and other revenues 149,113 Other non-operating revenues 498,818

Net cash provided by noncapital financing activities 29,509,550

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

State apportionments, capital 105,775 State grants and contracts, capital 3,398,067 Local property taxes and revenues, capital 6,249,279 Interest income, capital 41,551 Purchases of capital assets (7,476,933) Sale of capital assets 40,393 Proceeds from lease receivable 22,525 Principal paid on capital debt (1,190,000) Interest paid on capital debt (4,736,775)

Net cash used by capital and related financing activities (3,546,118)

CASH FLOWS FROM INVESTING ACTIVITIES:Interest income, noncapital 113,415

Net cash provided by investing activities 113,415

NET DECREASE IN CASH AND EQUIVALENTS (1,494,294)

CASH AND EQUIVALENTS -- BEGINNING OF YEAR 32,337,430

CASH AND EQUIVALENTS -- END OF YEAR 30,843,136$


STATEMENT OF CASH FLOWSYEAR ENDED JUNE 30, 2015


Reconciliation to statement of net position: Cash and cash equivalents 3,200,640$ Restricted cash and cash equivalents, noncurrent 27,642,496

Total cash and cash equivalents 30,843,136$

RECONCILIATION OF NET OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:

Operating loss (28,392,305)$ Adjustments to reconcile operating loss to net cash used by operating activities:

Depreciation expense 1,980,847 Changes in assets and liabilities:

Receivables, net (16,840) Prepaid expenses (71,395) Deferred outflows related to pensions (182,872) Accounts payable (754,237) Accrued payroll (272,120) Unearned revenue 819,321 Compensated absences 12,416 Postemployment benefits (900,310) Net pension liability (6,223,144) Deferred inflows related to pensions 6,429,498

Net cash used by operating activities (27,571,141)$

NON-CASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES:

Amortization of deferred amount on refunding (264,888)$ Amortization of premiums on long-term debt 261,417

STATEMENT OF CASH FLOWS (Continued)YEAR ENDED JUNE 30, 2015



Private-Purpose Trust

FundsASSETS:

Cash and cash equivalents 500,062$ Receivables 216

TOTAL ASSETS 500,278$

LIABILITIES:Accounts payable 18,372Amounts held in trust for others 18,092

TOTAL LIABILITIES 36,464

RESTRICTED NET POSITION:Restricted net position held in trust 463,814$


STATEMENT OF FIDUCIARY NET POSITIONJUNE 30, 2015


Private-Purpose Trust

FundsADDITIONS:

Employer contributions 104,222$ ASB fees and sales 139,734 Donations and fundraising 79,162 Other local receipts 8,794

TOTAL ADDITIONS 331,912

DEDUCTIONS:Salaries 54,342 Employee benefits 38,062 Supplies and services 63,460 Operating expenses 107,604 Capital outlay 12,825 Scholarships 4,959

TOTAL DEDUCTIONS 281,252

CHANGE IN NET POSITION 50,660

NET POSITION -- BEGINNING OF YEAR 413,154

NET POSITION -- END OF YEAR 463,814$


STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONJUNE 30, 2015



NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2015

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1. ORGANIZATION AND REPORTING ENTITY

Gavilan Joint Community College District (the "District") is a political subdivision of the State of California and provides educational services to the local residents of the surrounding area. While the District is a political subdivision of the State, it is not a component unit of the State in accordance with the provisions of Governmental Accounting Standards Board (GASB) Codification Section (Cod. Sec.) 2100. The District is classified as a state instrumentality under Internal Revenue Code Section 115 and is therefore exempt from federal taxes. The District has reviewed criteria to determine whether other entities with activities that benefit the District should be included within its financial reporting entity. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in generally accepted accounting principles (GAAP) and GASB Cod. Sec. 2100. The District, based on its evaluation of these criteria, did not identify any component units.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board and Audits of State and Local Governmental Units, issued by the American Institute of Certified Public Accountants (AICPA). Basis of Accounting – For financial reporting purposes, the District is considered a special-purpose government engaged only in business-type activities. Accordingly, the District’s financial statements have been presented using the economic resources measurement focus and accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recognized when an obligation has been incurred. All significant interfund transactions have been eliminated. The budgetary and financial accounts of the District are recorded and maintained in accordance with the Chancellor’s Office of the California Community Colleges’ Budget and Accounting Manual, which is consistent with generally accepted accounting principles in the United States of America. In addition to the District’s business-type activities, the District maintains fiduciary funds. These funds account for assets held by the District in a trustee capacity or as an agent on behalf of others. Fiduciary funds are accounted for using the economic resources measurement focus. The District reports the following fiduciary funds:

Trust Funds – These funds include the Associated Students Trust Fund and the Student Center Fee Fund. The amounts reported for these funds are reported in the aggregate in the statement of fiduciary net position and the statement of changes in fiduciary net position.

Change in Presentation – The OPEB Irrevocable Trust Fund, presented as a fiduciary fund in the District’s financial statements for the year ended June 30, 2014, was excluded from the District’s financial statements for the year ended June 30, 2015, as it does not meet the definition of a fiduciary fund as defined in GASB Statement No. 34.



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The Student Center Fee Fund was presented as an agency fund in the District’s statement of fiduciary net position as of June 30, 2014, as the Student Center Agency Fund. For the year ended June 30, 2015, the District has presented the Student Center Fee Fund as a trust fund in accordance with the Budget and Accounting Manual issued by the California Community Colleges Chancellor’s Office. Budgets and Budgetary Accounting – By state law, the District's governing board must approve a tentative budget no later than July 1st and adopt a final budget no later than September 15th of each year. A hearing must be conducted for public comments prior to adoption. The budget is revised during the year to incorporate categorical funds which are awarded during the year and miscellaneous changes to the spending plans. Revisions to the budget are approved by the District's governing board.

Estimates used in Financial Reporting – In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Current Year GASB Implementation – For the year ended June 30, 2015, the District implemented GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, and GASB Statement No. 71 (GASB 71) Pension Transition for Contributions Made Subsequent to the Measurement Date – an Amendment of GASB Statement No. 68. The primary objectives of GASB 68 and GASB 71 are to improve accounting and financial reporting by state and local governments for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. They require employers to report a net pension liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. GASBs 68 and 71 identify the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note 8 explains the effect of the current year GASB implementation.

Since GASB 68 requires retroactive application, beginning net position is reduced by the net pension liability offset by the related deferred outflow of resources as of June 30, 2014. As a result, for the year ended June 30, 2015, the beginning net position decreased by $27,282,189 as the cumulative effect of a change in accounting principles.



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Restatement of Net Position due to Cumulative Effect of Correction of Errors – During the year ended June 30, 2015, the District made adjustments to its construction in progress balance to capitalize expenses for capital outlay, and correct the calculation of capitalized interest recorded in the year ended June 30, 2014. The District also made a correction to its calculation of the net other postemployment benefits (OPEB) asset/liability for the years ended June 30, 2009, through June 30, 2014. Additionally, the District made a correction to record a long-term lease receivable for the sale of portables that had been expensed in prior years. The effects of the adjustments are as follows:

District’s net position, beginning of year, as previously reported $ 14,531,201

Change in accounting principles (GASBs 68 & 71) (27,282,189) Addition to construction in progress for capital outlay 2,126,096 Reduction of construction in progress for capitalized interest (1,302,682) Reduction of net OPEB asset for contribution recognition (1,334,626) Addition of lease receivable for sale of portables 540,595

District’s net position, beginning of year, as restated $ (12,721,605) Cash and Cash Equivalents – For the purposes of the financial statements, cash equivalents are defined as financial instruments with an original maturity of three months or less. Funds invested in the Santa Clara County Treasury are considered cash equivalents. Restricted Cash and Cash Equivalents – Cash that is externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other noncurrent assets, is classified as a restricted noncurrent asset in the statement of net position.

Receivables – Receivables consist of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the State of California. Receivables also include amounts due from the federal government, state and local governments, or private sources, in connection with reimbursements of allowable expenditures made pursuant to the District's grants and contracts. The District provides for an allowance for uncollectible accounts as an estimation of amounts that may not be received. The allowance is based upon management's estimates and analysis. The allowance was estimated at $163,686 for the year ended June 30, 2015. Capital Assets – Capital assets are recorded at cost at the date of acquisition or, if donated, at fair market value at the date of donation. For equipment, the District's capitalization policy includes all items with a unit cost of $5,000 or more, and estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 25 to 50 years for buildings, 20 to 50 years for building improvements, 5 to 20 years for equipment, and 5 to 10 years for vehicles. The District capitalizes interest paid on obligations related to the acquisition, construction or rehabilitation of District capital assets, if such costs exceed related interest earnings. Interest expense totaled $4,738,288 during the year ended June 30, 2015, and no amounts were capitalized as interest earnings on tax-exempt debt proceeds restricted for capital projects exceeded interest costs attributable to construction.



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Deferred Outflows/Deferred lnflows of Resources – In addition to assets, the statement of net position reports separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of resources that applies to a future period(s) and will not be recognized as an outflow of resources (expense) until then. Conversely, deferred inflows of resources represent an acquisition of resources that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time.

The District’s deferred amount on refunding, resulting from the difference in the carrying value and reacquisition price of the refunded debt, is reported as a deferred outflow of resources and is amortized over the shorter of the life of the refunded debt or refunding bond.

Contributions made to the District’s pension plans after the measurement date but before the fiscal year-end are recorded as a deferred outflow of resources and will reduce the net pension liability in the next fiscal year.

Additional factors involved in the calculation of the District’s pension expense and net pension liability include the differences between expected and actual experience, changes in assumptions, differences between projected and actual investment earnings, changes in proportion, and differences between the District’s contributions and proportionate share of contributions. These factors are recorded as deferred outflows and inflows of resources and amortized over various periods. See Note 8 for further details related to these pension deferred outflows and inflows.

Pensions – Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Classified employees are members of the California Public Employees’ Retirement System (CalPERS), and certificated employees are members of the State Teachers’ Retirement System (CalSTRS), collectively referred to as the Plans. For purposes of measuring the net pension liability, pension expense, and deferred outflows/inflows of resources related to pensions, information about the fiduciary net position of the District’s portions of the Plans and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Unearned Revenues – Unearned revenues include amounts received for tuition and fees prior to the end of the fiscal year, but related to the subsequent accounting period. Unearned revenues also include amounts received from grants, contracts, and certain categorical programs that have not yet been earned. Compensated Absences – Compensated absence costs are accrued when earned by employees. Accumulated unpaid employee vacation benefits are recognized at year-end as liabilities of the District. Sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expenditure or expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits for certain employees in the CalPERS and CalSTRS plans when the employee retires.

Net Position – The District's net position is classified as follows:

Net investment in capital assets: This represents the District's total investment in capital assets, net of associated outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.



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Restricted net position: Restricted expendable net position includes resources in which the District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

Unrestricted net position: Unrestricted net position (deficit) represents resources derived from student tuition and fees, state apportionments, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the District, and may be used at the discretion of the governing board to meet current expenses for any purpose.

When an expense is incurred that can be paid using either restricted or unrestricted resources, the District typically first applies the expense toward restricted resources, then to unrestricted resources. This practice ensures fully utilizing restricted funding each fiscal year.

Classification of Revenues and Expenses – The District has classified its revenues and expenses as either operating or nonoperating revenues according to the following criteria:

Operating revenues and expenses: Operating revenues and expenses include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, and (3) most Federal, State and local grants and contracts and Federal appropriations. All expenses are considered operating expenses except for interest expense on capital asset-related debt.

Nonoperating revenues and expenses: Nonoperating revenues and expenses include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, “Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting” and GASB No. 34, such as State appropriations and investment income.

Scholarship Discounts and Allowances and Financial Aid – Student tuition and fee revenue are reported net of scholarship discounts and allowances in the statement of revenues, expenses, and changes in net position. The District offers Board of Governor’s (BOG) grants to qualified students and these tuition waivers are reported as scholarship discounts and allowances. Grants, such as Federal, State, or non-governmental programs, are recorded as operating or nonoperating revenues in the District’s financial statements.

Property Taxes – Secured property taxes attach as an enforceable lien on property as of January 1, and are payable in two installments on November 1 and February 1. Unsecured property taxes are payable in one installment on or before August 31. The Santa Clara and San Benito Counties each bill and collect taxes for the District. Tax revenues are recognized by the District when received.

Future Accounting Pronouncements – In June of 2015, the GASB issued GASB Statement No. 75 (GASB 75), Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, with required implementation for the District during the year ended June 30, 2018. The primary objective of GASB 75 is to improve accounting and financial reporting by state and local governments for other postemployment benefits (OPEB) by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. It will require employers to report a net OPEB liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of



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benefits. GASB 75 identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. GASB 75 is required to be implemented retroactively and will require a restatement of beginning net position.

3. CASH AND CASH EQUIVALENTS

The District’s cash and cash equivalents as of June 30, 2015, are classified in the accompanying financial statements as follows:

Statement of net position of the District:

Cash and cash equivalents $ 3,200,640Restricted cash and cash equivalents - noncurrent 27,642,496

Statement of fiduciary net position: Cash and cash equivalents 500,062

Total cash and cash equivalents $ 31,343,198

Cash and cash equivalents as of June 30, 2015, consist of the following:

District

Fiduciary

Funds

Cash and cash equivalents in Santa Clara County Treasury $ 30,815,576 $ 18,894Cash in banks 27,560 481,168

Total cash, cash equivalents, and investments $ 30,843,136 $ 500,062

Cash in County Treasury – In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Santa Clara County Treasury (the Treasury). The Treasury pools these funds with those of other districts in the county and invests the cash. The share of each fund in the pooled cash account is separately accounted for and interest earned is apportioned quarterly based on the relationship of a fund’s daily balance to the total of pooled cash and investments.

Participants’ equity in the investment pool is determined by the dollar amount of the participant deposits, adjusted for withdrawals and distributed income. This method differs from the fair value method used to value investments in these financial statements in that unrealized gains or losses are not distributed to pool participants.

The Treasury is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et seq. and is restricted by Government Code Section 53635, pursuant to Section 53601. The funds maintained by the Treasury are either secured by federal depository insurance or are collateralized.



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Investments Authorized by the District’s Investment Policy – The table below identifies the investment types authorized for the District by the California Government Code Section 53601 and 53602. This table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentrations of credit risk.

Authorized Investment Type

MaximumMaturity

Maximum Percentage of Portfolio

Maximum Investment in

One Issuer

Local Agency Bonds or Notes 5 years None None U.S. Treasury Obligations 5 years None None State Obligations – CA and Others 5 years None None CA Local Agency Obligations 5 years None None U.S. Agency Obligations 5 years None None Bankers’ Acceptances 180 days 40% None Commercial Paper (pooled and non-pooled) 270 days 25% or 40% 10% Negotiable Certificates of Deposits 5 years 30% 10% Non-negotiable Certificates of Deposits 5 years None None Deposit Placement Services 5 years 30% 10% CD Placement Services 5 years 30% 10% Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% None Medium-Term Notes 5 years 30% None Mutual Funds & Money Market Mutual Funds N/A 20% 10% Collateralized Bank Deposits 5 years None None Mortgage Pass-through Securities 5 years 20% None Joint Powers Authority Pool N/A None None County Pooled Investment Funds N/A None None Local Agency Investment Funds (LAIF) N/A None None Voluntary Investment Program Fund N/A None None Supranational Obligations 5 years 30% None Interest Rate Risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As of June 30, 2015, the weighted average maturity of the investments contained in the Treasury’s investment pool is approximately 469 days. Credit Risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The County Treasury investment pool does not have a rating provided by a nationally recognized statistical rating organization. Concentration of Credit Risk – The District's investment policy places limits on the amount it may invest in any one issuer. At June 30, 2015, the District had no concentrations of credit risk.



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Deposits – The District limits custodial credit risk by ensuring uninsured balances are collateralized by the respective financial institution. Cash balances held in banks are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and are collateralized by the respective financial institutions. At June 30, 2015, the carrying amount of the District's cash in banks for the primary governmental entity was $27,560. The bank balance for such accounts at June 30, 2015, was $268,841, of which $18,781 exceeded FDIC limits. At June 30, 2015, cash in banks for the fiduciary funds had a carrying amount of $481,168 and a bank balance of $493,627, of which $65,567 exceeded FDIC limits. Restricted Cash and Cash Equivalents – The District’s noncurrent restricted cash and cash equivalents balance is $27,642,496 at June 30, 2015. Included in this restricted balance is $23,580,499 of unspent bond proceeds restricted for capital projects, $3,933,609 of assessments collected by the County Treasurer’s Office on behalf of the District for the repayment of the District’s general obligation bonds, and $128,388 restricted for other purposes. Derivative Investments – The District did not directly enter into any derivative investments. Information regarding the amount invested in derivatives by the County Treasury was not available.

4. RECEIVABLES

The District’s receivables at June 30, 2015 are summarized as follows: Federal $ 942,514State 1,903,804Local and other 835,525

3,681,843Less allowance for doubtful accounts (163,686)

Receivables, net $ 3,518,157

In November 2013, the District sold portables purchased with Measure E funds to the Gilroy Unified School District at fair value under a lease purchase agreement. Payments of $22,525 are due annually over a 25 year period, with the first payment due in the year ended June 30, 2014. Future payments are due as follows:

Year Ending June 30,

Payment

2016 $ 22,525 2017 22,525 2018 22,525 2019 22,525 2020 22,525

2021-2025 112,625 2026-2030 112,625 2031-2035 112,625 2036-2038 67,570

$ 518,070



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5. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2015, was as follows:

Balance July 1, 2014,

Restated

Additions

Transfers Deductions

Balance June 30,

2015

Capital assets, not depreciated: Land $ 28,074,857 $ 28,074,857Construction in progress 3,242,871 $ 7,405,284 $ (760,234) 9,887,921

Total capital assets, not depreciated 31,317,728 7,405,284

(760,234) 37,962,778

Capital assets, depreciated:

Land improvements 921,512 431,218 1,352,730Buildings and building

improvements 70,280,050 11,041

$ (64,627) 70,226,464Furniture and equipment 6,861,781 60,608 329,016 7,251,405Vehicles 276,214 (12,000) 264,214

Total capital assets, depreciated 78,339,557 71,649 760,234 (76,627) 79,094,813

Less accumulated depreciation:

Land improvements (708,360) (18,745) (727,105) Buildings and building

improvements (17,218,786) (1,445,762) 24,234 (18,640,314) Furniture and equipment (4,865,167) (504,806) (5,369,973) Vehicles (259,681) (11,534) 12,000 (259,215)

Total accumulated depreciation (23,051,994) (1,980,847) 36,234 (24,996,607) Total capital assets, depreciated, net 55,287,563 (1,909,198) 760,234 (40,393) 54,098,206

Capital assets, net $ 86,605,291 $ 5,496,086 $ $ (40,393) $ 92,060,984



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6. TAX REVENUE ANTICIPATION NOTES Tax Revenue Anticipation Notes (TRANs) are short-term debt instruments. They are issued to eliminate cash flow deficiencies that result from fluctuations in revenue receipts and expenditure disbursements. On July 16, 2014, the District issued $2,000,000 of TRANs maturing on June 30, 2015, with interest at 2.0%. The District made payments of principal and interest of $1,019,111 on January 15, 2015, and April 15, 2015. A summary of the District's TRANs activity for the year ended June 30, 2015 is as follows:

Outstanding July 1, 2014 Additions Deletions

Outstanding June 30, 2015

2014/15 - 2.0% TRANs $ $ 2,000,000 $ (2,000,000) $ 7. LONG-TERM LIABILITIES

General Obligation Bonds In June 2004, the District issued $29,170,000 of General Obligation Bonds, 2004 Series A. The Bonds were issued to finance the construction and modernization of District facilities and refund certain lease obligations. In April 2012, the District refunded $22,770,000 of the 2004 Series A General Obligation Bonds through the issuance of the 2012 Series A and Series B General Obligation Refunding Bonds. The remaining 2004 Series A General Obligation Bonds mature through August 2028 and bear interest at rates ranging from 2.000% to 5.375%. The following is the schedule of future payments for the remaining 2004 Series A General Obligation Bonds:


Principal Interest Total

2016 $ 20,000 $ 33,181 $ 53,1812017 20,000 32,319 52,3192018 25,000 31,319 56,3192019 30,000 29,969 59,9692020 30,000 28,394 58,394

2021-2025 225,000 111,066 336,0662026-2029 290,000 34,100 324,100

$ 640,000 $ 300,348 $ 940,348 In December 2007, the District issued $50,000,000 of General Obligation Bonds, 2004 Series C. The Bonds were issued to finance the construction and modernization of District facilities, the acquisition of equipment, and to pay the costs of issuance associated with the Bonds. The Bonds mature through August 2032 and bear interest at rates ranging from 4.000% to 5.000%. Bond premium (net of accumulated amortization) of $529,194 is capitalized and will be amortized over the term of the Bond.



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The following is a schedule of the future payments for the 2004 Series C General Obligation Bonds:



2016 $ 560,000 $ 2,216,444 $ 2,776,4442017 660,000 2,192,044 2,852,0442018 765,000 2,163,544 2,928,5442019 910,000 2,130,044 3,040,0442020 1,000,000 2,091,344 3,091,344

2021-2025 7,185,000 9,543,844 16,728,8442026-2030 14,920,000 7,270,559 22,190,5592031-2033 21,470,000 1,584,600 23,054,600

$ 47,470,000 $ 29,192,423 $ 76,662,423 In May 2011, the District issued $28,000,000 of General Obligation Bonds, 2004 Series D. The Bonds were issued to finance the construction and modernization of District facilities, the acquisition of equipment, and to pay the costs of issuance associated with the Bonds. The Bonds mature through August 2035 and bear interest at rates ranging from 2.000% to 5.750%. Bond premium (net of accumulated amortization) of $791,160 is capitalized and will be amortized over the term of the Bond. The following is a schedule of the future payments for the 2004 Series D General Obligation Bonds:



2016 $ 50,000 $ 1,540,125 $ 1,590,1252017 85,000 1,537,675 1,622,6752018 125,000 1,533,475 1,658,4752019 165,000 1,527,675 1,692,6752020 210,000 1,520,175 1,730,175

2021-2025 1,810,000 7,412,275 9,222,2752026-2030 3,480,000 6,761,788 10,241,7882031-2035 15,245,000 4,954,369 20,199,369

2036 6,565,000 188,744 6,753,744

$ 27,735,000 $ 26,976,301 $ 54,711,301 In April 2012, the District issued $12,120,000 of General Obligation Refunding Bonds, 2012 Series A, and $11,800,000 of General Obligation Refunding Bonds, 2012 Series B. The Bonds were issued to partially refund the 2004 Series A General Obligations Bonds and to pay the costs of issuance associated with the Bonds. The 2012 Series A and Series B Refunding Bonds mature through August 2024 and August 2028, respectively, and bear interest at rates ranging from 2.000% to 5.000%. Bond premium (net of accumulated amortization) of $1,625,013 is capitalized and will be amortized over the term of the Bonds.



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The following is a schedule of the future payments for the 2012 Series A General Obligation Refunding Bonds:



2016 $ 690,000 $ 516,650 $ 1,206,6502017 605,000 503,700 1,108,7002018 875,000 488,900 1,363,9002019 935,000 461,450 1,396,4502020 1,095,000 415,375 1,510,375

2021-2025 7,760,000 1,050,000 8,810,000

$ 11,960,000 $ 3,436,075 $ 15,396,075 The following is a schedule of the future payments for the 2012 Series B General Obligation Refunding Bonds:



2016 $ 100,000 $ 387,550 $ 487,5502017 280,000 383,750 663,7502018 105,000 379,900 484,9002019 100,000 377,850 477,8502020 105,000 375,275 480,275

2021-2025 585,000 1,825,675 2,410,6752026-2029 10,140,000 759,213 10,899,213

$ 11,415,000 $ 4,489,213 $ 15,904,213 Changes in Long-Term Liabilities A schedule of changes in long-term liabilities for the year ended June 30, 2015, is as follows:

Beginning Balance, Restated

Additions Deductions Ending Balance

Due Within One Year

General Obligation Bonds $ 100,410,000 $ (1,190,000) $ 99,220,000 $ 1,420,000Premiums 3,206,784 (261,417) 2,945,367 261,417Compensated absences 698,621 $ 12,416 711,037 711,037OPEB liability (Note 9) 1,093,523 495,697 (1,396,007) 193,213 Net pension liability (Note 8) 29,074,262 1,998,427 (8,221,571) 22,851,118

$ 134,483,190 $ 2,506,540 $ (11,068,995) $ 125,920,735 $ 2,392,454



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8. PENSION PLANS

California State Teachers’ Retirement System (CalSTRS)

Plan Description

The District participates in the State Teachers’ Retirement Plan (the CalSTRS Plan), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. CalSTRS acts as a common investment and administrative agent for participating public entities within the State of California. CalSTRS issues a publicly available financial report that includes financial statements and required supplementary information for this plan. This report is available online at www.calstrs.com.

Benefits Provided

The benefits for the CalSTRS Plan are established by contract, in accordance with the provisions of the State Teachers' Retirement Law. Benefits are based on members’ years of service, age, final compensation, and a benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. The California Public Employees’ Pension Reform Act of 2013 (PEPRA) made significant changes to the benefit structure that primarily affect members first hired to perform CalSTRS creditable activities on or after January 1, 2013. As a result of PEPRA, the CalSTRS Plan has two benefit structures: 1) CalSTRS 2% at 60 – Members first hired on or before December 31, 2012, to perform CalSTRS creditable activities, and 2) CalSTRS 2% at 62 – Members first hired on or after January 1, 2013, to perform CalSTRS creditable activities. The 2 percent, also known as the age factor, refers to the percentage of final compensation received as a retirement benefit for each year of service credit. To be eligible for service retirement, members hired prior to January 1, 2013, must be at least age 60 with a minimum of five years of CalSTRS-credited service, while members hired after January 1, 2013, must be at least age 62 with five years of service.

Contributions

Assembly Bill 1469 (AB 1469), signed into law as a part of the State of California’s (the State) 2014-15 budget, increases contributions to the CalSTRS Plan from members, employers, and the State over the next seven years, effective July 1, 2014. School employer contributions will increase from 8.25% to a total of 19.1% of covered payroll over the seven-year period. The District’s required contribution rate for the year ended June 30, 2015, was 8.88% of annual pay. District contributions to the CalSTRS Plan were $1,014,998 for the year ended June 30, 2015.

The State contributes a percentage of the annual earnings of all members of the CalSTRS Plan. AB 1469 increases the State’s contribution attributable to the benefits in effect in 1990, but does not change the base rate of 2.017%. Thus the State contribution rate, which in the period ended June 30, 2015, was 3.454% of covered payroll, will increase over the next two years to a total of 6.328%.



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Actuarial Assumptions

The total pension liability for the CalSTRS Plan was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2013, and rolling forward the total pension liability to the measurement date of June 30, 2014. The financial reporting actuarial valuation as of June 30, 2013, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement:

Actuarial Cost Method Entry-Age Normal Actuarial Assumptions:

Discount Rate 7.60%Consumer Price Inflation 3.00%Wage Growth 3.75%Investment Rate of Return 7.60% (1) Mortality(2) CalSTRS’ Membership DataPost-Retirement Benefit Increase 2% simple

(1) Net of investment expenses, but gross of administrative expenses. (2) CalSTRS uses custom mortality tables to best fit the patterns of mortality among

its members. These custom tables are based on RP2000 series tables adjusted tofit CalSTRS experience. RP2000 series tables are an industry standard set of mortality rates published by the Society of Actuaries. See CalSTRS July 1, 2006 – June 30, 2010 Experience Analysis for more information.

Discount Rate

The discount rate used to measure the CalSTRS Plan’s total pension liability was 7.60%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increases per AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60%) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the CalSTRS Plan’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best-estimate ranges were developed using capital market assumptions from CalSTRS’ general investment consultant as an input to the process. Based on the model from CalSTRS consulting actuary’s investment practice, a best estimate range was determined by assuming the portfolio is re-balanced annually and that annual returns are lognormally distributed and independent from year to year to develop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation by CalSTRS’ general investment consultant is based on CalSTRS’ board policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the CalSTRS board.



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Best estimates of 10-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:

Asset Class

Assumed Asset

Allocation

Long-Term* Expected Real Rate of Return

Global Equity 47.00% 4.50% Private Equity 12.00% 6.20% Real Estate 15.00% 4.35% Inflation Sensitive 5.00% 3.20% Fixed Income 20.00% 0.20% Cash / Liquidity 1.00% 0.00%

Total 100.00% *10-year geometric average

California Public Employees’ Retirement System (CalPERS)

Plan Description

The District participates in the Schools Pool (the CalPERS Plan), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. CalPERS issues a publicly available financial report that includes financial statements and required supplementary information for this plan. This report is available online at www.calpers.ca.gov.

Benefits Provided

The benefits for the CalPERS Plan are established by contract, in accordance with the provisions of the California Public Employees’ Retirement Law (PERL). The benefits are based on members’ years of service, age, final compensation, and a benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. PEPRA made significant changes to the benefit structure that primarily affect members first hired to perform CalPERS creditable activities on or after January 1, 2013. As a result of PEPRA, the CalPERS Plan has two benefit structures: 1) CalPERS 2% at 55 –Members first hired on or before December 31, 2012, to perform CalPERS creditable activities, and 2) CalPERS 2% at 62 – Members first hired on or after January 1, 2013, to perform CalPERS creditable activities. To be eligible for service retirement, members hired prior to January 1, 2013, must be at least age 50 with a minimum of five years of CalPERS-credited service, while members hired on or after January 1, 2013, must be at least age 52 with a minimum of five years of service.

Contributions

Section 20814(c) of the PERL requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Contribution rates for the CalPERS Plan are determined annually on an actuarial basis as of June 30 by CalPERS. The CalPERS Plan’s actuarially determined rate is the estimated amount



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necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District’s required contribution rate for the year ended June 30, 2015, was 11.771% of annual pay. District contributions to the CalPERS Plan were $959,947 for the year ended June 30, 2015.

Actuarial Assumptions

For the measurement period ended June 30, 2014 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and June 30, 2014 total pension liability amounts were based on the following actuarial methods and assumptions:

Actuarial Cost Method Entry-Age Normal Actuarial Assumptions:

Discount Rate 7.50%Inflation 2.75%Salary Increases Varies(1)

Investment Rate of Return 7.50%(2)

Mortality(3) CalPERS’ Membership Data Post-Retirement Benefit Increase Up to 2.75%(4)

(1) Depending on age, service and type of employment (2) Net of pension plan investment and administrative expenses; includes inflation (3) The mortality table used was developed based on CalPERS-specific data. The table

includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, refer to the 2014 experience study report.

(4) Contract COLA up to 2.00% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter

All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates.

Discount Rate

The discount rate used to measure the total pension liability was 7.50% for the CalPERS Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The stress test results are presented in a detailed report, GASB Statements 67 and 68 Crossover Testing Report for Measurement Date June 30, 2014 based on June 30, 2013 Valuations, that can be obtained from the CalPERS website.

According to Paragraph 30 of GASB 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. For the CalPERS Plan, the 7.50% investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65%. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference.



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CalPERS is scheduled to review all actuarial assumptions as part of its regular asset liability management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the year ended June 30, 2018. CalPERS will continue to check the materiality of the difference in calculation until such time as CalPERS has changed their methodology.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

Asset Class

New

Strategic Allocation

Real Return Years 1 – 10(a)

Real Return Years 11+(b)

Global Equity 47.00% 5.25% 5.71%Global Fixed Income 19.00% 0.99% 2.43%Inflation Sensitive 6.00% 0.45% 3.36%Private Equity 12.00% 6.83% 6.95%Real Estate 11.00% 4.50% 5.13%Infrastructure and Forestland 3.00% 4.50% 5.09%Liquidity 2.00% -0.55% -1.05%

Total 100.00% (a) An expected inflation of 2.5% was used for this period. (b) An expected inflation of 3.0% was used for this period.



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Pension Liabilities, Pension Expense, and Deferred Outflows/Inflows of Resources Related to Pensions

As of June 30, 2015, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for the State’s pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows:

District’s proportionate share of the net pension liability: CalSTRS Plan $ 14,609,250 CalPERS Plan 8,241,868State’s proportionate share of CalSTRS net pension

liability associated with the District 8,896,441

Total $ 31,747,559

The District’s net pension liability is measured as the proportionate share of each Plan’s net pension liability. The net pension liabilities of the Plans are measured as of June 30, 2014, and calculated by reducing the total pension liability of each Plan by the respective Plan’s fiduciary net position. The District’s proportion of each Plan’s net pension liability was based on the ratio of the District’s actual employer contributions in the measurement period to the total actual employer and State contributions received by the respective Plan in the measurement period. The District’s proportionate share of the net pension liability as of June 30, 2014, was 0.025% and 0.0726% for the CalSTRS and CalPERS Plans, respectively.

For the year ended June 30, 2015, the District recognized pension expense of $2,769,305 and revenue of $770,878 for support provided by the State. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

District contributions subsequent to the measurement date $ 1,974,945

Net differences between projected and actual earnings on plan investments $ 6,429,498

Total $ 1,974,945 $ 6,429,498



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The $1,974,945 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2016. Other amounts reported as deferred outflows/inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended June 30

2016 $ (1,607,375) 2017 (1,607,375) 2018 (1,607,374) 2019 (1,607,374)

Total $ (6,429,498)

Sensitivity of the District’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the District’s proportionate share of the net pension liability of the Plans as of the measurement date, calculated using the discount rate, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower or 1 percentage-point higher than the current rate:

Discount Rate –1%

(6.60%)

Current

Discount Rate (7.60%)

Discount Rate +1% (8.60%)

District’s proportionate share of the CalSTRS Plan’s net pension liability $ 22,772,000 $ 14,609,250 $ 7,803,000

Discount Rate –1%

(6.50%)

Current Discount Rate

(7.50%) Discount Rate +1%

(8.50%) District’s proportionate share of

the CalPERS Plan’s net pension liability $ 14,1458,117 $ 8,241,868 $ 3,047,564

Defined Contribution Plan

The District has also adopted the Accumulation Program for Part-Time and Limited Service Employees (APPLE), a defined contribution plan covered under Internal Revenue Code Section 401(a). APPLE participants include all individuals who have worked for the District on or after January 1, 1992, provided that they are not covered by the CalSTRS or CalPERS Plans through the District's employment. Participants make tax deferred contributions to APPLE equal to 7.5% of total compensation, and these contributions are allocated to accounts in the name of each participant. The District is not required to make contributions to APPLE. Participant account balances are fully vested and non-forfeitable, and are paid in a single distribution upon retirement or other termination.



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9. OTHER POSTEMPLOYMENT BENEFITS In addition to the pension benefits described in Note 8, the District provides postemployment health care benefits for retired employees in accordance with negotiated contracts with the various bargaining units of the District. The Gavilan Plan (the "Plan") is a single-employer defined benefit healthcare plan administered by the District. The Plan provides medical, vision and dental insurance benefits to eligible retirees and, under certain conditions, their spouses and dependents. Under the Plan, certificated employees retiring on or after age 55 with 10 years of service may continue on their active health plans until the earlier of age 65 or receipt of Medicare. Classified employees hired before July 1, 1986, retiring on or after age 55 with 10 years of service may continue on their active health plans for their lifetime. Classified employees hired after July 1, 1986, retiring on or after age 55 with 10 years of service may continue on their active health plans until the earlier of age 65 or receipt of Medicare. For employees retiring after December 31, 2003, the benefit is fixed at the date of retirement, and the retiree pays any increases in the costs of their health benefits. The District is a member of the California Community College League Retiree Health Benefit Program, which is an investment program used to set aside funds for future retiree benefits in an irrevocable trust (the Investment Trust). The District provides benefits on a pay-as-you-go basis, and also makes contributions to the Investment Trust. Separate financial statements for the Investment Trust can be obtained by contacting the California Community College League Retiree Health Benefit Program at 2017 O Street, Sacramento CA 95811. The District’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed, and changes in the District's net OPEB asset:

Annual required contribution $ 480,935Interest on net OPEB obligation (60,117) Adjustment to annual required contribution 74,879

Annual OPEB expense 495,697Contributions made:

Pay-as-you-go (458,024)Deposits in Investment Trust (937,983) Decrease in OPEB obligation (900,310)

Net OPEB obligation at July 1, 2014, restated 1,093,523

Net OPEB obligation at June 30, 2015 $ 193,213 Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimations are made about the future. Projections of benefits are based on the types of benefits provided under the substantive plan at



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the time of each valuation and on the pattern of sharing of benefit costs between the employer and plan members to that point, and, if applicable, the disclosure that the projections of benefits for financial reporting purposes do not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the employer and plan members in the future. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation. The schedule of funding progress included in the required supplementary information presents information regarding whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The following table presents the actuarial methods and assumptions used in the July 1, 2014 valuation:

Actuarial cost method Projected Unit Credit Amortization method 30-year level dollar, closed period Remaining amortization period at June 30, 2015 23 years Inflation rate 2.75% annually Asset valuation method Market value basis Investment return 7.00% annually Healthcare cost trend rate 4.00% - 6.50% annually Projected payroll increases 3.00% annually

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the year ended June 30, 2015, and the preceding two years, is as follows:

Fiscal Year Ended Restated

Annual OPEB Expense % of Annual OPEB

Expense ContributedRestated

Net OPEB Obligation

June 30, 2013 $ 625,420 (242.78)%* $ 819,650 June 30, 2014 $ 796,890 65.63% $ 1,093,523 June 30, 2015 $ 495,697 281.63% $ 193,213

*The District's contributions of $1,295,819 in the year ended June 30, 2013, were offset by a reimbursement from the Investment Trust of $2,814,203 for pay-as-you-go contributions paid by the District between July 1, 2009, and June 30, 2013. The District’s funding status for other postemployment benefits as of the most recent valuation date, July 1, 2014, is as follows:

Actuarial Valuation

Date

Actuarial Value of Assets

(a)

ActuarialAccrued Liability (AAL)

(b)

Unfunded

AAL (UAAL) (b – a)

FundedRatio (a / b)

Covered Payroll

(c)

UAAL as aPercentageof Covered

Payroll ([b – a] / c)

7/1/14 $5,091,482 $ 7,564,417 $ 2,472,935 67% $ 15,348,578 16%



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10. CONTINGENCIES Litigation The District is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the District. State and Federal Allowances, Awards, and Grants

The District has received state and federal funds for specific purposes that are subject to review or audit by the grantor agencies. Although such audits could result in expenditure disallowances under terms of the grants, it is management's opinion that any required reimbursements or future revenue offsets subsequently determined would not be material.

11. SELF INSURANCE AND JOINT VENTURES (Joint Powers Agreements)

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees and students; and natural disasters. The District is partially self-insured for first ten thousand dollars ($10,000) of its general liability and property coverage. The District participates in two joint ventures under joint powers agreements (JPAs), the Bay Area Community College Districts Joint Powers Authority (BACCDJPA) and the Northern California Community College Pool (NCCCP). The relationship between the District and each JPA is such that no JPA is a component unit of the District for financial reporting purposes. Each JPA is governed by a board consisting of a representative from each member organization. The boards control the operations of the JPAs, including selection of management and approval of operating budgets independent of any influence by the members beyond their representation on the governing boards. BACCDJPA provides property and liability insurance for its members. NCCCP arranges for and provides workers’ compensation insurance for its members. The members of each JPA pay premiums commensurate with the level of coverage requested, and they share surpluses and deficits proportionate to their participation in the JPAs. The JPAs are independently accountable for their fiscal matters. The insurance groups maintain their own accounting records. Budgets are not subject to any approval other than that of the JPAs’ governing boards. Complete separate financial statements for the JPAs may be obtained from:

JPA Address

BACCDJPA 1740 Technology Dr. Suite 300; San Jose, CA 95110 NCCCP 1740 Technology Dr. Suite 300; San Jose, CA 95110



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Self-insurance and other limits are as follows:

Type of Coverage

Self-Insurance BACCDJPA NCCCP

General Liability Up to $10,000 $10,001 -

$25,000,000 N/A

Property Up to $10,000 $10,001 -

$250,000,000 N/A

Workers’ Compensation N/A N/A

To Statutory Limits

All property is insured at full replacement value. For the past three years, there have been no significant reductions in any of the District’s insurance coverage types and no settlement amounts have exceeded commercial or authority insurance coverage.

Annual premiums are charged by each JPA using various allocation methods that include actual costs, trends in claims experience, and number of participants.

Condensed financial information reported by each JPA for the years indicated are as follows (not covered by independent auditor’s report):

BACCDJPA Property / Liability

June 30, 2015

NCCCP Workers’

compensation June 30, 2015

Total Assets $ 8,473,681 $ 1,666,541

Total Liabilities $ 2,795,957 $ 671,097

Net Position 5,677,724 995,444

Total Liabilities and Net Position $ 8,473,681

$ 1,666,541

Total Revenues $ 4,471,587

$ 3,693,539 Total Expenses 2,843,129 3,686,082

Net Increase in Net Position $ 1,628,458 $ 7,457



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12. SUBSEQUENT EVENT On August 20, 2015, the District issued 2015 General Obligation Refunding Bonds in the amount of $42,320,000, maturing through August 2032 and bearing interest at rates ranging from 3.000% to 5.000%. The bonds were issued to advance refund $45,485,000 of the District’s outstanding 2004 Series C General Obligation Bonds, and to pay the costs associated with the issuance of the bonds. The refunding reduces the District’s total debt service payments by $3,502,137 over the next 18 years, and results in an economic gain of $2,682,001.

REQUIRED SUPPLEMENTARY INFORMATION


SCHEDULE OF FUNDING PROGRESS FOR OTHER POSTEMPLOYMENT BENEFITS YEAR ENDED JUNE 30, 2015

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Actuarial Valuation

Date

Actuarial Value of Assets

(a)

Actuarial Accrued Liability (AAL)

(b)

Unfunded

AAL (UAAL) (b – a)

Funded Ratio (a / b)

Covered Payroll

(c)

UAAL as aPercentageof Covered

Payroll ([b – a] / c)

7/1/08 $ 5,299,464 $ 8,202,275 $ 2,902,811 65% $ 14,777,481 20%

7/1/11 $ 6,669,900 $ 8,643,029 $ 1,973,129 77% $ 14,754,000 13%

7/1/14 $ 5,091,482 $ 7,564,417 $ 2,472,935 67% $ 15,348,578 16%


SCHEDULE OF THE DISTRICT’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

AS OF JUNE 30, 2015 LAST 10 YEARS*

44

CalSTRS Plan 2015

District’s proportion of the net pension liability 0.025% District’s proportionate share of the net pension liability $ 14,609,250State’s proportionate share of the net pension liability associated with the District 8,896,441

Total $ 23,505,691 District’s covered-employee payroll $ 7,708,655 District’s proportionate share of the net pension liability as a percentage of its

covered employee payroll 190% Plan fiduciary net position as a percentage of the total pension liability 77%

CalPERS Plan 2015

District’s proportion of the net pension liability 0.073% District’s proportionate share of the net pension liability $ 8,241,868 District’s covered-employee payroll $ 6,798,379 District’s proportionate share of the net pension liability as a percentage of its

covered employee payroll 121% Plan fiduciary net position as a percentage of the total pension liability 83% Notes to Schedule: Change of benefit terms – In 2015, there were no changes to the benefit terms. Changes in assumptions– In 2015, there were no changes in assumptions. * - Fiscal year 2015 was the 1st year of implementation, therefore only one year is shown.


SCHEDULE OF THE DISTRICT’S CONTRIBUTIONS AS OF JUNE 30, 2015

LAST 10 YEARS*

45

CalSTRS Plan 2015

Contractually required contribution (actuarially determined) $ 1,014,998Contributions in relation to the contractually required contributions (1,014,998)

Contribution deficiency (excess) $ 0 District’s covered-employee payroll $ 8,461,631

Contributions as a percentage of covered-employee payroll 12.00%

CalPERS Plan 2015

Contractually required contribution (actuarially determined) $ 959,947Contributions in relation to the contractually required contributions (959,947)

Contribution deficiency (excess) $ 0 District’s covered-employee payroll $ 6,886,947

Contributions as a percentage of covered-employee payroll 13.94%

* - Fiscal year 2015 was the 1st year of implementation, therefore only one year is shown.

SUPPLEMENTARY INFORMATION

Federal Pass-ThroughFederal Grantor/Pass-Through Grantor/ CFDA Identifying ProgramProgram or Cluster Title Number Number Expenditures

U.S. Department of Education:

Student Financial Assistance Programs Cluster:Pell Grant Program 84.063 N/A 6,236,339$ College Work Study Program 84.033 N/A 99,825 Supplemental Educational Opportunity Grant Program 84.007 N/A 66,391 Direct Student Loan Program 84.268 N/A 146,933

Subtotal Student Financial Assistance Programs Cluster 6,549,488

Higher Education - Institutional Aid Program:Higher Education - STEM 84.031C P031C110070 1,186,905 Title V - Higher Education 84.031S P031S100002 602,792 Title V - Higher Education 84.031S P031S120075 954,494

Subtotal Higher Education - Institutional Aid Program 2,744,191

TRIO Staff Training Program 84.042A N/A 231,723 Adult Education 84.002A N/A 106,220 21st Century Afterschool Program 84.287C N/A 120,008

Passed through California Department of Education:Vocational and Applied Technology - Title IC 84.011 03578 142,600 Vocational and Applied Technology - CTE Transitions 84.048 03578 43,269 State Vocational Rehabilitation Services 84.126A 03578 112,231

Total U.S. Department of Education 10,049,730

U.S. Department of Agriculture:Passed through California Department of Education:

Child and Adult Care Food Program 10.558 5320 11,033

U.S. Department of Health and Human Services:GAIN Program 93.558 N/A 173,255

Total Expenditures of Federal Awards 10,234,018$


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSYEAR ENDED JUNE 30, 2015

See the accompanying notes to supplementary information. 46

Unearned UnearnedPrior Year Current Total Revenue and Accounts Revenue and Program

Program Title Carryforward Entitlement Entitlement Cash Received Receivable Payables Total Expenditures

TANF 76,217$ 76,217$ 76,217$ 76,217$ 76,217$ Financial Aid - BFAP 1,573$ 241,509 243,082 243,082 243,082 243,082 EOPS 440,453 440,453 440,453 440,453 440,453 CARE 115,314 115,314 115,314 115,314 115,314 DSPS 686,516 686,516 686,516 686,516 686,516 Cal WORKs 375,817 375,817 370,436 5,381$ 375,817 375,817 SSSP (Credit) 976,651 976,651 976,651 185,150$ 791,501 791,501 SSSP (Non-Credit) 51,920 51,920 51,920 22,638 29,282 29,282 Child Development Consortium 12,427 6,475 18,902 18,201 700 18,901 18,901 Staff Diversity 4,369 4,369 4,369 4,369 4,369 Staff Development 12,771 12,771 12,771 12,771 Student Equity 263,549 263,549 263,549 135,412 128,137 128,137 Basic Skills 13/14 61,583 61,583 61,583 61,583 61,583 Basic Skills 14/15 99,352 99,352 99,352 99,352 99,352 Region 4 9,327 9,327 10,000 673 9,327 9,327 Cal Grant B & C 1,600 404,246 405,846 356,640 52,042 2,836 405,846 405,846 MESA 54,736 54,736 34,536 20,200 8,617 46,119 46,119 CTC Apprenticeship 75,012 146,047 221,059 221,059 40,790 180,269 180,269 Capacity RN Grant 78,287 78,287 78,287 78,287 78,287 CTE Comm. Collaborative Project 3,640 3,640 3,640 3,640 3,640 Lifeline 17,659 5,954 23,613 23,613 21,825 1,788 1,788 Adult Ed AB 86 111,956 95,542 207,498 201,520 5,978 207,498 207,498 Instructional Equipment 100,000 100,000 100,000 57,201 42,799 42,799 Scheduled Maintenance 109,710 (85,043) 24,667 717,465 692,798 24,667 24,667 Proposition 39 143,632 74,652 218,284 345,287 76,441 268,846 268,846 Water System Replacement 4,388,880 4,388,880 3,057,768 1,331,112 4,388,880 4,388,880 Child Development - Preschool 118,719 118,719 113,369 13,683 8,333 118,719 118,719

Total 547,923$ 8,733,129$ 9,281,052$ 8,683,598$ 1,429,096$ 1,265,485$ 8,847,209$ 8,847,209$


SCHEDULE OF STATE FINANCIAL ASSISTANCEYEAR ENDED JUNE 30, 2015

Program RevenuesEntitlements



SCHEDULE OF WORKLOAD MEASURES FOR STATE GENERAL APPORTIONMENT ANNUAL (ACTUAL) ATTENDANCE



STATE GENERAL APPORTIONMENT Categories

Reported Data

Audit Adjustments

Revised

Data A. Summer Intersession (Summer 2014 Only)

1. Noncredit 65.22 65.222. Credit 248.14 248.14

B. Summer Intersession (Summer 2015, Prior to July 1, 2015)

1. Noncredit 0.00 0.002. Credit 296.43 296.43

C. Primary Terms (Exclusive of Summer Intersession)

1. Census Procedure Courses: (a) Weekly Census Contact Hours 3,089.87 3,089.87(b) Daily Census Contact Hours 78.60 (4.32) 74.28

2. Actual Hours of Attendance Courses: (a) Noncredit 474.58 474.58(b) Credit 582.39 (10.82) 571.57

3. Alternative Attendance Accounting Procedure: (a) Weekly Census Procedure Courses 401.30 401.30(b) Daily Census Procedure Courses 27.67 27.67(c) Noncredit Independent Study 0.00 0.00

D. Total Full-Time Equivalent Students 5,264.20 (15.14) 5,249.06

Supplemental Information

E. In-service Training Courses (FTES) 113.11 113.11

F. Basic Skills Courses and Immigrant Education (FTES) (a) Noncredit 146.43 146.43(b) Credit 495.09 495.09

CCFS 320 Addendum CDCP Noncredit FTES 21.09 21.09

Centers FTES

(a) Noncredit 0.00 0.00(b) Credit 0.00 0.00

Object/TOP Reported Audit Revised Reported Audit Revised Codes Data Adjustments Data Data Adjustments Data

ACADEMIC SALARIESInstructional Salaries:

Contract or Regular 1100 4,864,414$ 4,864,414$ 4,958,268$ 4,958,268$ Other 1300 5,430,089 5,430,089 5,751,205 5,751,205

Total Instructional Salaries 10,294,503 10,294,503 10,709,473 10,709,473 Non-Instructional Salaries:

Contract or Regular 1200 2,156,243 2,156,243 Other 1400

Total Non-Instructional Salaries 2,156,243 2,156,243 Total Academic Salaries 10,294,503 10,294,503 12,865,716 12,865,716

CLASSIFIED SALARIESNon-Instructional Salaries:

Regular Status 2100 4,604,309 4,604,309 Other 2300 209,044 209,044

Total Non-Instructional Salaries 4,813,353 4,813,353 Instructional Aides:

Regular Status 2200 530,425 530,425 338,297 338,297 Other 2400 130,675 130,675 144,293 144,293

Total Instructional Aides 661,100 661,100 482,590 482,590 Total Classified Salaries 661,100 661,100 5,295,943 5,295,943

Employee Benefits 3000 2,672,892 2,672,892 5,457,919 5,457,919 Supplies and Materials 4000 463,435 463,435 Other Operating Expenses 5000 3,551,815 3,551,815 Equipment Replacement 6420

TOTAL EXPENDITURES PRIOR TO EXCLUSIONS 13,628,495 13,628,495 27,634,828 27,634,828

Activity (ECSA) ECS 84362 A Activity (ECSB) ECS 84362 BInstructional Salary CostAC 0100-5900 & AC 6110

Total CEEAC 0100-6799


RECONCILIATION OF ECS 84362 (50 PERCENT LAW) CALCULATIONYEAR ENDED JUNE 30, 2015


Object/TOP Reported Audit Revised Reported Audit Revised Codes Data Adjustments Data Data Adjustments Data

Activity (ECSA) ECS 84362 A Activity (ECSB) ECS 84362 BInstructional Salary CostAC 0100-5900 & AC 6110

Total CEEAC 0100-6799


RECONCILIATION OF ECS 84362 (50 PERCENT LAW) CALCULATIONYEAR ENDED JUNE 30, 2015

EXCLUSIONSActivities to Exclude:

Instructional Staff-Retirees' Benefits and Retirement Incentives 5900 Student Health Services Above Amount Collected 6441 Student Transportation 6491 Noninstructional Staff-Retirees' Benefits and Retirement Incentives 6740

Objects to Exclude: Rents and Leases 5060 373,007 373,007 Lottery Expenditures:

Academic Salaries 1000 Classified Salaries 2000 Employee Benefits 3000 Supplies and Materials: 4000

Software 4100 Books, Magazines, & Periodicals 4200 Instructional Supplies & Materials 4300 251,995 251,995 Noninstructional Supplies & Materials 4400

Total Supplies and Materials 251,995 251,995 Other Operating Expenses and Services 5000 703,365 703,365 Capital Outlay: 6000

Library Books 6300 Equipment: 6400

Equipment - Additional 6410 Equipment - Replacement 6420

Total Equipment Total Capital Outlay Other Outgo 7000

TOTAL EXCLUSIONS 1,328,367 1,328,367

Total for ECS 84362, 50% Law 13,628,495$ 13,628,495$ 26,306,461$ 26,306,461$ Percent of CEE (Instructional Salary Cost / Total CEE) 51.81% 51.81% 100% 100%50% of Current Expense of Education 13,153,231$ 13,153,231$


Activity Classification Activity Code Unrestricted

EPA Proceeds: 8630 5,055,410$

Activity Classification Activity Code

Salaries and Benefits

(1000-3000)

Operating Expenses

(4000-5000)

Capital Outlay (6000) Total

Instructional Activities 0100-5900 5,055,410$ 5,055,410

Total Expenditures for EPA* 5,055,410$ $ $ 5,055,410

Revenues less Expenditures $

*Total Expenditures for EPA may not include Administrator Salaries and Benefits or other administrative costs.

Prop 30 EPA Expenditure Report


RECONCILIATION OF EDUCATION PROTECTION ACCOUNT EXPENDITURESTO DISTRICT ACCOUNTING RECORDS




RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT (CCFS-311) WITH AUDITED FINANCIAL STATEMENTS



Other Debt Service Fund

June 30, 2015 Annual Financial and Budget Report (Form CCFS-311) Fund Balance $ 5,447,176

Adjustments and Reclassifications decreasing fund balance:

Adjustment to exclude the OPEB Irrevocable Trust Fund assets as they do not meet the definition of fiduciary fund assets in accordance with GAAP (6,158,213)

Adjustment to add back liabilities for compensated absences as such liabilities represent a long-term liability that should not be recorded in the District’s governmental fund financial statements 711,037

June 30, 2015 Adjusted Fund Balance $

Unrestricted

General Fund


Adjustments and Reclassifications decreasing fund balance:

Adjustment to transfer payments received for the sale of portables purchased with Measure E funds to the Measure E Bond Construction Fund (45,050)

June 30, 2015 Adjusted Fund Balance $ 2,788,660

Measure E Bond

Construction Fund*


Adjustments and Reclassifications increasing fund balance:

Adjustment to transfer payments received for the sale of portables purchased with Measure E funds from the Unrestricted General Fund 45,050

June 30, 2015 Adjusted Fund Balance $ 23,055,628

*Listed as the Revenue Bond Construction Fund in the CCFS-311. There were no other adjustments necessary to reconcile the annual CCFS-311 report with the District’s Fund balances for fiscal year 2014-15.


NOTES TO SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2015

53

1. PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards The audit of the District for the year ended June 30, 2015, was conducted in accordance with OMB Circular A-133, which requires disclosure of the financial activities of all federally funded programs. To comply with OMB Circular A-133, the Schedule of Expenditures of Federal Awards was prepared by the District.

� General – The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal award programs of the District. The District reporting entity is defined in Note 1 to the District’s basic financial statements.

� Basis of Accounting – The accompanying Schedule of Expenditures of Federal Awards is

presented using the accrual basis of accounting, which is described in Note 2 to the District’s basic financial statements.

� Subrecipients – Of the federal expenditures presented in the Schedule of Expenditures of Federal

Awards, the District provided federal awards to subrecipients as follows:

Program Title

Federal CFDA

Number

Amount Provided to

Subrecipients

Title V – Higher Education 84.031S $ 332,328Higher Education – STEM 84.031C 196,669

Total Amount Provided to Subrecipients $ 528,997

Schedule of State Financial Awards The California Community Colleges Chancellor’s Office requires disclosure of the financial activities of all state funded programs. To comply with this requirement, the Schedule of State Financial Assistance is presented. Schedule of Workload Measures for State General Apportionment Annual (Actual) Attendance Full-time equivalent students (FTES) is a measurement of the number of students attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to community college districts. This schedule provides information regarding the attendance of students based on various methods of accumulating attendance data.


NOTES TO SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2015

54

Reconciliation of ECS 84362 (50 Percent Law) Calculation The Reconciliation of ECS 84362 (50 Percent Law) Calculation form shows the annual reported data from the CCFS-311 and any audit adjustments. Reconciliation of Education Protection Account Expenditures to District Accounting Records This reconciliation of Education Protection Account expenditures shows the annual general apportionment and the expenditures the District applied toward the apportionment. Reconciliation of Annual Financial and Budget Report (CCFS-311) with Audited Financial Statements This schedule provides the information necessary to reconcile the fund balance of all funds reported on the CCFS-311 to the audited basic financial statements.

ADDITIONAL INFORMATION SECTION

Unrestricted General Fund

Restricted General Fund

Restricted Instructional Equipment

FundRestricted

Parking Fund

Child Development

Fund

Bond Interest and

Redemption Fund

Assets:Current assets:

Cash and cash equivalents 3,373,486$ 128,930$ 180$ (1,980)$ 3,056$ 3,933,609$ Receivables, net 608,129 1,168,595 5,379 27,313 2,254 Due from other funds 718,783 15,410 15,298 Prepaid expenses/expenditures 25,536 12,907 57,087

Total current assets 4,725,934 1,325,842 57,267 3,399 45,667 3,935,863

Noncurrent assets:Restricted cash and cash equivalents Lease receivable Depreciable capital assets, net Nondepreciable capital assets

Total noncurrent assets Total assets 4,725,934 1,325,842 57,267 3,399 45,667 3,935,863

Deferred outflows of resources:Deferred amount on refunding Deferred outflows of resources related to pensions

Total deferred outflows ofresources

Liabilities:Current liabilities:

Accounts payable 555,087 550,398 3,399 1,188 Accrued payroll 337,026 1,997 Accrued interest payable Unearned revenue 999,541 729,648 57,201 Due to other funds 45,620 43,799 44,479 Compensated absences Bonds payable, current portion

Total current liabilities 1,937,274 1,325,842 57,201 3,399 45,667 Noncurrent liabilities:

Other postemployment benefits liability

Net pension liabilityBonds payable, noncurrent portion

Total noncurrent liabilities Total liabilities 1,937,274 1,325,842 57,201 3,399 45,667

Deferred inflows of resources:Deferred inflows of resources related to pensions

Net position:Net investment in capital assets Restricted for:

Debt service 3,935,863 Capital projects Other special purposes 66

Unrestricted 2,788,660

Total net position 2,788,660$ $ 66$ $ $ 3,935,863$

(UNAUDITED)

COMBINING STATEMENTS OF FUND BALANCE/NET POSITION BY FUNDJUNE 30, 2015


55

Capital Projects Fund

Measure E Bond

Construction Fund

Student Financial Aid

Fund Totals

Reconciling Adjustments/ Eliminations

Statement of Net Position

Assets:Current assets:

Cash and cash equivalents 1,258$ 23,580,499$ (175,902)$ 30,843,136$ (27,642,496)$ 3,200,640$ Receivables, net 1,337,040 57,741 89,200 3,295,651 222,506 3,518,157 Due from other funds 78,984 74,121 902,596 (902,596) Prepaid expenses/expenditures 95,530 95,530

Total current assets 1,417,282 23,712,361 (86,702) 35,136,913 (28,322,586) 6,814,327

Noncurrent assets:Restricted cash and cash equivalents 27,642,496 27,642,496 Lease receivable 518,070 518,070 Depreciable capital assets, net 54,098,206 54,098,206 Nondepreciable capital assets 37,962,778 37,962,778

Total noncurrent assets 120,221,550 120,221,550 Total assets 1,417,282 23,712,361 (86,702) 35,136,913 91,898,964 127,035,877

Deferred outflows of resources:Deferred amount on refunding 2,141,175 2,141,175 Deferred outflows of resources related to pensions 1,974,945 1,974,945

Total deferred outflows ofresources 4,116,120 4,116,120

Liabilities:Current liabilities:

Accounts payable 315,657 182,623 117,712 1,726,064 1,726,064 Accrued payroll 339,023 339,023 Accrued interest payable 1,981,094 1,981,094 Unearned revenue 769,238 (204,414) 2,351,214 204,414 2,555,628 Due to other funds 276,496 474,110 884,504 (884,504) Compensated absences 711,037 711,037 Bonds payable, current portion 1,681,417 1,681,417

Total current liabilities 1,361,391 656,733 (86,702) 5,300,805 3,693,458 8,994,263 Noncurrent liabilities:

Other postemployment benefits liability 193,213 193,213

Net pension liability 22,851,118 22,851,118 Bonds payable, noncurrent portion 100,483,950 100,483,950

Total noncurrent liabilities 123,528,281 123,528,281 Total liabilities 1,361,391 656,733 (86,702) 5,300,805 127,221,739 132,522,544

Deferred inflows of resources:Deferred inflows of resources related to pensions 6,429,498 6,429,498

Net position:Net investment in capital assets 15,092,420 15,092,420 Restricted for:

Debt service 3,935,863 3,935,863 Capital projects 55,891 23,055,628 23,111,519 (23,055,628) 55,891 Other special purposes 66 66

Unrestricted 2,788,660 (29,672,945) (26,884,285)

Total net position 55,891$ 23,055,628$ $ 29,836,108$ (37,636,153)$ (7,800,045)$

(UNAUDITED)


COMBINING STATEMENTS OF FUND BALANCE/NET POSITION BY FUND (Continued)JUNE 30, 2015

56

Unrestricted General Fund

Restricted General Fund

Restricted Instructional Equipment

FundRestricted

Parking Fund

Child Development

Fund

Bond Interest and

Redemption Fund

Operating revenues:Tuition and fees 1,938,385$ 287,309$ Less: Scholarship discounts and allowance

Net tuition and fees 1,938,385 287,309 Grants and contracts, noncapital:

Federal 12,605 3,773,322 11,033$ State 1,186,100 4,020,883 118,719 Local 235,141 126,273 13,246

Total operating revenues 3,372,231 8,207,787 142,998

Operating expenditures/expenses:Salaries 16,612,353 4,862,769 90,733$ 221,000 Employee benefits 6,575,134 1,517,082 49,726 108,374 Supplies, materials, and other operating expenses and services 5,665,149 3,000,873 45,407$ 23,531 13,874 5,400$ Student aid 590,916 Depreciation

Total operating expenditures/expenses 28,852,636 9,971,640 45,407 163,990 343,248 5,400

Loss from operations (25,480,405) (1,763,853) (45,407) (163,990) (200,250) (5,400)

Non-operating revenues (expenditures/expenses):State apportionment, noncapital 5,529,792 160,935 Education protection account 5,055,410 Local property taxes, noncapital 15,800,956 2,303 State taxes and other revenues 101,786 47,327 Interest income, noncapital 35,979 64 4,629 Other non-operating revenues (expenditures/expenses) 256,371 91,847 148,003 290 Interfund transfers out (1,812,274) (44,299) Interfund transfers in 1,536,468 15,987 199,896

Total non-operating revenues(expenditures/expenses) 24,968,020 1,744,951 163,990 200,250 54,259

Gain (loss) before capital activity (512,385) (18,902) (45,407) 48,859

Capital activity:State apportionment, capital 18,902 42,799 State grants and contracts, capitalLocal property taxes and other revenues, capital 6,249,279 Interest income, capitalDebt reduction (1,190,000) Interest expense on capital asset related debt (4,736,775)

Total capital activity 18,902 42,799 322,504 Change in fund balance/net position (512,385) (2,608) 371,363

Fund balance/net position, beginning of year, as previously reported 2,705,860 2,674 3,564,500

Cumulative effect of change in accounting principles Cumulative effect of correction of errors 595,185

Fund balance/net position (deficit), beginningof year, as restated 3,301,045 2,674 3,564,500

Fund balance/net position (deficit), end of year 2,788,660$ $ 66$ $ $ 3,935,863$


COMBINING STATEMENTS OF REVENUES, EXPENDITURES/EXPENSES,

JUNE 30, 2015AND CHANGES IN FUND BALANCE/NET POSITION BY FUND

(UNAUDITED)

57

Capital Projects Fund

Measure E Bond

Construction Fund

Student Financial Aid

Fund Totals

Reconciling Adjustments/ Eliminations

Statement of Net Position

Operating revenues:Tuition and fees 2,225,694$ 2,860,671$ 5,086,365$ Less: Scholarship discounts and allowance (2,860,671) (2,860,671)

Net tuition and fees 2,225,694 2,225,694 Grants and contracts, noncapital:

Federal 6,437,058$ 10,234,018 10,234,018 State 4,631,831$ 9,957,533 (3,618,002) 6,339,531 Local 374,660 374,660

Total operating revenues 4,631,831 6,437,058 22,791,905 (3,618,002) 19,173,903

Operating expenditures/expenses:Salaries 21,786,855 12,416 21,799,271 Employee benefits 8,250,316 (105,950) 8,144,366 Supplies, materials, and other operating expenses and services 4,631,831 2,600,396$ 15,986,461 (7,372,711) 8,613,750 Student aid 6,437,058 7,027,974 7,027,974 Depreciation 1,980,847 1,980,847

Total operating expenditures/expenses 4,631,831 2,600,396 6,437,058 53,051,606 (5,485,398) 47,566,208

Loss from operations (2,600,396) (30,259,701) 1,867,396 (28,392,305)

Non-operating revenues (expenditures/expenses):State apportionment, noncapital 5,690,727 5,690,727 Education protection account 5,055,410 5,055,410 Local property taxes, noncapital 15,803,259 15,803,259 State taxes and other revenues 149,113 149,113 Interest income, noncapital 879 113,415 154,966 (113,415) 41,551 Other non-operating revenues (expenditures/expenses) 65,225 561,736 (62,918) 498,818 Interfund transfers out (1,856,573) 1,856,573 Interfund transfers in 1,752,351 (1,752,351)

Total non-operating revenues(expenditures/expenses) 879 178,640 27,310,989 (72,111) 27,238,878

Gain (loss) before capital activity 879 (2,421,756) (2,948,712) 1,795,285 (1,153,427)

Capital activity:State apportionment, capital 61,701 61,701 State grants and contracts, capital 4,388,880 4,388,880 Local property taxes and other revenues, capital 6,249,279 6,249,279 Interest income, capital 113,415 113,415 Debt reduction (1,190,000) 1,190,000 Interest expense on capital asset related debt (4,736,775) (1,513) (4,738,288)

Total capital activity 384,205 5,690,782 6,074,987 Change in fund balance/net position 879 (2,421,756) (2,564,507) 7,486,067 4,921,560

Fund balance/net position, beginning of year, as previously reported 55,012 25,454,859 31,782,905 (17,251,704) 14,531,201

Cumulative effect of change in accounting principles (27,282,189) (27,282,189) Cumulative effect of correction of errors 22,525 617,710 (588,327) 29,383

Fund balance/net position (deficit), beginningof year, as restated 55,012 25,477,384 32,400,615 (45,122,220) (12,721,605)

Fund balance/net position (deficit), end of year 55,891$ 23,055,628$ $ 29,836,108$ (37,636,153)$ (7,800,045)$

(UNAUDITED)


COMBINING STATEMENTS OF REVENUES, EXPENDITURES/EXPENSES,

JUNE 30, 2015 AND CHANGES IN FUND BALANCE/NET POSITION BY FUND (Continued)

58

OTHER INDEPENDENT AUDITOR’S REPORTS

59

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Independent Auditor’s Report

Board of Trustees Gavilan Joint Community College District Gilroy, California

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities and the aggregate remaining fund information of the Gavilan Joint Community College District (the District), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, as listed in the table of contents, and have issued our report thereon dated December 22, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal control, described in the accompanying Schedule of Audit Findings and Questioned Costs as item 2015-001, that we consider to be a material weakness.


60

Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

The District’s Responses to Findings

The District’s response to the finding identified in our audit is described in the accompanying Schedule of Audit Findings and Questioned Costs. The District’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. GILBERT ASSOCIATES, INC. Sacramento, California December 22, 2015

61

REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY

OMB CIRCULAR A-133

Independent Auditor’s Report Board of Trustees Gavilan Joint Community College District Gilroy, California Report on Compliance for Each Major Federal Program We have audited the Gavilan Joint Community College District’s (the District) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District’s major federal programs for the year ended June 30, 2015. The District's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Audit Findings and Questioned Costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District’s compliance.


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Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major programs for the year ended June 30, 2015. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying Schedule of Audit Findings and Questioned Costs as items 2015-004 and 2015-005. Our opinion on each major federal program is not modified with respect to these matters. The District’s responses to the noncompliance findings identified in our audit are described in the accompanying Schedule of Audit Findings and Questioned Costs. The District’s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs as items 2015-004 and 2015-005, that we consider to be significant deficiencies.


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The District’s responses to the internal control over compliance findings identified in our audit are described in the accompanying Schedule of Audit Findings and Questioned Costs. The District’s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. GILBERT ASSOCIATES, INC. Sacramento, California December 22, 2015

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REPORT ON COMPLIANCE WITH APPLICABLE REQUIREMENTS IN ACCORDANCE WITH THE CONTRACTED DISTRICT AUDIT MANUAL

Independent Auditor's Report Board of Trustees Gavilan Joint Community College District Gilroy, California Report on Compliance with Applicable Requirements We have audited Gavilan Joint Community College District’s (the District) compliance with the types of compliance requirements described in Section 400, State Compliance Requirements, of the Contracted District Audit Manual, issued by the California Community Colleges Chancellor's Office identified in the schedule below for the year ended June 30, 2015. Management’s Responsibilities Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for the District’s state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Section 400, State Compliance Requirements, of the Contracted District Audit Manual, issued by the California Community Colleges Chancellor's Office. Those standards and the Contracted District Audit Manual require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary under the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance. However, our audit does not provide a legal determination on the District’s compliance with those requirements. In connection with the requirements referred to above, we have selected and tested transactions and records to determine the District’s compliance with the applicable programs identified below:

� Salaries of Classroom Instructors (50% Law)

� Apportionment for Instructional Service Agreements/Contracts


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� State General Apportionment Funding System

� Residency Determination for Credit Courses

� Students Actively Enrolled

� Concurrent Enrollment of K-12 Students in Community College Credit Courses

� Scheduled Maintenance Program

� Gann Limit Calculation

� Open Enrollment

� Student Fees – Health Fees and Use of Health Fee Funds

� Proposition 39 Clean Energy

� Extended Opportunity Programs and Services (EOPS) and Cooperative Agencies Resources for Education (CARE)

� Disabled Student Programs and Services (DSPS)

� To Be Arranged Hours (TBA)

� Proposition 1D State Bond Funded Projects

� Proposition 30 Education Protection Account Funds Basis for Modified Opinion on State Compliance As described in the accompanying Schedule of Audit Findings and Questioned Costs as items 2015-002 and 2015-003, the District did not comply with certain requirements regarding Actual Hours of Attendance and the State General Apportionment Funding System. Compliance with such requirements is necessary, in our opinion, for the District to comply with the state laws and regulations applicable to that program.

Modified Opinion on State Compliance In our opinion, except for the noncompliance described in the “Basis for Modified Opinion” paragraph, the District complied, in all material respects, with the compliance requirements referred to above for the fiscal year ended June 30, 2015.

Other Matter The District’s response to the noncompliance finding identified in our audit is described in the accompanying Schedule of Audit Findings and Questioned Costs. This response was not subject to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. GILBERT ASSOCIATES, INC. Sacramento, California December 22, 2015

FINDINGS AND RECOMMENDATIONS


SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015

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SECTION I - SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting:

Material weakness(es) identified? X Yes No Significant deficiencies identified? Yes X None Reported

Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs:

Material weakness(es) identified? Yes X No Significant deficiencies identified? X Yes None Reported

Type of auditor's report issued on compliance for major programs:

Unmodified

Any audit findings disclosed that are required to be reported

in accordance with OMB Circular A-133, Section .510(a)?

X Yes

No

Identification of major programs CFDA Numbers

Name of Federal Programs or Cluster

84.007, 84.033, 84.063, 84.268 Student Financial Assistance Programs Cluster84.031 Higher Education – Institutional Aid Program Dollar threshold used to distinguish between

Type A and Type B programs:

$ 307,021

Auditee qualified as low-risk auditee? X Yes No State Awards

Internal control over state programs: Material weakness(es) identified? Yes X No Significant deficiencies identified? X Yes None Reported

Any audit findings disclosed that are required to be disclosed in accordance with Contracted District Audit Manual? X Yes No

Type of auditor's report issued on compliance for state programs:

Modified



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SECTION II – FINANCIAL STATEMENT FINDINGS

2015-001 – MATERIAL WEAKNESS OVER FINANCIAL STATEMENT CLOSE PROCESS Criteria: For financial reporting purposes, the District is considered a special-purpose government engaged only in business-type activities, and therefore presents District activities as a full accrual-enterprise fund. An essential aspect of any organization’s internal control over its financial reporting process is the ability to produce accurate financial data in accordance with generally accepted accounting principles (GAAP). Accurate financial reporting enables management and the Board of Trustees to have a sound financial basis for decision making. Conversely, the absence of accurate financial data may undermine the plans and initiatives of management and the Board of Trustees. Condition: Various errors in the conversion from the District’s fund financial statements to its full-accrual enterprise fund financial statements affecting balances at June 30, 2015, and June 30, 2014, were detected during the audit, resulting in significant adjustments in the following areas:

� Capital asset balances, additions, and disposals � Net OPEB asset/liability � Lease receivable � Amortization of the deferred amount on refunding

Cause: The District uses an independent contractor (contractor) to prepare the conversion entries required to develop full-accrual accounting statements in accordance with GAAP. The contractor did not properly record transactions related to capital asset additions and disposals, contributions to the District’s OPEB trust fund, long-term receivables related to the sale of portables, and amortization of the deferred amount on refunding. Additionally, an audit adjustment recorded to capitalize interest for the June 30, 2014 financial statements was not prepared in accordance with GAAP. District management is ultimately responsible for preparing financial statements in accordance with GAAP. The District did not identify the errors in the financial statements prepared by the contractor, nor the errors in the audit adjustment recorded in the June 30, 2014 financial statements. Effect: Significant adjustments were required to properly reflect capital assets, the net OPEB asset/liability, the lease receivable, and the deferred amount on refunding. These adjustments impacted the change in net position for the year ended June 30, 2015, as well as the beginning net position as of July 1, 2014.

Recommendation: We recommend that District management develop a process to ensure conversion entries are prepared in accordance with GAAP, and the full-accrual financial statements are complete and accurate.



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District’s Corrective Action Plan:

The District will prepare all conversion entries needed to be in accordance with GAAP in the future and not use an independent contractor. Because of shortage of staff in the past, an outside contractor was needed to help with the year-end close, however being fully staffed will allow the District to prepare these entries internally in consultation with the independent auditors with more accuracy.

In addition, the District will install the fixed asset Banner module, which has been purchased and licensed for use. This will allow the Business Office to maintain the fixed asset inventory throughout the year in conjunction with the newly installed Banner electronic procurement module. Once completed, the District will maintain assets more accurately on a month to month basis.

SECTION III – STATE COMPLIANCE

2015-002 – ACTUAL HOURS OF ATTENDANCE Criteria: According to California Code of Regulations, Title V, Section 58006, the Actual Hours of Attendance procedure is based on an actual count of students present at each class meeting, and applies to certain types of courses, including open entry/open exit courses. Attendance for open entry/open exit courses is to be tracked based on actual minutes attended by individual students in the courses, dividing by 50 minutes to obtain contact hours, and then dividing by 525 hours to obtain the full-time equivalent students (FTES) for such courses. Condition: Various errors were noted during testing of actual hours of attendance compliance, including the following:

� Contact hours for open entry/open exit courses offered by the Kinesiology department were not being

calculated properly. The District uses a time-tracking system for these classes, but rather than summing the actual minutes attended and dividing by 50 minutes to obtain contact hours, the instructors calculated contact hours using the following method:

� 0 – 60 minutes = 1 contact hour � 61 – 120 minutes = 2 contact hours � 121 minutes or more = 3 contact hours

� For one open entry/open exit keyboarding class, the instructor allocated estimated minutes for assignments

completed by students, and summed these amounts to be used to calculate the FTES for the course, rather than tracking actual minutes attended by each student.

Context: Out of 25 actual hours of attendance classes tested, 16 were open entry/open exit courses, and four of these courses had errors. Three were Kinesiology classes using the improper contact hours method described above, and the fourth was the keyboarding class that used estimated minutes as described above. No errors were detected in actual hours of attendance courses that were not open entry/open exit courses.



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Effect: FTES was misstated for open entry/open exit courses offered by the Kinesiology department. The District claimed the following FTES for open entry/open exit courses offered by the Kinesiology department in the CCFS 320 (P-Annual):

� Credit courses, residents – 39.36 FTES � Credit courses, nonresidents – 0.35 FTES

Because it appeared the error in methodology described above was used for all open entry/open exit courses offered by the Kinesiology department, the District recalculated FTES for all of the department’s open entry/open exit courses and calculated corrected FTES as follows:


The difference between the reported and recalculated FTES for Kinesiology department open entry/open exit courses is:

� Credit courses, residents – Overreported 2.89 FTES � Credit courses, nonresidents – Overreported 0.07 FTES

FTES was misstated for open entry/open exit courses offered by one instructor in the Computer Science and Information Systems (CSIS) department. The District claimed the following FTES for the eight open entry/open exit courses offered by the CSIS instructor in the CCFS 320 (P-Annual):


The District recalculated FTES for the instructor’s eight open entry/open exit courses and calculated corrected FTES as follows:


The difference between the reported and recalculated FTES for CSIS instructor’s open entry/open exit courses is:

� Credit courses, residents – Overreported 7.93 FTES � Credit courses, nonresidents – Overreported 0.06 FTES

Questioned Costs: The total misstatement of the Kinesiology department actual hours of attendance errors for residents in credit courses identified above is 2.89 FTES, which based on the District’s funding per FTES, is equal to $13,513. The total misstatement of the CSIS instructor’s actual hours of attendance errors for residents in credit courses identified above is 7.93 FTES, which based on the District’s funding per credit FTES, is equal to $37,080.



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Recommendation: We recommend that the District remind instructors about the required methods to calculate contact hours for courses using actual hours of attendance procedures.

We recommend that the District perform an internal audit of actual hours of attendance classes to ensure contact hours are properly calculated, and therefore FTES amounts reported are accurate.


The District has already taken immediate action to correct these calculations with the open entry/open exit courses offered by the Kinesiology department and open entry/open exit courses offered by the CSIS department. All instructors that have open entry/open exit courses have met several times and have been trained on how time must be accounted for and on the attendance procedures. In addition, the District has licensed and purchased updated attendance software that the instructors will be trained to use correctly going forward each semester as there are faculty changes made. It is understood that the past lack of training has resulted in the inappropriate calculation of contact hours for these courses resulting in inaccurate FTES reporting, so the District will maintain training going forward.

The District will also perform internal audits of actual hours on attendance classes periodically to ensure that contact hours are properly calculated, and therefore FTES amounts reported are accurate. 2015-003 – STATE GENERAL APPORTIONMENT FUNDING SYSTEM Criteria: According to California Code of Regulations, Title V, Section 58003.1, for credit courses scheduled to meet for five or more days and scheduled regularly with respect to the number of hours each scheduled day (daily census courses), the units of FTES shall be computed by multiplying the daily student contact hours of active enrollment as of the census days nearest to one-fifth of the length of the course by the number of days the course is scheduled to meet, and dividing by 525. According to California Code of Regulations, Title V, Section 58003.1, for credit courses scheduled coterminously with a community college’s primary term and scheduled to meet the same number of hours and same days each week throughout the term, FTES shall be computed by multiplying the student contact hours of active enrollment on the census date by the term length multiplier and dividing by 525. Condition: The District’s attendance system has a control to check that total contact hours reported for a weekly or daily census class reconcile to the contact hours calculated based on the parameters of the class by type, scheduled meeting days and times, and active enrollment on the census date. Differences detected by the system are flagged for review. FTES claimed for five classes claimed under daily attendance accounting procedures was not calculated properly due to errors that occurred when course information was entered into the District’s attendance system. FTES claimed for one class was not calculated properly, as the class was entered into the system as a daily census course but did not meet the same number of hours each day.



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Context: Out of 25 daily census classes and 25 weekly census classes tested in the original samples, one was not scheduled to meet the same number of hours each day and therefore was not eligible to be tracked as a daily census course. The attendance system had identified the class with a warning, as the contact hours per meeting entered into the system multiplied by the number of meetings did not agree to total contact hours for the class. In response to the error identified, the sample was expanded. Based on review of the detail from the attendance system, five other classes had been flagged with a warning, and all such classes were daily census courses. These five classes, plus five haphazardly selected classes, were selected for testing. Of the total sample of 35 daily census classes, and the sample of 25 weekly census courses, only the six flagged by the attendance system were improperly calculated, therefore the error has been isolated to the six flagged courses. Effect: The first class identified as improperly calculated is not eligible for weekly or daily census attendance reporting based on the irregular meeting times, and therefore should have been tracked using the actual hours of attendance procedures. As documentation was not maintained to track actual hours of attendance for the course, all FTES reported for the course is considered ineligible as follows:


The five additional courses flagged by the attendance system were eligible for daily census attendance reporting, but were overreported due to errors in entering course information into the District’s attendance system. The errors resulted in overreported FTES as follows:


Questioned Costs: The total overreported daily census FTES for residents in credit courses identified above is 4.32 FTES, which based on the District’s funding per credit FTES, is equal to $20,200. Recommendation: We recommend that the District review the detailed attendance data produced by the attendance system for flags indicating contact hours are not calculated properly, and make corrections as needed to ensure contact hours and FTES are properly calculated and reported. We recommend such a review be performed prior to each attendance reporting period. Additionally, we recommend the District review weekly and daily census courses to ensure the scheduling of such courses meets the requirements for weekly and daily census attendance procedures.



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District’s Corrective Action Plan: The District will review the detailed attendance data produced by the attendance system for flags indicating contact hours are not calculated properly, and make corrections as needed to ensure contact hours and FTES are properly calculated and reported. This review will be performed prior to each attendance reporting period. Additionally, the District will review weekly and daily census courses to ensure the scheduling of such courses meets the requirements for weekly and daily census attendance procedures. SECTION IV - FEDERAL COMPLIANCE

2015-004 – SUBRECIPIENT MONITORING Federal Program: Higher Education - Institutional Aid Program: Federal Agency: U.S. Department of Education CFDA Number: 84.031 Grant Award Number and Year: P031S120075-13, 10/1/13 – 9/30/14

Criteria:

31 USC 7502(f)(2)(c) specifies the following:

Each pass-through entity shall review the audit of a subrecipient as necessary to determine whether prompt and appropriate corrective action has been taken with respect to audit findings, as defined by the Director [of the Office of Management and Budget], pertaining to Federal awards provided to the subrecipient by the pass-through entity.

Condition:

The District did not adequately monitor its subrecipients’ audit reports to ensure that subrecipient audits reports are completed timely, that the reports were reviewed for audit findings and if applicable, management decisions were issued for subrecipient findings and appropriate correction action was taken.

Cause:

The District program staff was not aware of the requirement for to monitor subrecipient audit reports for the Higher Education - Institutional Aid program.

Effect:

Noncompliance at the subrecipient level may occur and not be detected by the District. Of the District’s three subrecipients who received pass-through awards in the year ended June 30, 2015, only one was the District’s subrecipient in the year ended June 30, 2014, and therefore only one audit report was required to be reviewed during the year under audit. Based on review of the subrecipient’s June 30, 2014 audit report, there were no audit findings that pertained to the Higher Education – Institutional Aid program.



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Recommendation:

We recommend that the District implement procedures to ensure that audit reports for subrecipients are reviewed to ensure compliance with single audit requirements, and to determine whether prompt and appropriate corrective action has been taken for any audit findings related to the Higher Education – Institutional Aid program.


The District has already implemented procedures to ensure that audit reports for subrecipients are reviewed to ensure compliance with single audit requirements, and to determine whether prompt and appropriate corrective action has been taken for any audit findings related to the Higher Education – Institutional Aid program.

In addition, the District will provide training to those individuals responsible to ensure compliance with single audit requirements for new grants received that have subrecipients.

2015-005 – ALLOWABLE COSTS Federal Program: Higher Education - Institutional Aid Program: Federal Agency: U.S. Department of Education CFDA Number: 84.031 Grant Award Number and Year: P031C110070-13, 10/1/13 – 9/30/14; P031C110070-14, 10/1/14 – 9/30/15; P031S100002-14, 10/1/14 – 9/30/15; P031S120075-13, 10/1/13 – 9/30/14; P031S120075-14, 10/1/14 – 9/30/15;

Criteria:

In accordance with OMB Circular A-21, Cost Principles for Educational Institutions, the method for charging payroll to federal awards must recognize the principle of after-the-fact confirmation or determination so that costs distributed represent actual costs, unless a mutually satisfactory alternative agreement is reached.

Condition:

Payroll costs were allocated to the program based on budgeted costs and not actual costs. The District did not have a process to perform an after-the-fact determination of actual program costs related to payroll.

Cause:

The District’s process was to informally compare budgeted versus actual hours, however there was no formal process to ensure that adjustments were made at year-end if budgeted costs did not equal actual costs.



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Effect:

Expenditures charged to the program could be overstated when payroll costs charged to the program are based on budgeted amounts rather than actual costs.

Questioned Costs:

Of the twenty-five selections tested, ten selections had a different percentage of actual time worked on the program compared to the expected (budgeted) percentage of time the respective employee would work on the program. Of these ten exceptions, six employees had actual hours exceeding budgeted hours, resulting in possible additional program costs of $5,511 for the pay periods tested. The other four employees had actual hours below the budgeted hours, resulting in an overstatement of $4,604 for the pay periods tested.

Recommendation:

We recommend the District implement a procedure to compare budgeted to actual payroll costs, and record adjustments as necessary for any differences.

Management’s Response: The District has already met with those individuals who are responsible for time and effort reporting and have trained staff and implemented a procedure to compare budgeted to actual payroll costs, and record adjustments as necessary for any differences at the end of the year.


STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS YEAR ENDED JUNE 30, 2015

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Recommendation Current Status

District Explanation

If Not Implemented

2014-001 CAPITALIZED CONSTRUCTION COSTS

The previous auditor recommended that the District implement controls to ensure all capitalizable costs are allocated to construction projects.

Partially implemented. See finding 2015-001.

See District’s corrective

action plan for finding 2015-

001.

2014-002 SALARIES OF CLASSROOM INSTRUCTORS (50 PERCENT LAW) The previous auditor recommended that the District review procedures used in determining the proper classification of salary costs to ensure job descriptions for instructional costs charged as instructional aides are properly classified for the 50 Percent Law calculation.

Implemented. N/A

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APPENDIX C

GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITIES OF GILROY, HOLLISTER AND MORGAN HILL AND

SANTA CLARA AND SAN BENITO COUNTIES, CALIFORNIA

The following information regarding the Cities of Gilroy, Hollister and Morgan Hill (collectively, the “Cities”) and Santa Clara and San Benito Counties (collectively, the “Counties”) is included only for the purpose of supplying general information regarding the local community and economy. The Bonds are not a debt of the Cities or of the Counties. This material has been prepared by or excerpted from the sources noted herein and has not been reviewed for accuracy by the District, the Authority, the Financial Advisor, Bond Counsel or the Underwriter.

General

The City of Gilroy. Located approximately 75 miles south of San Francisco, Gilroy is the southernmost city in Santa Clara County. Incorporated in 1870, it is a charter city with a Council-Administrator form of government. The seven City Council members, including the Mayor, are elected at large to staggered four-year terms. The City Council appoints the City Administrator who heads the executive branch of the government. Because its growing season ranges from 300 to 350 days a year, Gilroy’s economy has been dominated by agriculture since the 1880s. Recently influenced by the growth of nearby Silicon Valley, the city is transitioning toward a light industrial and services based economy.

The City of Hollister. The county seat of San Benito County, the city of Hollister is primarily an agricultural town. It is located approximately 95 miles south of San Francisco, was incorporated in 1872, and is a general law city with a Council-Manager form of government. The City Council consists of four members, who are elected by district to staggered four-year terms. The Mayor is elected at large every two years. Functioning as a commuter hub, the city is a regional shopping center for the county.

The City of Morgan Hill. Located approximately 12 miles south of San Jose, the city of Morgan Hill was incorporated in 1906, and is a general law city with a Council-Manager form of government. The four City Council members are elected at large to staggered four-year terms, while the Mayor is elected to a two year term. Primarily known as a bedroom community for Silicon Valley employees, the city also has a reasonably diverse local business economy.

Santa Clara County. Santa Clara is one of the nine counties in the greater metropolitan San Francisco Bay Area, and occupies an area of 1,316 square miles. Established by an act of State legislation in 1850, it was one of the original 27 counties in the State of California. Home to Silicon Valley, the birthplace of the semiconductor and computer industries in the United States, Santa Clara operates under a Home Rule Charter adopted by its voters. The County Board of Supervisors is comprised of officials elected by each of five districts to four-year staggered terms. The economy of Santa Clara County is based largely on the primary and secondary businesses associated with the computer and electronics industry.

San Benito County. With an area of 1,396 square miles, San Benito County is bordered by Santa Clara County on the north, Merced and Fresno Counties on the east, and Monterey County on the south and west. Approximately 85 miles south of San Francisco, it was incorporated in 1874 and is home to several American Viticultural Areas. Along with agriculture, agritourism is having a growing economic impact on San Benito County, in addition to the many recreational opportunities provided by its several parks, such as Pinnacles National Park. A five-member Board of Supervisors elected by each of their

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districts to staggered four-year terms governs San Benito County under a Board of Supervisors-County Administrator form of government.

Population

The following table shows historical population figures for the Cities, the Counties and the State of California from 2007 through 2016.

POPULATION ESTIMATES City of Gilroy, City of Hollister, City of Morgan Hill,

Santa Clara County, San Benito County and the State of California 2007 through 2016

Year(1) City of Gilroy

City of Hollister

City of Morgan Hill

Santa Clara County

San Benito County

State of California

2007 47,047 35,039 36,467 1,725,066 54,948 36,399,676 2008 48,353 34,994 37,107 1,747,912 55,022 36,704,375 2009 48,627 34,843 37,653 1,767,204 55,068 36,966,713 2010(2) 48,821 34,928 37,882 1,781,642 55,269 37,253,956 2011 49,600 35,166 38,456 1,803,362 55,524 37,536,835 2012 50,730 35,582 39,432 1,828,496 55,781 37,881,357 2013 52,506 35,846 40,486 1,856,194 56,003 38,239,207 2014 53,377 36,037 41,562 1,879,813 56,231 38,567,459 2015 54,324 36,291 42,382 1,903,974 56,445 38,907,642 2016 55,170 36,484 43,645 1,927,888 56,648 39,255,883

(1) As of January 1. (2) As of April 1. Source: 2010: U.S. Department of Commerce, Bureau of the Census, for April 1. 2007-09, 2011-16 (2000 and 2010 DRU Benchmark): California Department of Finance for January 1.


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Income

The following table shows the per capita personal income for the Counties, the State of California and the United States for the past ten years.

PER CAPITA PERSONAL INCOME

Santa Clara County, San Benito County, the State of California, and the United States 2006 through 2015

Year Santa Clara

County San Benito

County State of

California United States 2006 $57,002 $35,995 $41,693 $38,144 2007 61,229 37,054 43,182 39,821 2008 60,423 36,326 43,786 41,082 2009 55,646 35,076 41,588 39,376 2010 59,545 34,556 42,411 40,277 2011 64,542 36,314 44,852 42,453 2012 71,670 37,598 47,614 44,266 2013 71,431 39,576 48,125 44,438 2014 74,883 41,486 49,985 46,049

2015(1) 52,651 47,669 Note: Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation). (1)! Annual 2015 county data is not yet available. Source: U.S. Department of Commerce, Bureau of Economic Analysis.


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Principal Employers

The following tables show the principal employers located in the Cities and the Counties.

PRINCIPAL EMPLOYERS City of Gilroy

As of June 30, 2015

Employer Industry Number of Employees

Christopher Ranch LLC Agricultural Production Crops 600

Saint Louise Regional Hospital Health Services 500

Gilroy Gardens Theme Park (formerly Bonfante)

Amusement and Recreation Services 464

Olam International (formerly ConAgra-Gilroy Foods)

Agricultural Production Crops 440

Wal-Mart Retail Trade 395

Monterey Gourmet Foods Manufacturing: Food 270

Costco Wholesale Wholesale Trade 253

City of Gilroy Public Administration 243

Rebekah Childrens Services Social Services 233

Community Solutions Social Services 219 Source: City of Gilroy Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2015.


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PRINCIPAL EMPLOYERS City of Hollister

As of June 30, 2015


Natural Select Foods Manufacturing: Food 1000

Hazel Hawkins Memorial Hospital Health Services 575

San Benito Foods Manufacturing: Food 500

Pride of San Juan Wholesale Trade: Non-durable Goods 425

Milgard Windows & Doors Manufacturing Fixtures 330

San Benito High School District Educational Services 245

Quantic Holex Manufacturing: Transportation Equipment 240

McCormick Selph Sanitary Services 220

Semifab Manufacturing: Industrial Instruments 200

Target Retail Trade 167 Source: City of Hollister Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2015.

PRINCIPAL EMPLOYERS City of Morgan Hill As of June 30, 2015


Morgan Hill Unified School District Educational Services 796

Anritsu Company Manufacturing: Industrial Instruments 529

Specialized Bicycle Components Manufacturing: Motorcycles, Bicycles, and Parts 400

Flextronics International USA, Inc. Manufacturing: Current-Carrying Wiring Devices 355

Paramit Corporation Manufacturing: Medical Goods 310

Lusamerica Foods, Inc. Wholesale Trade: Non-durable Goods 240

Infineon Technologies, North America Corp.

Manufacturing: Electronic Equipment 228

City of Morgan Hill Public Administration 182

Del Monaco Specialty Foods, Inc. Manufacturing: Food 161

Young’s Market Company, LLC Retail Trade: Liquor Stores 159 Source: City of Morgan Hill Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2015.

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PRINCIPAL EMPLOYERS Santa Clara County As of June 30, 2015


Apple Computer, Inc. Computer and Office Equipment 16,000 to 23,400 County of Santa Clara Public Administration 16,837 Cisco Systems Inc. Computer and Office Equipment 15,800

Stanford University Educational Services 15,053

Kaiser Permanente Insurance Carriers 13,500

Google Inc. Computer and Office Equipment 11,000 to 16,500 Stanford Healthcare (formerly Hospital & Clinics)

Health Services 7,689

Lockheed Martin Space Systems Co. Engineering and Related Services 7,000 Intel Corporation Computer and Office Equipment 6,277 City of San Jose Public Administration 5,759

Source: County of Santa Clara Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015.

PRINCIPAL EMPLOYERS

San Benito County As of June 30, 2015


Earthbound Farm Agricultural Production Crops 1,000-4,999

R & R Labor Farm Labor and Management Services 500-999

County of San Benito Public Administration 436

American Electrical Service Inc. Electric, Gas, and Sanitary Services 250-499

San Benito High School Educational Services 250 - 499

True Leaf Farms Agricultural Production Crops 250 - 499

Hazel Hawkins Medical Center Health Services 250 - 499

MC Electronics Inc. Manufacturing Metal Products 250 - 499

Milgard Manufacturing Inc. Manufacturing Fixtures 250 - 499

Ridgemark Golf & Country Club Amusement and Recreation Services 100 - 249 Source: County of San Benito Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015; State of California Employment Development Department, America’s Labor Market Information System Employer Database, 2016 1st Edition

C-7

Employment

The following table summarizes the labor force, employment and unemployment figures for the years 2011 through 2015 for the Cities, the Counties, the State of California and the United States.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT City of Gilroy, City of Hollister, City of Morgan Hill,

Santa Clara County, San Benito County, the State of California, and the United States 2011 through 2015(1)

Year and Area

Labor Force

Employment(2)

Unemployment(3) Unemployment

Rate (%)

2011 City of Gilroy 21,600 18,400 3,200 14.6 City of Hollister 17,300 14,200 3,100 17.7 City of Morgan Hill 17,900 15,700 2,300 12.6 Santa Clara County 893,700 806,100 87,600 9.8 San Benito County 26,300 22,100 4,200 15.8 State of California 18,419,500 16,260,100 2,159,400 11.7 United States 153,617,000 139,869,000 13,747,000 8.9

2012

City of Gilroy 21,900 19,100 2,800 12.6 City of Hollister 17,400 14,700 2,700 15.5 City of Morgan Hill 18,200 16,200 2,000 10.9 Santa Clara County 911,000 834,400 76,600 8.4 San Benito County 26,600 22,900 3,700 13.8 State of California 18,554,800 16,630,100 1,924,700 10.4 United States 154,975,000 142,469,000 12,506,000 8.1

2013


2014


C-8

2015

City of Gilroy 27,200 25,700 1,500 5.5 City of Hollister 18,700 17,200 1,400 7.7 City of Morgan Hill 22,500 21,500 1,000 4.6 Santa Clara County 1,018,400 976,100 42,300 4.2 San Benito County 29,800 27,500 2,300 7.6 State of California 18,993,900 17,905,100 1,088,800 5.7 United States 157,130,000 148,834,000 8,296,000 5.3

Note: Data is not seasonally adjusted. (1) Annual averages, unless otherwise specified. (2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table. Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. March 2015 Benchmark.


C-9

Industry

The Counties are included in the San Jose-Santa Clara-Sunnyvale Metropolitan Statistical Area (the “MSA”). The distribution of employment in the MSA is presented in the following table for the calendar years 2011 through 2015. These figures are multi county-wide statistics and may not necessarily accurately reflect employment trends in the Counties.

INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES San Jose-Santa Clara-Sunnyvale MSA

2011 through 2015

Category 2011 2012 2013 2014 2015

Total Farm 5,000 4,900 5,000 5,300 5,400 Total Nonfarm 889,700 924,100 960,800 1,001,700 1,042,800 Total Private 797,000 832,600 869,100 908,300 950,100 Goods Producing 187,100 190,800 193,200 198,300 205,000 Mining and Logging 200 200 300 300 200 Construction 31,600 34,600 37,200 39,400 43,200 Manufacturing 155,300 155,900 155,700 158,700 161,600 Durable Goods 144,200 144,400 144,300 147,000 150,200 Nondurable Goods 11,100 11,500 11,500 11,700 11,400 Service Providing 702,600 733,300 767,600 803,400 837,800 Private Service Producing 609,900 641,900 675,800 710,000 745,000 Trade, Transportation and Utilities 127,900 132,100 135,300 137,700 139,300 Wholesale Trade 34,000 35,000 36,300 36,500 36,400 Retail Trade 81,800 84,100 84,900 86,400 87,500 Transportation, Warehousing and Utilities

12,100 13,000 14,200 14,900 15,500

Information 51,300 54,200 58,700 66,300 74,800 Financial Activities 32,400 33,300 33,900 34,700 35,300 Professional and Business Services 166,700 178,200 191,200 203,000 216,000 Educational and Health Services 129,700 136,800 143,800 150,000 156,700 Leisure and Hospitality 77,400 82,500 87,500 91,900 95,700 Other Services 24,600 24,800 25,400 26,400 27,100 Government 92,700 91,400 91,800 93,400 92,700 Total, All Industries 894,700

928,900 965,800 1,007,000 1,048,200

Note: The “Total, All Industries” data is not directly comparable to the employment data found herein. Source: State of California, Employment Development Department, Labor Market Information Division, San Jose-Sunnyvale- Santa Clara MSA Industry Employment & Labor Force by Annual Average. March 2015 Benchmark.

C-10

Commercial Activity

Summaries of annual taxable sales for the Cities and the Counties from 2009 through 2013 are shown in the following tables.

ANNUAL TAXABLE SALES City of Gilroy

2009 through 2013(1) (Dollars in Thousands)

Year

Retail Permits

Retail Stores Taxable

Transactions

Total Permits

Total Taxable Transactions

2009 924 $893,564 1,361 $1,010,486 2010 931 933,062 1,366 1,062,813 2011 926 1,028,046 1,332 1,160,862 2012 950 1,072,867 1,362 1,209,176 2013 1,029 1,103,278 1,444 1,243,769

Note: In 2009, retail permits expanded to include permits for food services. (1) Complete calendar year 2014 data is not yet available. Source: “Taxable Sales in California (Sales & Use Tax),” California State Board of Equalization.

ANNUAL TAXABLE SALES City of Hollister

2009 through 2013(1) (Dollars in Thousands)

Year

Retail Permits


Transactions

Total Permits


2009 449 $199,961 694 240,643 2010 458 207,213 714 249,704 2011 439 223,561 702 264,973 2012 421 244,627 685 280,951 2013 446 256,001 700 303,314


C-11

ANNUAL TAXABLE SALES City of Morgan Hill 2009 through 2013(1)

(Dollars in Thousands)

Year

Retail Permits


Transactions

Total Permits


2009 650 339,751 1,136 420,506 2010 662 370,765 1,158 467,096 2011 647 442,627 1,142 539,548 2012 670 501,940 1,127 664,539 2013 721 553,599 1,169 704,194


ANNUAL TAXABLE SALES

Santa Clara County 2009 through 2013(1)


Retail and Food

Permits

Retail and Food Taxable

Transactions

Total Permits Total Taxable Transactions

2009 26,695 16,385,238 43,396 27,427,709 2010 27,215 17,695,858 43,583 30,523,322 2011 27,252 19,419,542 43,390 33,431,217 2012 28,109 21,116,708 43,980 36,220,445 2013 29,535 22,424,642 45,310 37,621,606

Note: In 2009, retail permits expanded to include permits for food services. (1) Complete calendar year 2014 data is not yet available. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

C-12

ANNUAL TAXABLE SALES

San Benito County 2009 through 2013(1)


Year

Retail Permits


Transactions

Total Permits


2009 816 $245,237 1,219 $422,942 2010 833 257,233 1,244 449,872 2011 803 281,201 1,217 486,490 2012 786 308,777 1,199 530,017 2013 844 329,051 1,260 560,238

Note: In 2009, retail permits expanded to include permits for food services. (1) Complete calendar year 2014 data is not yet available. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

Construction Activity

The annual building permit valuations and number of permits for new dwelling units issued from 2010 through 2014 for the Cities and the Counties are shown in the following tables.

BUILDING PERMITS AND VALUATIONS City of Gilroy

2010 through 2014 (Dollars in Thousands)

2010 2011 2012 2013 2014

Valuation Residential $33,460 $63,052 $84,657 $57,447 $74,155 Non-Residential 9,790 22,241 5,754 10,854 13,823 Total $43,250 $85,293 $90,411 $68,301 $87,978 Units Single Family 57 169 216 153 226 Multiple Family 0 0 26 0 2 Total 57 169 242 153 228 Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

C-13

BUILDING PERMITS AND VALUATIONS

City of Hollister 2010 through 2014


2010 2011 2012 2013 2014 Valuation Residential $16,332 $8,139 $9,416 27,066 14,895 Non-Residential 2,526 3,184 4,422 4,578 8,592 Total $18,858 $11,323 $13,838 $31,644 $23,487 Units Single Family 42 27 32 109 50 Multiple Family 97 0 0 0 0 Total 139 27 32 109 50 Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

BUILDING PERMITS AND VALUATIONS City of Morgan Hill 2010 through 2014


2010 2011 2012 2013 2014 Valuation Residential $45,798 $35,452 $87,752 $84,556 $91,341 Non-Residential 10,232 13,957 11,471 16,796 15,035 Total $56,030 $49,409 $99,223 $101,352 106,376 Units Single Family 108 97 235 297 306 Multiple Family 49 0 190 35 30 Total 157 97 425 332 336 Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

C-14

BUILDING PERMITS AND VALUATIONS

Santa Clara County 2010 through 2014


2010 2011 2012 2013 2014

Valuation Residential $1,076,362 $1,005,884 $1,524,818 $2,060,045 $2,230,348 Non-Residential 1,137,316 1,498,752 1,885,770 4,204,576 2,655,413 Total $2,213,678 $2,504,637 $3,410,588 $6,264,621 $4,885,761

Units Single Family 815 978 1,432 1,859 1,602 Multiple Family 3,617 2,234 4,245 6,009 8,310 Total 4,432 3,212 5,677 7,868 9,912

Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

BUILDING PERMITS AND VALUATIONS San Benito County 2010 through 2014


2010 2011 2012 2013 2014 Valuation Residential $20,284 $11,918 $11,051 $35,594 $23,957 Non-Residential 8,914 7,439 13,449 9,711 22,053 Total $29,198 $19,357 $24,500 $45,305 $46,010 Units Single Family 48 32 36 138 78 Multiple Family 97 0 0 0 0 Total 145 32 36 138 78 Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

D-1

APPENDIX D

SANTA CLARA COUNTY COMMINGLED INVESTMENT POOL

The following information concerning the Santa Clara County Commingled Investment Pool (the “Investment Pool”) has been provided by the Director of Finance, and has not been confirmed or verified by the District, the Authority, the Financial Advisor or the Underwriter. The District, the Authority, the Financial Advisor and the Underwrites have not made an independent investigation of the investments in the Investment Pool and have made no assessment of the current County investment policy. The value of the various investments in the Investment Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Director of Finance, at the direction of the County Board of Supervisors may change the County investment policy at any time. Therefore, there can be no assurance that the values of the various investments in the Investment Pool will not vary significantly from the values described herein. Finally, none of the District, the Authority, the Financial Advisor or the Underwriter make any representation as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date. Additional information regarding the Investment Pool may be obtained from the Director of Finance at www.sccgov.org; however, the information presented on such website is not incorporated herein by any reference.


Quarterly Investment Report

March 31, 2016

Quarterly Investment ReportTable of Contents

Summary of Cost Values versus Market Values and YieldsPortfolio Strategy, Compliance, Review and MonitoringCommingled Pool: Allocation by Security TypesCommingled Pool: Allocation by RatingsCommingled Pool: Holdings by IssuerCommingled Pool: Historical Month End Book ValuesCommingled Pool: Distribution by MaturityCommingled Pool: Yield to Maturity and Weighted Average MaturityApproved Issuers and Broker/DealersCommingled Pool: Compliance with Investment PolicyHoldings Report: Commingled PoolHoldings Report: Worker's CompensationHoldings Report: Mountain View-Los AltosHoldings Report: Palo Alto UnifiedHoldings Report: Park Charter FundHoldings Report: San Jose-EvergreenTransaction Activity Report

Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian

County Executive: Jeffrey V. Smith

26272830

12

2524

1011

6789

Quarterly Investment Review Table of Contents

1245

Commingled Investment PoolWorker's CompensationMountain View-Los AltosPalo Alto UnifiedPark Charter FundSan Jose-EvergreenMedical Malpractice Insurance Fund (1)

Total

Commingled Investment PoolWorker's CompensationWeighted Yield

Santa Clara County Commingled Pool and Segregated Investments

$140,430$6,114,392,726

$2,021,454$603,886

$11,436,278$20,011,796$13,033,790

$2,021,435$27,410,646 $27,680,966

March 31, 2016

$6,040,114,555Cost Value** Market Value

$6,051,172,362VarianceFund$11,057,808 0.18%

% Variance

$270,320 0.99%

$12,893,360

$36-$524

$99,7191.09%

$19

0.54%

2015

0.83%

Mar 310.54%0.83%

1.21% 1.22%0.78%

0.82%

0.82%1.21% 1.21%

Jan 31 Feb 29 Mar 312016

0.77%

FundSummary of Yields* for Select Santa Clara County Investment Funds

0.00%0.01%0.00%0.50%

$6,125,960,533 0.19%$11,567,807

$603,850$11,436,803$19,912,077

*Yield to maturity (YTM) is the rate of return paid on a bond, note, or other fixed income security if the investor buys and holds it to its maturity date and if the coupon interest paid over the life of the bond is reinvested at the same rate as the coupon rate. The calculation for YTM is based on the coupon rate, length of time to maturity, and market price at time of purchase. Yield is a snapshot measure of the yield of the portfolio on the day it was measured based on the current portfolio holdings on that day. This is not a measure of total return, and is not intended to be, since it does not factor in unrealized capital gains and losses and reinvestment rates are dependent upon interest rate changes **Cost Value is the amortized book value of the securities as of the date of this report.

(1) Managed by Chandler Asset Management, Inc.

1

Our portfolio strategy continues to focus on the: (1) acquisition of high quality issuers; (2) identifying and selecting bonds with attractive valuations; (3) appropriately sizing the liquidity portion of the portfolio to ensure adequate cash for near term obligations; and (4) ensuring that monies targeted for longer term investments are deployed in vehicles with favorable risk adjusted yields. Broker-dealers have generally down-sized the amount of securities carried in inventories in response to risk-curbing rules crafted after the 2008 financial crisis, including Basel III and the 2010 Dodd-Frank Act. With more efficient software, we have been addressing this issue by scanning a larger scope of inventory listings to find attractive bonds. Our portfolio structuring does not engage in interest rate anticipation strategies.


Portfolio StrategyMarch 31, 2016

The U.S. job market remained healthy throughout the first quarter 2016 with an average payroll gain per month of 200,000 jobs. Even though April’s payroll report was mildly disappointing, the underlying positive trends found in prior months held steady. Rising employment translates into rising income. The latter fuels consumption. Another key element, consumer borrowing, also supports consumption. Household borrowing surged in March at the fastest pace since November 2001. Financing for automobiles and credit card debt posted sizable increases. With improving labor markets, consumers may be growing more comfortable carrying larger credit card balances. Overall household borrowing in the first quarter grew at a 6.4 percent annualized rate. This compares with a 6.2 percent rate which occurred in the final three months of 2015.

The Dow Jones Industrial Average in mid-April closed above 18,000 for the first time since July 2015. This hefty 15 percent gain from the lows posted by the index in February 2016 found support from several sources. The Federal Reserve Bank’s announced intent to move even more gradually with further rate hikes bolstered investor sentiment and calmed fears of higher rates hurting the economy. So far, the Federal Reserve Bank hasn’t altered interest rates since December 2015, when it raised its benchmark rate for the first time in nearly a decade. Higher oil prices and expectations of lower excess crude oil inventories also has bolstered investor sentiment. Over the past twelve months, much of the weakness in aggregate corporate earnings as well as in business spending reflected in GDP has stemmed from the collapse in the energy sector. Crude oil, which continues to benefit from growing demand and, even with moderately higher prices, is expected to be less of a drag on GDP and business earnings in 2016.

The U.S. economy as measured by gross domestic product (GDP) grew very slowly during the first calendar quarter of 2016. GDP expanded at an annualized rate of one half of one percent, barely positive. GDP is a primary indicator used to gauge the health of a country’s economy and consists of the total dollar value of all goods and services produced. Despite weakness in growth, economists have not expressed strong concern for several reasons. Slow first quarters followed by improved and sometimes robust economic performance have become a common seasonal pattern in recent years. In 2010 through 2015, first-quarter GDP growth averaged just 0.8 percent compared with 3.1 percent for the second quarter, 2.2 percent in the third quarter and 2.4 percent for the fourth quarter. More importantly, economists generally expect the strength in U.S. labor markets, the rebound in domestic equity markets, steady consumer spending and an improving manufacturing sector will prevent the U.S. from slipping into recession.

2

Yield and Weighted Average Maturity

Compliance

Review and Monitoring

Additional Information


Portfolio Compliance, Review, and MonitoringMarch 31, 2016

The yield of the Commingled Pool is 0.832and the weighted average life is 428 days.

The County Treasuer believes the Commingled Pool contains sufficent cash flow from liquid and maturing securities, bank deposits and incoming cash to meet the next six months of expected expenditures.

FTN Financial Main Street Advisors, the County’s investment advisor, currently monitors the Treasury Department’s investment activities.

Securities are purchased with the expectation that they will be held to maturity, so unrealized gains or losses are not reflected in the yield calculations.

The market values of securities were taken from pricing services provided by the Bank of New York Mellon, Bloomberg Analytics, dealer quotes, and an independent pricing service.

3

Sector % ChngFederal AgenciesCorporate BondsRepurchase AgreementsCommercial PaperAsset-Backed SecuritiesMunicipal SecuritiesU.S. TreasuriesNegotiable CDsLAIFMoney Market FundsSupranationalsTotal

SectorFederal AgenciesCorporate BondsRepurchase AgreementsCommercial PaperAsset-Backed SecuritiesMunicipal SecuritiesU.S. TreasuriesNegotiable CDsLAIFMoney Market FundsSupranationalTotal Amounts are based on book value

1.52% 0.1%2.90% 2.68% 0.2%

Santa Clara County Commingled Pool

Allocation by Security Types

3/31/2016 12/31/201560.85% 62.79% -1.9%

3.72% 3.43% 0.3%

March 31, 2016

1.49% 1.2%2.69%

224,860,551 224,733,205

3.39% 2.25% 1.1%

4.58% 4.23%

10.60% 12.05% -1.4%

0.4%0.83% 0.00% 0.8%

8.11% 8.94% -0.8%0.66% 0.61% 0.1%

1.65%

3,675,538,128 4,108,273,874 276,912,986 276,909,811

50,000,000 -

100.00% 100.00%

3/31/2016 12/31/2015

175,422,200 175,478,569 490,000,000 585,000,000

40,069,267 40,032,216

204,868,042 147,305,396 99,471,317 99,654,387

6,040,114,555 6,543,388,499

640,518,911 788,481,963 162,453,153 97,519,080

Agy 60.9%

Corp 4.6%

Repo 0.8%

CP 3.7%

ABS 3.4%

Muni 1.6% Tsy 2.9% CDs 8.1%

LAIF 0.7%

MMF 10.6%

Supra 2.7%

4

*Not Rated by Moody's but A-1+ by S&P

**Repurchase Agreements are not rated, but are collateralized by U.S. Treasury securities or securities issued by the Federal Agencies of the U.S.

***LAIF is not rated, but is comprised of State Code allowable securities

Amounts are based on book values

Total

A2 A3

LAIF*** Repo**

Not Rated*

Aaa Aa1 Aa2 Aa3 A1

- 165,788,871

6,040,114,555

17.3%75.1%1.2%0.7%2.3%0.0%0.0%0.0%0.7%0.0%2.7%

100.0%

4,533,744,537


Allocation by RatingsMarch 31, 2016

1,044,089,353 Portfolio %Portfolio $Moody's Rating

P-1

- 40,069,267

72,977,915 44,251,879

139,192,734 - -

P-1 17.3%

Aaa 75.1%

Aa1 1.2% Aa2 0.7%

Aa3 2.3% A1 0.0% A2 0.0%

LAIF*** 0.7% Repo** 0.0% Not Rated* 2.7%

5

Amounts are based on book values

March 31, 2016

Holdings by Issuer - Percent of Commingled Pool


0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.5% 0.5% 0.6% 0.7% 0.7% 0.7% 0.7% 0.7%

1.0% 1.0% 1.0% 1.1% 1.1% 1.1% 1.2% 1.2% 1.2%

1.6% 1.7% 1.7%

2.5% 2.7%

3.7% 4.4% 4.5%

7.9% 14.2%

16.0% 21.7%

0% 5% 10% 15% 20% 25%

MORGAN STANLEY TRSY INSTL 8304UNIVERSITY CALIFORNIA REVSBMW VEHICLE OWNER TRUST

APPLE INCNISSAN AUTO LEASE TRUST

BERKSHIRE HATHWYVOLKSWAGEN AUTO LOAN ENHANCED

IBMMICROSOFT CORP

HONDA AUTO RECEIVABLES OWNER TMERCEDES-BENZ AUTO LEASE TRUST

CHASE ISSUANCE TRUST (ABS)WALMART

JOHN DEERE OWNER TRUSTTOYOTA AUTO REC OWNER TRUST

BANK OF MONTREAL CHICAGOLOCAL AGENCY INVEST FUND

BMW VEHICLE LEASE TRUSTBANK OF AMERICA CORPROYAL BANK OF CANADA

JOHNSON & JOHNSONEXXON MOBIL CORP

RABOBANKCHEVRON CORP.

CANADIAN IMP BKTORONTO DOMINION

FARMER MAC DISCOUNT NOTEBNP PARIBAS NY BRANCH

TOYOTA MOTOR CREDITCALIFORNIA STWELLS FARGO

MORGAN STANLEY GOVT INSTL 8302U S BANK

INTL BANK RECON & DEVELOPU.S. TREASURY

BLACKROCKDREYFUS CASH MANAGEMENT

FFCBFNMA

FHLMCFHLB

6

Amounts in billions

FY 2015 $4.267 $4.194 $4.096 $4.051 $6.284 $6.065 $5.690$4.247 $5.639 $5.045 $5.085 $5.420


Historical Month End Book ValuesMarch 31, 2016

Fiscal Year Dec Jan Feb

FY 2014 $4.133 $4.052 $3.975 $3.758 $5.386 $5.487 $5.108$4.271 $5.419 $5.019 $4.520 $4.461FY 2013

$3.541$3.230

$3.736$3.801$3.508

FY 2010FY 2011

$3.307

FY 2012

$3.373 $3.307 $3.307 $3.408 $4.175$3.032

$3.555 $3.805 $4.567 $4.097$3.143 $2.898 $3.227 $3.943

$3.645 $4.600

$3.695

$4.521$4.032$4.040 $4.926 $4.525

$3.551 $3.712 $4.339

$3.918 $3.982 $4.606 $5.286

$4.179 $3.935

Jul Aug Sep Oct Nov Mar Apr May Jun

FY 2016 $5.212 $4.990 $4.941 $4.587

$4.384 $3.536

$3.833$3.637

$3.408 $3.687 $4.463

$5.120 $6.543 $5.997 $5.752 $6.040

$4.952$3.517 $3.515 $3.469

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

Jul-2

009

Oct

-200

9

Jan-

2010

Apr-

2010

Jul-2

010

Oct

-201

0

Jan-

2011

Apr-

2011

Jul-2

011

Oct

-201

1

Jan-

2012

Apr-

2012

Jul-2

012

Oct

-201

2

Jan-

2013

Apr-

2013

Jul-2

013

Oct

-201

3

Jan-

2014

Apr-

2014

Jul-2

014

Oct

-201

4

Jan-

2015

Apr-

2015

Jul-2

015

Oct

-201

5

Jan-

2016

Apr-

2016

Billi

ons

7

*Amounts are based on book value

31-90 Days 830,945,423 91-365 Days 1,628,839,002

19.67%

1Yr-2Yr 989,416,285 2Yr-3Yr 1,188,211,807

4Yr-5Yr

3Yr-4Yr 6.04%4Yr-5Yr 1.36%

1-30 Days 1.24%31-90 Days 13.76%

91-365 Days 26.97%1Yr-2Yr 16.38%2Yr-3Yr


Distribution by MaturityMarch 31, 2016

Maturity Amount*Overnight 880,588,178

Overnight 14.58%

3Yr-4Yr 364,933,807 82,194,708

Maturity Amount*

6,040,114,555

1-30 Days 74,985,344

100.00%

$0$200,000,000$400,000,000$600,000,000$800,000,000

$1,000,000,000$1,200,000,000$1,400,000,000$1,600,000,000$1,800,000,000

Overnight 1-30 Days 31-90 Days 91-365 Days 1Yr-2Yr 2Yr-3Yr 3Yr-4Yr 4Yr-5Yr

Distribution By Maturity Dollars

0%

5%

10%

15%

20%

25%

30%

Overnight 1-30 Days 31-90 Days 91-365 Days 1Yr-2Yr 2Yr-3Yr 3Yr-4Yr 4Yr-5Yr

Distribution By Maturity Percentages

8

402 418 428 4282Yr T-Note 0.57% 0.61% 0.65% 0.66%

494 463 500 4820.74% 0.63% 0.73%

0.48% 0.43% 0.47% 0.38%0.72%1.05% 0.78% 0.78%

6 Mon T-Bill 0.04% 0.06% 0.11% 0.15%

LAIF WAM 220 222 239 240 216 152211 200 183 179 167 159

0.33% 0.36% 0.37%0.23% 0.07% 0.23% 0.39%

0.93%SCC WAM 466 471 469 496

0.72% 0.77% 0.82% 0.83%LAIF YTM 0.28% 0.29% 0.30% 0.32% 0.33% 0.47%0.40% 0.45% 0.47%

0.70% 0.68% 0.77% 0.77%Sep-15 Oct-15 Nov-15

SCC YTM 0.59% 0.61% 0.62% 0.68%


Yield to Maturity and Weighted Average MaturityMarch 31, 2016

Item Apr-15 May-15 Jun-15 Jul-15 Aug-15 Mar-16Dec-15 Jan-16 Feb-16

-0.10%

0.10%

0.30%

0.50%

0.70%

0.90%

1.10%Yield to Maturity

Santa ClaraLAIF6 Mon T-Bill2Yr T-Note

135

185

235

285

335

385

435

485

535

Days

Weighted Average Maturity Santa ClaraLAIF

9

Direct Commercial Paper Issuers Broker/DealersToyota Motor Credit Corp Barclays Capital, IncUS Bancorp Blaylock Robert Van, LLCWells Fargo & Co BMO Capital Markets

BNP Paribas Securities CorpBrean Capital LLCCantor Fitzgerald & CoCastleoak Securities LPCitigroup Global Markets IncCredit Suisse Securities, USADaiwa Capital Markets America IncDeutsche Bank Securities IncFTN Financial, IncIncapital LLCJefferies & CoJP Morgan Securities, IncKeybanc Capital Markets, IncLoop Capital Markets LLCMerrill Lynch & Co IncMizuho Securities USA, IncMorgan Stanley & Co IncPiper Jaffray & CoRaymond James, Inc.RBC Capital Markets, IncStifel Nicolaus & CoSuntrust Robinson Humphrey IncUBSVining Sparks LPWedbush Securities IncWells Fargo Institutional SecuritiesWilliams Capital

Santa Clara County

Approved Issuers and Broker/DealersMarch 31, 2016

10

Yes

Yes

Yes, None in Portfolio

Yes


Sector limit 30%, issuer limit 5%, max maturity 5 years, if under 1 year rated by at least two: A-1 (S&P), P-1 (Moody's), F-1 (Fitch), if greater than 1 year rated by at least two: AA- (S&P/Fitch)/Aa3 (Moody's)

Negotiable Certificates of Deposit

Sector limit 10%, no issuer limit, State of CA, local CA agencies, and other municipal securities of the other 49 states, if long-term rated, then by at least two: A- (S&P/Fitch)/A3 (Moody's), if short-term rated, then by at least two: SP-1 (S&P), MIG-1

(Moody's), F-1 (Fitch), revenue based bonds payable solely out of the States' or local agencies' revenuesMunicipal Securities

Securities LendingSector limit 20%, max maturity 92 days for loans and reinvestment, loan counterparty must be a primary dealer, loaned

securities must be owned for at least 30 days

Bankers' Acceptances

Sector limit 20% in aggregate with ABS, no issuer limit, max maturity 5 years, collateralized by pools of conforming residential mortgage loans insured by FHLMC/FNMA and residential mortgages guaranteed by FHA (GNMA)

Mortgage-Backed Securities

Sector limit 20% in aggregate with ABS, no issuer limit, max maturity 5 years, collateralized by pools of loans such as installment/receivables, security must be rated by at least two: AA- (S&P/Fitch), Aa3 (Moody's), issuer rated by at least two: A-

(S&P/Fitch), A3 (Moody's)Asset-Backed Securities

Yes

Sector limit 40%, issuer limit 5%, max maturity 270 days, rated by at least two: A-1 (S&P), P-1 (Moody's), F-1 (Fitch), issued by domestic corporation w/ at least $500 mil of assets, and long term debt rated by at least two: AA- (S&P/Fitch)/Aa3 (Moody's)

Commercial Paper Yes

Money Market FundsSector limit 20%, issuer limit 10%, rated by at least two: AAA-m (S&P/Fitch)/Aaa-mf (Moody's), MMF has at least $500 mil

managed Yes

Corporate BondsYes

No sector limit, no Issuer limit, max maturity 92 days, treasury and agency collateral at 102% of investment, if maturity exceeds 15 days, must be collateralized by securities with 5 years or less maturities

Sector limit 30%, issuer limit 5%, max maturity 5 years, rated by at least two: AA- (S&P/Fitch)/Aa3 (Moody's), issued by domestic corps/depositories

Repurchase Agreements

Supranational Debt Obligations

Sector limit 10%, max maturity 5 years, issued or unconditionally gauranteed by the IBRD, rated by at least two: AAA (S&P/Fitch), Aaa (Moody's)

Yes

Sector limit 40%, issuer limit 5%, max maturity 180 days, rated by at least two: A-1 (S&P), P-1 (Moody's), F-1 (Fitch), issued by commercial banks


LAIF

U.S. Treasuries

YesU.S. Federal Agencies

No sector limit, no issuer limit, CA State's deposit limit $50 millionYesNo sector limit, no issuer limit, max maturity 5 years

Interest Periods Securities must pay interest within one year of the initial investment and at least semiannually in subsequent years

Yes

Investment Swaps Similar maturity swaps, so as not to affect cash flow needs, should have minimum 5 basis point gain

No sector limit, no issuer limit, max maturity 5 years

Issuer LimitsNo more than 5% of the portfolio shall be invested in aggregate of any single institution of the following types: Bankers

Acceptances, CP, Negotiable CDs, and Corporate Notes Yes

YesYes

Santa Clara County Commingled PoolCompliance with Investment Policy

March 31, 2016

MaturityIn Compliance

YesParametersItem/Sector

Weighted Average Maturity (WAM) must be less than 24 months

11

SANTA CLARA COUNTY INVESTMENTS

March 31, 2016

Fund COMM - COMMINGLED POOLInvestments by Fund

Par ValueDays ToMaturity

MaturityDate

CurrentRateMarket ValueCUSIP Investment # Issuer

PurchaseDate Book Value

YTM360

YTM365

Negotiable CDs

BANK OF AMERICA CORP36484 45,000,000.0006052TRE2 09/23/2016 1750.86012/28/2015 45,021,735.00 0.848 0.86045,000,000.00BANK OF MONTREAL CHICAGO36464 40,000,000.0006427EPD7 07/29/2016 1190.84012/17/2015 40,034,400.00 0.828 0.84040,000,000.00BNP PARIBAS NY BRANCH36451 45,000,000.0034959TDL7 09/12/2016 1640.92012/15/2015 45,016,965.00 0.907 0.92045,000,000.00BNP PARIBAS NY BRANCH36483 25,000,000.0034959TDP8 07/29/2016 1190.85012/28/2015 25,014,825.00 0.838 0.85025,000,000.00CANADIAN IMP BK36466 30,000,000.0013606ALD8 07/15/2016 1050.82012/17/2015 30,018,210.00 0.808 0.82030,000,000.00CANADIAN IMP BK36470 35,000,000.0013606ALN6 07/29/2016 1190.85012/18/2015 35,022,260.00 0.838 0.85035,000,000.00RABOBANK36453 35,000,000.0021685VKR9 07/29/2016 1190.80012/15/2015 35,018,445.00 0.789 0.80035,000,000.00RABOBANK36465 25,000,000.0021684BC36 09/16/2016 1680.85012/17/2015 25,006,075.00 0.838 0.85025,000,000.00ROYAL BANK OF CANADA36156 20,000,000.0078009NVR4 07/30/2018 8501.69307/30/2015 20,000,000.00 1.669 1.69320,000,000.00ROYAL BANK OF CANADA36480 25,000,000.0078009NYM2 08/25/2016 1460.91512/24/2015 25,024,450.00 0.902 0.91525,000,000.00TORONTO DOMINION36452 30,000,000.0089113EX27 06/13/2016 730.79012/15/2015 30,017,790.00 0.779 0.79030,000,000.00TORONTO DOMINION36469 35,000,000.0089113EX92 09/16/2016 1680.94012/18/2015 35,027,650.00 0.927 0.94035,000,000.00WELLS FARGO36386 45,000,000.0094988EMB1 06/21/2016 810.62011/24/2015 44,996,040.00 0.611 0.62045,000,000.00WELLS FARGO36408 30,000,000.0094988EMF2 06/01/2016 610.67012/03/2015 30,002,340.00 0.660 0.67030,000,000.00WELLS FARGO36471 25,000,000.0094988EMS4 07/14/2016 1040.82012/18/2015 25,008,225.00 0.808 0.82025,000,000.00

Subtotal and Average 490,000,000.00 490,000,000.00 490,229,410.00 0.846 0.858 154

Repurchase Agreements

U.S. TREASURY NOTES36647 50,000,000.00SYS36647 04/01/2016 00.29003/30/2016 50,000,000.00 0.290 0.29450,000,000.00


Federal Agency Bonds

FARMER MAC36535 15,000,000.003132X0EW7 01/27/2017 3010.75001/27/2016 15,003,270.00 0.744 0.75514,999,383.33FFCB NOTES35448 10,000,000.003133EECW8 05/25/2016 540.37511/25/2014 10,001,710.00 0.369 0.37510,000,000.00FFCB NOTES35449 10,000,000.003133EECW8 05/25/2016 540.37511/25/2014 10,001,710.00 0.369 0.37510,000,000.00FFCB NOTES35497 15,000,000.003133EDQM7 07/17/2017 4721.00012/10/2014 15,051,810.00 0.942 0.95515,008,578.98FFCB NOTES35527 10,000,000.003133EEFE5 12/18/2017 6261.12512/18/2014 10,058,960.00 1.077 1.09210,005,484.44FFCB NOTES35529 10,000,000.003133EEFE5 12/18/2017 6261.12512/18/2014 10,058,960.00 1.109 1.12510,000,000.00FFCB NOTES35536 20,000,000.003133EEFZ8 02/23/2017 3280.70012/23/2014 20,014,480.00 0.690 0.70020,000,000.00FFCB NOTES35537 30,000,000.003133EEFZ8 02/23/2017 3280.70012/23/2014 30,021,720.00 0.739 0.74929,986,748.46FFCB NOTES35678 10,000,000.003133EEQX1 09/25/2017 5421.00002/26/2015 10,033,550.00 0.909 0.92210,011,327.87

Portfolio SCL2AP

Run Date: 05/09/2016 - 13:56 FI (PRF_FI) 7.1.1Report Ver. 7.3.5

12

March 31, 2016


MaturityDate

CurrentRateMarket Value

Fund COMM - COMMINGLED POOLInvestments by Fund Page 2

CUSIP Investment # IssuerPurchase

Date Book ValueYTM360

YTM365


FFCB NOTES35683 15,000,000.003133EEQX1 09/25/2017 5421.00002/27/2015 15,050,325.00 0.958 0.97115,006,300.97FFCB NOTES35757 20,000,000.003133EEQX1 09/25/2017 5421.00003/24/2015 20,067,100.00 0.880 0.89320,031,273.08FFCB NOTES35799 9,950,000.003133EEWG1 04/01/2019 1,0951.30004/01/2015 10,025,739.40 1.353 1.3719,929,157.24FFCB NOTES35872 10,000,000.003133EEQX1 09/25/2017 5421.00004/16/2015 10,033,550.00 0.752 0.76210,034,810.24FFCB NOTES35877 12,195,000.003133EEUT5 01/23/2017 2970.70004/17/2015 12,213,207.14 0.527 0.53412,211,236.99FFCB NOTES35892 5,000,000.003133ECBX1 09/28/2017 5450.82004/21/2015 5,000,355.00 0.787 0.7985,001,592.02FFCB NOTES35940 5,000,000.003133EEE71 05/01/2018 7600.92005/01/2015 4,989,170.00 0.907 0.9205,000,000.00FFCB NOTES35941 5,000,000.003133EEE71 05/01/2018 7600.92005/01/2015 4,989,170.00 0.907 0.9205,000,000.00FFCB NOTES35965 5,000,000.003133EEJ50 05/11/2018 7701.03005/11/2015 5,021,725.00 1.082 1.0974,993,043.89FFCB NOTES36201 10,000,000.003133EDEB4 06/28/2017 4531.10008/31/2015 10,044,520.00 0.734 0.74410,043,747.49FFCB NOTES36370 15,000,000.003133EFPJ0 11/19/2018 9621.29011/19/2015 15,138,510.00 1.276 1.29414,998,420.00FFCB NOTES36440 20,000,000.003133EFSG3 03/14/2018 7121.10012/14/2015 20,093,360.00 1.222 1.23920,000,000.00FFCB NOTES36441 15,000,000.003133EFSG3 03/14/2018 7121.10012/14/2015 15,070,020.00 1.222 1.23915,000,000.00FFCB NOTES36442 15,000,000.003133EFSH1 06/14/2018 8041.17012/14/2015 15,055,275.00 1.174 1.19014,993,391.67FFCB NOTES36443 20,000,000.003133EFSH1 06/14/2018 8041.17012/14/2015 20,073,700.00 1.174 1.19019,991,012.67FFCB NOTES36584 15,000,000.003133EFZN0 02/12/2019 1,0471.03002/24/2016 15,013,245.00 1.057 1.07214,982,189.19FHLB NOTES33890 25,000,000.00313379DD8 06/21/2017 4461.00012/31/2012 25,094,350.00 0.678 0.68825,093,670.81FHLB NOTES34257 15,000,000.003133834R9 06/24/2016 840.37505/10/2013 14,999,910.00 0.426 0.43214,998,039.46FHLB NOTES34261 35,000,000.003133834R9 06/24/2016 840.37505/13/2013 34,999,790.00 0.452 0.45834,993,288.18FHLB NOTES34533 25,000,000.003133834R9 06/24/2016 840.37509/17/2013 24,999,850.00 0.698 0.70824,980,998.24FHLB NOTES34652 22,355,000.00313373SZ6 06/10/2016 702.12511/14/2013 22,426,848.97 0.542 0.55022,421,913.63FHLB NOTES34663 25,000,000.00313373SZ6 06/10/2016 702.12511/19/2013 25,080,350.00 0.479 0.48625,077,934.04FHLB NOTES34682 50,000,000.00313373SZ6 06/10/2016 702.12511/26/2013 50,160,700.00 0.476 0.48350,156,193.65FHLB NOTES34749 15,000,000.00313373SZ6 06/10/2016 702.12512/17/2013 15,048,210.00 0.500 0.50715,046,163.55FHLB NOTES35004 15,000,000.003130A1NN4 05/24/2017 4180.87504/11/2014 15,034,155.00 0.925 0.93714,989,353.21FHLB NOTES35097 10,000,000.003130A22N5 06/06/2016 660.42005/19/2014 10,001,770.00 0.427 0.4339,999,753.05FHLB NOTES35136 5,000,000.003130A2C61 06/10/2016 700.37506/06/2014 4,999,800.00 0.439 0.4464,999,323.34FHLB NOTES35193 25,000,000.003130A22N5 06/06/2016 660.42006/30/2014 25,004,425.00 0.460 0.46624,997,898.71FHLB NOTES35195 5,000,000.003130A2C61 06/10/2016 700.37506/30/2014 4,999,800.00 0.461 0.4684,999,112.86FHLB NOTES35206 20,000,000.003130A22N5 06/06/2016 660.42007/09/2014 20,003,540.00 0.503 0.51019,996,764.19FHLB NOTES35397 30,000,000.003130A22N5 06/06/2016 660.42010/30/2014 30,005,310.00 0.416 0.42129,999,898.44FHLB NOTES35398 20,000,000.003130A3CE2 10/14/2016 1960.62510/30/2014 20,013,880.00 0.526 0.53320,009,704.83

Portfolio SCL2AP


13

March 31, 2016


MaturityDate





YTM365


FHLB NOTES35402 10,000,000.003130A3CE2 10/14/2016 1960.62510/31/2014 10,006,940.00 0.563 0.57110,002,866.17FHLB NOTES35407 10,000,000.003130A3CE2 10/14/2016 1960.62511/06/2014 10,006,940.00 0.584 0.59210,001,741.98FHLB NOTES35408 15,000,000.003130A3CE2 10/14/2016 1960.62511/06/2014 15,010,410.00 0.584 0.59215,002,612.97FHLB NOTES35466 10,000,000.003130A3M35 10/14/2016 1960.52012/02/2014 9,993,430.00 0.500 0.50710,000,689.29FHLB NOTES35482 15,000,000.003130A3P32 07/01/2016 910.43012/05/2014 15,005,325.00 0.422 0.42815,000,071.55FHLB NOTES35483 10,000,000.003130A3P32 07/01/2016 910.43012/05/2014 10,003,550.00 0.424 0.43010,000,000.00FHLB NOTES35488 25,000,000.003130A3P32 07/01/2016 910.43012/09/2014 25,008,875.00 0.479 0.48624,996,516.90FHLB NOTES35505 25,000,000.003130A3P40 07/03/2017 4580.87512/11/2014 25,065,250.00 0.912 0.92524,984,532.97FHLB NOTES35512 13,975,000.003130A2C61 06/10/2016 700.37512/12/2014 13,974,441.00 0.470 0.47713,972,275.65FHLB NOTES35516 25,000,000.003133782N0 03/10/2017 3430.87512/15/2014 25,051,750.00 0.806 0.81825,013,244.16FHLB NOTES35517 35,000,000.003133782N0 03/10/2017 3430.87512/15/2014 35,072,450.00 0.740 0.75135,040,385.22FHLB NOTES35520 25,000,000.003130A2C61 06/10/2016 700.37512/16/2014 24,999,000.00 0.421 0.42724,997,512.64FHLB NOTES35528 25,000,000.003130A3RW6 08/15/2017 5011.00012/18/2014 25,104,025.00 0.938 0.95125,016,518.29FHLB NOTES35531 17,000,000.003130A3SZ8 08/15/2017 5010.95012/18/2014 17,072,760.00 0.966 0.98016,993,128.91FHLB NOTES35549 10,000,000.003130A3SL9 06/15/2017 4400.95012/30/2014 10,043,660.00 0.907 0.92010,003,530.85FHLB NOTES35684 20,000,000.003130A4GJ5 04/25/2018 7541.12502/27/2015 20,151,520.00 1.124 1.13919,993,985.24FHLB NOTES35685 12,000,000.003130A4GJ5 04/25/2018 7541.12502/27/2015 12,090,912.00 1.124 1.13911,996,391.14FHLB NOTES35803 25,000,000.003130A4WA6 07/06/2018 8261.00004/06/2015 25,033,200.00 0.986 1.00025,000,000.00FHLB NOTES35815 20,000,000.003130A4WB4 01/08/2018 6470.87504/08/2015 20,029,420.00 0.863 0.87520,000,000.00FHLB NOTES35816 25,000,000.003130A4UP5 06/29/2018 8191.05004/08/2015 25,015,975.00 0.976 0.99025,033,057.71FHLB NOTES35826 9,460,000.00313383VN8 09/13/2019 1,2602.00004/09/2015 9,767,241.88 1.321 1.3409,668,377.21FHLB NOTES35827 25,155,000.00313383VN8 09/13/2019 1,2602.00004/09/2015 25,971,984.09 1.332 1.35125,699,685.92FHLB NOTES35855 12,000,000.003130A4WA6 07/06/2018 8261.00004/14/2015 12,015,936.00 0.996 1.01011,997,306.71FHLB NOTES35864 26,500,000.003130A4Y71 06/15/2018 8051.00004/15/2015 26,510,626.50 0.981 0.99426,502,953.12FHLB NOTES35865 16,915,000.003130A4YA4 08/15/2018 8661.05004/15/2015 16,974,659.20 1.025 1.03916,918,972.49FHLB NOTES35867 10,000,000.00313378QK0 03/08/2019 1,0711.87504/15/2015 10,256,110.00 1.196 1.21310,189,175.12FHLB NOTES35879 10,000,000.003130A4KD3 03/09/2017 3420.75004/17/2015 10,005,820.00 0.561 0.56810,016,884.19FHLB NOTES35906 20,000,000.00313379DT3 06/08/2018 7981.25004/23/2015 20,166,200.00 0.992 1.00620,104,653.51FHLB NOTES35922 10,000,000.00313378A43 03/09/2018 7071.37504/28/2015 10,109,800.00 0.921 0.93410,084,084.97FHLB NOTES35952 10,000,000.003130A57J2 07/06/2018 8261.00005/06/2015 10,017,240.00 0.997 1.0119,997,462.06FHLB NOTES35956 5,000,000.003133XRFZ8 06/08/2018 7984.75005/07/2015 5,415,375.00 1.138 1.1545,384,999.55FHLB NOTES35957 5,000,000.00313379DT3 06/08/2018 7981.25005/07/2015 5,041,550.00 1.096 1.1125,014,769.53

Portfolio SCL2AP


14

March 31, 2016


MaturityDate





YTM365


FHLB NOTES35958 15,000,000.003130A57G8 08/07/2018 8581.05005/07/2015 15,047,400.00 1.066 1.08114,989,327.38FHLB NOTES36053 5,000,000.00313378A43 03/09/2018 7071.37506/18/2015 5,054,900.00 1.122 1.1385,022,519.57FHLB NOTES36059 5,000,000.00313378A43 03/09/2018 7071.37506/19/2015 5,054,900.00 1.031 1.0455,031,410.00FHLB NOTES36129 5,000,000.003133XQSE3 04/18/2018 7474.11007/16/2015 5,331,105.00 1.044 1.0585,306,947.13FHLB NOTES36143 10,000,000.003130A62S5 08/28/2017 5140.75007/24/2015 10,004,350.00 0.846 0.8589,984,937.93FHLB NOTES36144 15,000,000.003130A62S5 08/28/2017 5140.75007/24/2015 15,006,525.00 0.846 0.85814,977,406.90FHLB NOTES36228 5,000,000.003130A6AE7 09/14/2018 8961.12509/16/2015 5,025,020.00 1.182 1.1994,991,071.71FHLB NOTES36267 11,000,000.003130A6LZ8 10/26/2017 5730.62510/09/2015 10,978,418.00 0.928 0.94110,981,700.75FHLB NOTES36288 5,000,000.003130A5Z77 07/29/2020 1,5801.83010/21/2015 5,098,825.00 1.461 1.4825,070,690.40FHLB NOTES36289 5,000,000.003130A5Z77 07/29/2020 1,5801.83010/21/2015 5,098,825.00 1.418 1.4385,080,439.23FHLB NOTES36298 5,000,000.003130A5Z77 07/29/2020 1,5801.83010/23/2015 5,098,825.00 1.432 1.4525,078,671.74FHLB NOTES36308 10,000,000.003130A5Z77 07/29/2020 1,5801.83010/26/2015 10,197,650.00 1.498 1.51910,129,151.20FHLB NOTES36310 5,000,000.003130A5Z77 07/29/2020 1,5801.83010/26/2015 5,098,825.00 1.490 1.5115,066,303.68FHLB NOTES36376 20,000,000.003130A6SW8 12/19/2017 6271.00011/20/2015 20,076,700.00 0.986 1.00020,000,000.00FHLB NOTES36377 20,000,000.003130A6SW8 12/19/2017 6271.00011/20/2015 20,076,700.00 0.986 1.00020,000,000.00FHLB NOTES36402 17,200,000.00313379EE5 06/14/2019 1,1691.62512/02/2015 17,541,987.60 1.426 1.44617,295,728.01FHLB NOTES36407 10,000,000.003130A4PA4 03/19/2018 7171.10012/03/2015 10,044,680.00 1.075 1.09010,001,885.71FHLB NOTES36508 20,000,000.00313375K48 09/14/2018 8962.00001/11/2016 20,537,440.00 1.175 1.19120,389,143.51FHLB NOTES36550 15,000,000.00313379EE5 06/14/2019 1,1691.62502/05/2016 15,298,245.00 1.102 1.11715,238,610.92FHLMC NOTES33721 20,000,000.003137EACW7 08/25/2016 1462.00011/01/2012 20,118,540.00 0.602 0.61020,109,666.38FHLMC NOTES34532 25,000,000.003137EADQ9 05/13/2016 420.50009/17/2013 25,004,275.00 0.718 0.72824,993,410.04FHLMC NOTES34543 10,000,000.003137EADS5 10/14/2016 1960.87509/23/2013 10,024,230.00 0.819 0.83010,002,331.43FHLMC NOTES34723 50,000,000.003137EADQ9 05/13/2016 420.50012/10/2013 50,008,550.00 0.455 0.46150,002,217.87FHLMC NOTES34751 44,400,000.003137EADQ9 05/13/2016 420.50012/17/2013 44,407,592.40 0.470 0.47744,401,162.81FHLMC NOTES34754 25,000,000.003137EADQ9 05/13/2016 420.50012/18/2013 25,004,275.00 0.457 0.46325,001,060.92FHLMC NOTES34971 20,000,000.003137EADQ9 05/13/2016 420.50004/01/2014 20,003,420.00 0.502 0.50919,999,768.50FHLMC NOTES35207 10,000,000.003137EADN6 01/12/2018 6510.75007/09/2014 9,996,450.00 1.255 1.2739,909,204.35FHLMC NOTES35498 25,000,000.003137EADH9 06/29/2017 4541.00012/10/2014 25,074,375.00 0.891 0.90325,029,492.93FHLMC NOTES35507 15,000,000.003137EADT3 02/22/2017 3270.87512/11/2014 15,029,310.00 0.701 0.71015,021,731.42FHLMC NOTES35508 16,917,000.003137EADC0 03/08/2017 3411.00012/11/2014 16,968,681.43 0.760 0.77016,952,880.45FHLMC NOTES35546 16,850,000.003137EADC0 03/08/2017 3411.00012/29/2014 16,901,476.75 0.873 0.88516,867,848.61FHLMC NOTES35556 25,000,000.003137EADJ5 07/28/2017 4831.00012/30/2014 25,090,325.00 0.987 1.00124,999,614.49

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MaturityDate





YTM365


FHLMC NOTES35755 20,000,000.003134G3M31 09/27/2017 5441.00003/23/2015 20,085,760.00 0.885 0.89720,030,001.77FHLMC NOTES35756 15,000,000.003134G3B90 08/15/2017 5010.87503/24/2015 15,039,165.00 0.836 0.84815,005,421.95FHLMC NOTES35760 10,000,000.003137EADN6 01/12/2018 6510.75003/25/2015 9,996,450.00 0.898 0.9119,971,737.44FHLMC NOTES35761 10,000,000.003137EADN6 01/12/2018 6510.75003/25/2015 9,996,450.00 0.921 0.9339,967,727.21FHLMC NOTES35785 5,000,000.003137EADN6 01/12/2018 6510.75003/30/2015 4,998,225.00 0.914 0.9264,984,486.78FHLMC NOTES35873 30,000,000.003137EADM8 10/02/2019 1,2791.25004/16/2015 30,129,150.00 1.296 1.31429,934,280.39FHLMC NOTES35893 25,000,000.003134G6TF0 06/29/2018 8190.93004/21/2015 24,995,100.00 0.922 0.93424,997,360.63FHLMC NOTES35942 10,000,000.003134G3ZH6 07/25/2017 4801.00005/01/2015 10,042,590.00 0.742 0.75310,032,171.87FHLMC NOTES36322 10,000,000.003137EADM8 10/02/2019 1,2791.25010/29/2015 10,043,050.00 1.343 1.3629,961,893.35FHLMC NOTES36332 18,350,000.003137EADM8 10/02/2019 1,2791.25011/04/2015 18,428,996.75 1.456 1.47618,209,158.93FHLMC NOTES36337 8,000,000.003137EADM8 10/02/2019 1,2791.25011/06/2015 8,034,440.00 1.519 1.5407,921,362.39FHLMC NOTES36340 10,000,000.003137EADM8 10/02/2019 1,2791.25011/09/2015 10,043,050.00 1.576 1.5989,882,168.85FHLMC NOTES36436 20,000,000.003137EADX4 12/15/2017 6231.00012/11/2015 20,078,340.00 1.031 1.04619,982,529.83FHLMC NOTES36437 15,000,000.003137EADX4 12/15/2017 6231.00012/11/2015 15,058,755.00 1.031 1.04614,986,897.38FHLMC NOTES36563 1,000,000.003134G7CU3 01/25/2017 2990.62502/12/2016 999,948.00 0.570 0.5781,000,377.14FNMA NOTES32277 20,000,000.003135G0ES8 11/15/2016 2281.37502/06/2012 20,105,680.00 0.941 0.95420,051,054.80FNMA NOTES32308 15,000,000.0031359M4D2 02/13/2017 3185.00002/22/2012 15,562,305.00 1.132 1.14715,485,376.88FNMA NOTES33714 20,000,000.003135G0ES8 11/15/2016 2281.37510/29/2012 20,105,680.00 0.654 0.66320,087,200.00FNMA NOTES34271 20,000,000.003135G0XP3 07/05/2016 950.37505/17/2013 19,994,840.00 0.481 0.48819,994,100.00FNMA NOTES34555 25,000,000.003135G0YE7 08/26/2016 1470.62509/27/2013 25,016,300.00 0.722 0.73224,989,287.42FNMA NOTES34664 15,000,000.003135G0XP3 07/05/2016 950.37511/20/2013 14,996,130.00 0.508 0.51514,994,553.97FNMA NOTES34692 25,000,000.003135G0XP3 07/05/2016 950.37511/27/2013 24,993,550.00 0.574 0.58224,991,837.63FNMA NOTES34720 30,000,000.003135G0XP3 07/05/2016 950.37512/10/2013 29,992,260.00 0.526 0.53329,987,652.97FNMA NOTES34721 25,000,000.003135G0YE7 08/26/2016 1470.62512/10/2013 25,016,300.00 0.574 0.58225,004,271.26FNMA NOTES34738 30,000,000.003135G0GY3 01/30/2017 3041.25012/13/2013 30,140,760.00 0.786 0.79730,111,030.61FNMA NOTES34739 25,000,000.003135G0XP3 07/05/2016 950.37512/13/2013 24,993,550.00 0.655 0.66524,987,373.21FNMA NOTES34750 35,000,000.003135G0XP3 07/05/2016 950.37512/17/2013 34,990,970.00 0.606 0.61534,986,219.99FNMA NOTES34913 10,000,000.003135G0ZB2 04/20/2017 3840.75003/10/2014 10,003,680.00 0.852 0.8639,988,190.09FNMA NOTES35447 10,000,000.003135G0VC4 02/28/2018 6981.13011/25/2014 10,025,310.00 1.170 1.1869,989,340.66FNMA NOTES35454 6,000,000.003135G0VC4 02/28/2018 6981.13011/26/2014 6,015,186.00 1.148 1.1645,996,166.40FNMA NOTES35750 16,365,000.003135G0PP2 09/20/2017 5371.00003/20/2015 16,415,846.06 0.909 0.92216,383,468.45FNMA NOTES35762 15,000,000.003135G0WJ8 05/21/2018 7800.87503/25/2015 15,018,435.00 1.022 1.03614,949,061.55

Portfolio SCL2AP


16

March 31, 2016


MaturityDate





YTM365


FNMA NOTES35814 25,000,000.003135G0YM9 09/18/2018 9001.87504/07/2015 25,608,950.00 1.009 1.02325,514,081.18FNMA NOTES35847 7,000,000.003135G0UU5 03/06/2020 1,4351.75004/13/2015 7,136,248.00 1.474 1.4947,067,475.35FNMA NOTES35856 14,584,000.003135G0UU5 03/06/2020 1,4351.75004/14/2015 14,867,862.98 1.469 1.48914,727,236.48FNMA NOTES35943 10,000,000.003135G0MZ3 08/28/2017 5140.87505/01/2015 10,022,530.00 0.755 0.76510,015,187.16FNMA NOTES36088 7,370,000.003136FTZZ5 01/30/2019 1,0341.75006/26/2015 7,537,026.31 1.397 1.4177,437,439.37FNMA NOTES36128 4,619,000.003136FPYB7 05/23/2017 4172.05007/16/2015 4,689,601.42 0.727 0.7374,687,788.61FNMA NOTES36347 10,000,000.003135G0A78 01/21/2020 1,3901.62511/13/2015 10,171,640.00 1.650 1.6739,982,375.33FNMA NOTES36361 20,000,000.003135G0A78 01/21/2020 1,3901.62511/18/2015 20,343,280.00 1.585 1.60720,005,651.36FNMA NOTES36378 15,000,000.003135G0WJ8 05/21/2018 7800.87511/20/2015 15,018,435.00 1.152 1.16814,907,317.98FNMA NOTES36383 10,000,000.003135G0A78 01/21/2020 1,3901.62511/24/2015 10,171,640.00 1.635 1.6589,987,828.32FNMA NOTES36384 10,000,000.003135G0A78 01/21/2020 1,3901.62511/24/2015 10,171,640.00 1.633 1.6569,988,560.45FNMA NOTES36505 25,000,000.003135G0H63 01/28/2019 1,0321.37501/08/2016 25,325,725.00 1.376 1.39524,985,669.55FNMA NOTES36564 7,923,000.003135G0GY3 01/30/2017 3041.25002/12/2016 7,960,174.72 0.564 0.5727,967,384.28

Subtotal and Average 2,429,660,187.93 2,425,083,000.00 2,436,674,032.60 0.848 0.860 496

Federal Agency Bonds - CALLABLE

FFCB NOTES36323 15,000,000.003133EFKM8 10/20/2017 5670.71010/29/2015 14,970,810.00 0.791 0.80214,978,772.15FFCB NOTES36492 13,300,000.003133EFMU8 05/02/2018 7610.95012/31/2015 13,291,780.60 1.324 1.34313,192,872.22FHLB NOTES35844 5,000,000.003130A4QS4 04/13/2018 7421.25004/13/2015 5,001,070.00 1.232 1.2505,000,000.00FHLB NOTES35846 10,600,000.003130A4RJ3 07/13/2018 8331.20004/13/2015 10,600,996.40 1.183 1.20010,600,000.00FHLB NOTES35866 5,000,000.003130A4PZ9 10/15/2018 9271.45004/15/2015 5,000,785.00 1.430 1.4505,000,000.00FHLB NOTES35905 10,000,000.003130A4YH9 04/20/2018 7491.10004/23/2015 10,003,360.00 1.084 1.09910,000,000.00FHLB NOTES35914 10,000,000.003130A4Y55 04/27/2018 7561.12504/27/2015 10,003,310.00 1.109 1.12510,000,000.00FHLB NOTES35915 10,000,000.003130A4Y55 04/27/2018 7561.12504/27/2015 10,003,310.00 1.109 1.12510,000,000.00FHLB NOTES35916 20,000,000.003130A4Y55 04/27/2018 7561.12504/27/2015 20,006,620.00 1.109 1.12520,000,000.00FHLB NOTES35929 5,000,000.003130A4Z88 10/29/2018 9411.22004/29/2015 5,000,405.00 1.203 1.2205,000,000.00FHLB NOTES35935 5,000,000.003130A4Z88 10/29/2018 9411.22004/29/2015 5,000,405.00 1.203 1.2205,000,000.00FHLB NOTES36117 7,250,000.003130A3XL3 02/10/2020 1,4101.50007/09/2015 7,262,085.75 1.624 1.6467,210,597.33FHLB NOTES36138 7,325,000.003130A5SS9 01/22/2019 1,0261.45007/22/2015 7,342,440.83 1.430 1.4507,325,000.00FHLB NOTES36151 25,000,000.003130A5XK0 07/28/2017 4830.80007/28/2015 24,961,100.00 0.789 0.80025,000,000.00FHLB NOTES36486 25,000,000.003130A6WL7 06/29/2018 8191.30012/29/2015 25,015,900.00 1.282 1.30025,000,000.00FHLB NOTES36530 7,700,000.003130A6ZD2 10/26/2018 9381.37501/26/2016 7,729,167.60 1.474 1.4957,703,597.22

Portfolio SCL2AP


17

March 31, 2016


MaturityDate





YTM365


FHLB NOTES36641 20,000,000.003130A7HM0 03/29/2019 1,0921.25003/29/2016 20,023,980.00 1.249 1.26719,990,018.52FHLMC NOTES35911 10,000,000.003134G6TW3 07/27/2018 8471.15004/27/2015 10,001,690.00 1.134 1.15010,000,000.00FHLMC NOTES35912 12,500,000.003134G6TW3 07/27/2018 8471.15004/27/2015 12,502,112.50 1.140 1.15612,498,213.68FHLMC NOTES35913 15,000,000.003134G6TW3 07/27/2018 8471.15004/27/2015 15,002,535.00 1.134 1.15015,000,000.00FHLMC NOTES35930 10,000,000.003134G6UE1 10/29/2018 9411.25004/29/2015 10,002,680.00 1.232 1.25010,000,000.00FHLMC NOTES35931 6,135,000.003134G6UW1 04/29/2019 1,1231.40004/29/2015 6,139,570.58 1.380 1.4006,135,000.00FHLMC NOTES36008 5,000,000.003134G6L76 05/25/2018 7841.25005/29/2015 5,001,765.00 1.232 1.2505,000,000.00FHLMC NOTES36066 10,000,000.003134G67C1 06/22/2018 8121.20006/22/2015 10,009,770.00 1.225 1.2429,990,729.17FHLMC NOTES36076 10,000,000.003134G64W0 06/23/2017 4480.90006/23/2015 10,024,550.00 0.892 0.9059,999,386.11FHLMC NOTES36087 10,000,000.003134G64W0 06/23/2017 4480.90006/26/2015 10,024,550.00 0.866 0.87810,002,589.12FHLMC NOTES36094 6,425,000.003134G6V26 06/29/2018 8191.25006/29/2015 6,434,798.13 1.232 1.2506,425,000.00FHLMC NOTES36309 2,000,000.003134G34W7 01/30/2018 6691.25010/26/2015 2,015,762.00 0.805 0.8162,015,673.51FHLMC NOTES36319 15,000,000.003134G7Z20 10/29/2018 9411.25010/29/2015 15,004,035.00 1.232 1.25015,000,000.00FHLMC NOTES36320 20,000,000.003134G7Z20 10/29/2018 9411.25010/29/2015 20,005,380.00 1.232 1.25020,000,000.00FHLMC NOTES36393 5,000,000.003134G74S7 08/27/2018 8781.00011/27/2015 5,001,205.00 1.086 1.1015,000,000.00FHLMC NOTES36487 10,465,000.003134G8AB5 06/29/2018 8191.20012/29/2015 10,469,363.91 1.183 1.20010,465,000.00FHLMC NOTES36488 12,000,000.003134G8DY2 09/29/2017 5461.00012/29/2015 12,008,484.00 1.152 1.16812,000,000.00FHLMC NOTES36497 13,875,000.003134G76G1 05/17/2018 7761.05001/04/2016 13,840,978.50 1.327 1.34613,789,151.65FHLMC NOTES36583 12,500,000.003134G8JT7 02/24/2020 1,4241.50002/24/2016 12,528,600.00 1.479 1.50012,500,000.00FHLMC NOTES36590 5,000,000.003134G8L98 02/26/2018 6961.05002/26/2016 5,000,680.00 1.035 1.0505,000,000.00FHLMC NOTES36591 5,000,000.003134G8L98 02/26/2018 6961.05002/26/2016 5,000,680.00 1.035 1.0505,000,000.00FHLMC NOTES36592 5,000,000.003134G8L98 02/26/2018 6961.05002/26/2016 5,000,680.00 1.035 1.0505,000,000.00FHLMC NOTES36593 5,000,000.003134G8L98 02/26/2018 6961.05002/26/2016 5,000,680.00 1.035 1.0505,000,000.00FHLMC NOTES36640 20,000,000.003134G8NS4 03/29/2019 1,0921.40003/29/2016 20,005,640.00 1.424 1.44419,974,048.15FHLMC NOTES36644 7,000,000.003134G8TV1 03/29/2019 1,0921.22003/29/2016 7,000,000.00 1.203 1.2207,000,000.00FHLMC NOTES36648 20,000,000.003134G8S83 12/30/2019 1,3681.50003/30/2016 20,065,520.00 1.479 1.50020,000,000.00FHLMC NOTES36649 20,000,000.003134G8PD5 09/30/2019 1,2771.35003/30/2016 20,009,800.00 1.337 1.35519,996,003.17FHLMC NOTES36650 3,715,000.003134G8PD5 09/30/2019 1,2771.35003/30/2016 3,716,820.35 1.337 1.3553,714,257.59FHLMC NOTES36651 6,375,000.003134G8PD5 09/30/2019 1,2771.35003/30/2016 6,378,123.75 1.331 1.3506,375,000.00FHLMC NOTES36654 12,500,000.003134G8PD5 09/30/2019 1,2771.35003/30/2016 12,506,125.00 1.335 1.35412,498,126.49FNMA NOTES34258 40,000,000.003135G0WY5 11/14/2016 2270.55005/14/2013 39,976,560.00 0.553 0.56139,997,162.50FNMA NOTES34358 50,000,000.003135G0XC2 08/22/2016 1430.50006/20/2013 50,001,350.00 0.713 0.72349,956,786.34

Portfolio SCL2AP


18

March 31, 2016


MaturityDate





YTM365


FNMA NOTES34398 50,000,000.003135G0VX8 09/26/2016 1780.62507/10/2013 50,032,850.00 0.946 0.96049,919,993.51FNMA NOTES34414 50,000,000.003135G0VX8 09/26/2016 1780.62507/17/2013 50,032,850.00 0.887 0.90049,934,243.66FNMA NOTES34464 10,500,000.003135G0XA6 05/21/2018 7801.03008/12/2013 10,500,021.00 1.578 1.60010,377,196.42FNMA NOTES35605 15,000,000.003135G0B77 01/30/2018 6692.00001/30/2015 15,166,260.00 1.175 1.19115,217,470.00FNMA NOTES35845 30,000,000.003136G2GD3 04/13/2018 7421.05004/13/2015 30,001,710.00 1.069 1.08329,979,666.67FNMA NOTES36003 7,500,000.003136G2JB4 08/27/2018 8781.20005/27/2015 7,510,042.50 1.183 1.2007,500,000.00FNMA NOTES36077 9,670,000.003136G2K71 05/25/2018 7841.25006/24/2015 9,680,936.77 1.213 1.2309,673,916.76FNMA NOTES36089 13,915,000.003136G2KD8 05/18/2018 7771.15006/26/2015 13,917,449.04 1.181 1.19713,901,172.47FNMA NOTES36093 5,300,000.003136G2KZ9 06/29/2018 8191.20006/29/2015 5,308,432.30 1.191 1.2085,299,008.70FNMA NOTES36227 1,000,000.003135G0E41 06/08/2018 7981.75009/16/2015 1,002,251.00 0.676 0.6851,006,178.99FNMA NOTES36305 25,000,000.003135G0F99 10/26/2018 9381.62510/26/2015 25,139,325.00 1.271 1.28925,210,908.56FNMA NOTES36321 13,000,000.003136G2PP6 10/29/2018 9411.07010/29/2015 13,003,965.00 1.057 1.07112,999,441.48FNMA NOTES36576 15,500,000.003136G2WX1 02/22/2019 1,0571.25002/22/2016 15,527,109.50 1.232 1.25015,500,000.00FNMA NOTES36594 9,000,000.003136G2ZW0 02/26/2019 1,0611.12502/26/2016 9,005,166.00 1.109 1.1259,000,000.00


US Treasury Notes

U.S. TREASURY NOTES34755 50,000,000.00912828VG2 06/15/2016 750.50012/18/2013 50,022,450.00 0.460 0.46650,003,380.41U.S. TREASURY NOTES34997 50,000,000.00912828VG2 06/15/2016 750.50004/09/2014 50,022,450.00 0.493 0.49950,000,000.00U.S. TREASURY NOTES35045 35,000,000.00912828VL1 07/15/2016 1050.62504/24/2014 35,027,335.00 0.532 0.54035,008,475.55U.S. TREASURY NOTES35886 25,000,000.00912828VK3 06/30/2018 8201.37504/20/2015 25,332,025.00 0.895 0.90725,258,006.64U.S. TREASURY NOTES35887 15,000,000.00912828VQ0 07/31/2018 8511.37504/20/2015 15,200,385.00 0.918 0.93115,152,336.91


Corporate Bonds

APPLE INC35970 3,000,000.00037833BB5 05/12/2017 4060.90005/13/2015 3,004,662.00 0.922 0.9342,998,845.52APPLE INC36580 5,000,000.00037833BN9 02/23/2018 6931.30002/23/2016 5,038,780.00 1.303 1.3214,997,963.47BERKSHIRE HATHWY34456 10,000,000.00084664BX8 08/15/2016 1360.95008/15/2013 10,010,220.00 0.954 0.9679,999,342.41BERKSHIRE HATHWY36620 5,000,000.00084664CG4 03/15/2019 1,0781.70003/15/2016 5,069,385.00 1.702 1.7264,996,256.30CHEVRON CORP.34349 5,000,000.00166764AC4 06/24/2016 840.88906/24/2013 5,002,120.00 0.876 0.8895,000,000.00CHEVRON CORP.35280 10,000,000.00166764AA8 12/05/2017 6131.10408/19/2014 9,982,680.00 1.202 1.2199,981,105.90CHEVRON CORP.35427 30,000,000.00166764AL4 11/15/2017 5931.34511/18/2014 30,180,720.00 1.326 1.34530,000,000.00

Portfolio SCL2AP


19

March 31, 2016


MaturityDate





YTM365

Corporate Bonds

CHEVRON CORP.35694 10,000,000.00166764AV2 03/02/2018 7001.36503/03/2015 10,035,610.00 1.346 1.36510,000,000.00CHEVRON CORP.36355 10,000,000.00166764BC3 11/09/2017 5871.34411/17/2015 10,057,030.00 1.340 1.35910,000,000.00IBM35633 10,000,000.00459200HZ7 02/06/2018 6761.12502/06/2015 10,018,050.00 1.212 1.2289,981,219.91IBM35644 10,000,000.00459200HK0 02/08/2018 6781.25002/13/2015 10,050,150.00 1.286 1.3049,990,196.65JOHNSON & JOHNSON34700 30,000,000.00478160BF0 11/28/2016 2410.70012/05/2013 29,998,080.00 0.730 0.74129,991,982.20JOHNSON & JOHNSON35435 30,000,000.00478160BL7 11/21/2017 5991.12511/21/2014 30,169,980.00 1.136 1.15129,987,052.78MICROSOFT CORP36329 20,000,000.00594918BF0 11/03/2018 9461.30011/03/2015 20,194,480.00 1.315 1.33419,982,740.74WALMART35034 10,000,000.00931142DN0 04/21/2017 3851.00004/22/2014 10,032,730.00 0.991 1.0059,999,471.73WALMART35269 9,000,000.00931142DN0 04/21/2017 3851.00008/13/2014 9,029,457.00 0.917 0.9309,006,536.16WALMART34176 2,000,000.00931142DE0 04/11/2016 100.60004/11/2013 2,000,040.00 0.615 0.6231,999,986.85WALMART34931 8,000,000.00931142DE0 04/11/2016 100.60003/18/2014 8,000,160.00 0.464 0.4708,000,285.33EXXON MOBIL CORP34942 10,000,000.0030231GAA0 03/15/2017 3480.92103/20/2014 10,015,670.00 0.908 0.92110,000,000.00EXXON MOBIL CORP35710 50,000,000.0030231GAL6 03/06/2018 7041.30503/06/2015 50,224,550.00 1.287 1.30550,000,000.00


Asset Backed Securities (ABS)

BMW VEHICLE LEASE TRUST35060 0.0009657YAD4 06/20/2016 800.66004/29/2014 0.00 0.465 0.4710.00BMW VEHICLE LEASE TRUST36274 30,000,000.0005581QAD0 02/20/2019 1,0551.40010/14/2015 30,036,345.00 1.342 1.36129,999,487.00BMW VEHICLE LEASE TRUST36569 13,000,000.0005581RAD8 06/20/2018 8101.34002/17/2016 12,982,452.60 1.440 1.46012,998,472.50BMW VEHICLE OWNER TRUST35376 262,255.3909658UAB5 04/25/2017 3890.53010/15/2014 262,160.74 0.526 0.534262,246.53CHASE ISSUANCE TRUST (ABS)34436 0.00161571FJ8 06/15/2017 4400.79007/29/2013 0.00 0.622 0.6310.00CHASE ISSUANCE TRUST (ABS)35420 0.00161571FJ8 06/15/2017 4400.79011/13/2014 0.00 0.419 0.4250.00CHASE ISSUANCE TRUST (ABS)35953 25,000,000.00161571GY4 04/15/2020 1,4751.36005/06/2015 25,068,725.00 1.352 1.37124,995,595.00HONDA AUTO RECEIVABLES OWNER T35457 1,492,399.0843814JAB0 01/17/2017 2910.58011/26/2014 1,492,001.65 0.572 0.5801,492,394.75HONDA AUTO RECEIVABLES OWNER T35986 7,000,000.0043813NAC0 02/21/2019 1,0561.04005/20/2015 6,990,386.90 1.036 1.0506,998,925.50HONDA AUTO RECEIVABLES OWNER T36587 14,000,000.0043814NAC9 12/18/2019 1,3561.57002/25/2016 13,989,262.00 1.560 1.58213,998,010.60JOHN DEERE OWNER TRUST35311 1,477,387.71477877AB0 07/17/2017 4720.54009/03/2014 1,476,901.80 0.538 0.5461,477,263.46JOHN DEERE OWNER TRUST35725 9,145,178.7747787UAB9 02/15/2018 6850.87003/11/2015 9,141,527.10 0.863 0.8759,144,589.82JOHN DEERE OWNER TRUST35726 6,000,000.0047787UAD5 06/17/2019 1,1721.32003/11/2015 6,004,937.40 1.309 1.3275,999,523.00JOHN DEERE OWNER TRUST36216 5,750,000.0047787WAC3 10/15/2019 1,2921.44009/09/2015 5,752,153.38 1.552 1.5735,748,903.48JOHN DEERE OWNER TRUST36600 10,500,000.0047788MAC4 04/15/2020 1,4751.36003/02/2016 10,490,883.90 1.352 1.37110,498,347.30MERCEDES-BENZ AUTO LEASE TRUST36623 23,000,000.0058768FAD8 03/15/2019 1,0781.52003/16/2016 23,027,275.70 1.475 1.49522,996,660.40

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Asset Backed Securities (ABS)

NISSAN AUTO LEASE TRUST36078 2,454,763.8165473DAB8 11/15/2017 5930.99006/24/2015 2,454,441.50 0.985 0.9992,454,538.46NISSAN AUTO LEASE TRUST36557 6,000,000.0065478UAD1 10/15/2020 1,6581.34002/10/2016 6,006,205.20 1.334 1.3535,998,636.80TOYOTA AUTO REC OWNER TRUST34933 5,169,246.2889231MAC9 12/15/2017 6230.67003/19/2014 5,162,428.56 0.671 0.6805,168,291.00TOYOTA AUTO REC OWNER TRUST35375 303,929.0589190AAB6 02/15/2017 3200.51010/15/2014 303,874.19 0.508 0.515303,910.48TOYOTA AUTO REC OWNER TRUST35701 5,130,281.5189236WAB4 07/17/2017 4720.71003/04/2015 5,128,031.37 0.702 0.7115,130,232.77TOYOTA AUTO REC OWNER TRUST36060 8,428,742.9589237CAB7 11/15/2017 5930.77006/17/2015 8,424,096.18 0.766 0.7768,428,174.85TOYOTA AUTO REC OWNER TRUST36601 15,000,000.0089237KAD5 03/16/2020 1,4451.25003/02/2016 15,006,097.50 1.436 1.45614,999,149.50VOLKSWAGEN AUTO LOAN ENHANCED35064 8,946,048.0992867RAC3 10/22/2018 9340.91004/30/2014 8,902,616.82 0.908 0.9208,944,285.72VOLKSWAGEN AUTO LOAN ENHANCED35065 0.0092867RAB5 03/20/2017 3530.42004/30/2014 0.00 0.415 0.4210.00VOLKSWAGEN AUTO LOAN ENHANCED35706 6,830,436.1492867VAB6 06/20/2017 4450.98003/05/2015 6,816,126.38 0.885 0.8986,830,402.67

Subtotal and Average 204,868,041.59 204,890,668.78 204,918,930.87 1.251 1.269 1,087

Municipal Bonds

CALIFORNIA ST32542 19,250,000.0013063BFQ0 03/01/2017 3345.75004/23/2012 20,079,675.00 2.190 2.22119,837,097.47CALIFORNIA ST34625 12,500,000.0013063CFD7 11/01/2016 2141.25011/05/2013 12,546,250.00 1.075 1.09012,511,441.68CALIFORNIA ST34645 5,000,000.0013063CFD7 11/01/2016 2141.25011/12/2013 5,018,500.00 0.899 0.9125,009,694.57CALIFORNIA ST34650 10,000,000.0013063CFC9 11/01/2017 5791.75011/13/2013 10,155,400.00 1.488 1.50810,036,882.35CALIFORNIA ST34729 9,085,000.0013063CFC9 11/01/2017 5791.75012/11/2013 9,226,180.90 1.678 1.7019,091,621.02CALIFORNIA ST35444 15,000,000.0013063CPM6 11/01/2016 2140.75011/25/2014 15,017,700.00 0.645 0.65415,008,327.59CALIFORNIA ST35534 12,450,000.0013063CPN4 11/01/2017 5791.25012/22/2014 12,552,214.50 1.236 1.25312,449,379.31CALIFORNIA ST36313 10,220,000.0013063CSQ4 04/01/2020 1,4611.80010/27/2015 10,346,217.00 1.632 1.65510,276,872.95CALIFORNIA ST36390 5,000,000.0013063CXU9 11/01/2017 5791.00011/25/2015 5,027,000.00 0.989 1.0025,000,000.00UNIVERSITY CALIFORNIA REVS35763 250,000.0091412GWV3 05/15/2019 1,1392.00303/25/2015 255,647.50 1.975 2.002250,000.00


Commercial Paper, Discount Notes

TOYOTA MOTOR CREDIT36366 40,000,000.0089233GFM3 06/21/2016 8111/19/2015 39,942,550.38 0.650 0.65939,942,550.38TOYOTA MOTOR CREDIT36397 35,000,000.0089233GGU4 07/28/2016 1180.71011/30/2015 34,918,000.62 0.724 0.73434,918,000.62


Federal Agency, Discount Notes

FARMER MAC36360 35,000,000.0031315KP61 11/15/2016 2280.61011/18/2015 34,895,805.00 0.621 0.62934,865,446.64

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Federal Agency, Discount Notes

FFCB DISCOUNT NOTE36103 20,000,000.00313312XF2 05/24/2016 530.33506/30/2015 19,992,340.00 0.340 0.34519,990,097.03FFCB DISCOUNT NOTE36457 25,000,000.00313312G20 09/16/2016 1680.70012/16/2015 24,951,000.00 0.712 0.72224,918,937.45FFCB DISCOUNT NOTE36652 45,000,000.00313313BK3 02/03/2017 3080.64003/30/2016 44,799,795.00 0.651 0.66044,754,574.85FFCB DISCOUNT NOTE36656 45,000,000.00313313BA5 01/25/2017 2990.61003/31/2016 44,813,115.00 0.620 0.62944,772,960.11FHLB DISCOUNT36205 15,000,000.00313384YV5 07/01/2016 9108/31/2015 14,986,350.00 0.396 0.40114,985,156.61FHLB DISCOUNT36642 40,000,000.00313384F38 09/09/2016 1610.49003/29/2016 39,924,880.00 0.497 0.50439,913,067.41FHLMC DISCO36459 25,000,000.00313396WJ8 05/03/2016 320.50012/16/2015 24,994,225.00 0.507 0.51424,988,853.42FHLMC DISCOUNT36362 30,000,000.00313588WZ4 05/18/2016 4711/18/2015 29,989,830.00 0.365 0.37029,985,851.69FHLMC DISCOUNT36435 30,000,000.00313396WE9 04/29/2016 280.51012/11/2015 29,995,110.00 0.518 0.52529,988,126.68FHLMC DISCOUNT36493 40,000,000.00313396ZY2 07/28/2016 1180.50012/31/2015 39,952,800.00 0.508 0.51539,934,231.71FREDDIE MAC DISCOUNT NOTE36446 35,000,000.00313396VH3 04/08/2016 70.45012/15/2015 34,998,565.00 0.456 0.46334,996,945.09FARMER MAC DISCOUNT NOTE36450 10,000,000.0031315KH45 09/26/2016 1780.69012/15/2015 9,979,230.00 0.702 0.7129,966,135.16FARMER MAC DISCOUNT NOTE36460 10,000,000.0031315KH86 09/30/2016 1820.69012/16/2015 9,978,770.00 0.702 0.7129,965,374.28


Commercial Paper-Coupon

U S BANK36655 150,000,000.00SYS36655 04/01/2016 00.20003/31/2016 150,000,000.00 0.197 0.200150,000,000.00


Local Agency Investment Fund

LOCAL AGENCY INVEST FUND8506 40,069,267.07SYS8506 10.45007/01/2015 40,069,267.07 0.443 0.45040,069,267.07


Money Market

BLACKROCK36105 265,270,997.77SYS36105 10.45006/30/2015 265,270,997.77 0.443 0.450265,270,997.77DREYFUS CASH MANAGEMENT23519 270,197,679.38SYS23519 10.32002/01/2008 270,197,679.38 0.315 0.320270,197,679.38MORGAN STANLEY GOVT INSTL 830234291 105,050,131.48SYS34291 10.23005/21/2013 105,050,131.48 0.226 0.230105,050,131.48MORGAN STANLEY TRSY INSTL 830434292 102.75SYS34292 10.03005/21/2013 102.75 0.029 0.030102.75


Supranationals - Green Bond

INTL BANK RECON & DEVELOP36643 45,000,000.0045905UVR2 01/29/2019 1,0331.17003/29/2016 45,029,970.00 1.154 1.17045,000,000.00

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Subtotal and Average 45,000,000.00 45,000,000.00 45,029,970.00 1.154 1.170 1,033

Supranationals

INTL BANK RECON & DEVELOP35802 12,500,000.0045905URF3 07/17/2017 4720.90004/06/2015 12,539,612.50 0.769 0.78012,519,156.52INTL BANK RECON & DEVELOP35936 15,000,000.00459058EJ8 06/15/2018 8051.00004/30/2015 15,000,705.00 1.034 1.04814,981,896.80INTL BANK RECON & DEVELOP35937 10,000,000.00459058EJ8 06/15/2018 8051.00004/30/2015 10,000,470.00 1.041 1.0559,987,931.20INTL BANK RECON & DEVELOP36258 15,000,000.00459058ER0 10/05/2018 9171.00010/07/2015 15,047,580.00 1.043 1.05714,978,615.96INTL BANK RECON & DEVELOP36259 25,000,000.00459058ER0 10/05/2018 9171.00010/07/2015 25,079,300.00 1.043 1.05724,964,359.93INTL BANK RECON & DEVELOP36352 20,000,000.00459058DN0 04/10/2018 7391.37511/16/2015 20,209,660.00 1.149 1.16520,082,350.00INTL BANK RECON & DEVELOP36653 20,000,000.00459058FA6 03/30/2020 1,4591.37503/30/2016 20,071,780.00 1.380 1.39919,938,842.50


Total Investments and Average 6,040,114,554.55 6,035,866,847.23 6,051,172,362.33 0.821 0.832 427

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Fund WK - WORKERS COMPInvestments by Fund Page 13



YTM365


FHLMC NOTES34808 4,500,000.003137EADS5 10/14/2016 1960.87501/08/2014 4,510,903.50 0.739 0.7504,502,973.48FNMA NOTES34806 4,500,000.003135G0MZ3 08/28/2017 5140.87501/08/2014 4,510,138.50 1.170 1.1864,480,703.04FNMA NOTES34807 4,600,000.003135G0WJ8 05/21/2018 7800.87501/08/2014 4,605,653.40 1.527 1.5484,536,117.90


US Treasury Notes

U.S. TREASURY NOTES34790 4,500,000.00912828A59 12/15/2016 2580.62512/27/2013 4,502,286.00 0.784 0.7954,494,644.83U.S. TREASURY NOTES34791 4,500,000.00912828UE8 12/31/2017 6390.75012/27/2013 4,501,584.00 1.309 1.3274,455,837.03U.S. TREASURY NOTES34792 4,500,000.00912828A75 12/31/2018 1,0041.50012/31/2013 4,581,036.00 1.721 1.7454,471,004.76


Money Market

DREYFUS CASH MANAGEMENT34789 469,364.66SYS34789 10.04012/26/2013 469,364.66 0.039 0.040469,364.66

Subtotal and Average 469,364.66 469,364.66 469,364.66 0.039 0.040 1

Total Investments and Average 27,410,645.70 27,569,364.66 27,680,966.06 1.189 1.205 555

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YTM365

Municipal Bonds

SAN FRANCISCO CITY & CNTY CA32345 70,000.00797646QR0 06/15/2016 755.00003/08/2012 70,639.80 1.084 1.09970,620.96


Money Market - Tax Exempt

BLACKROCK TAX FREE INST33614 1,950,814.17SYS33614 10.02009/25/2012 1,950,814.17 0.019 0.0201,950,814.17



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Fund PA - PALO ALTO UNIFIEDInvestments by Fund Page 15



YTM365

Municipal Bonds

SAN FRANCISCO CITY & CNTY CA32346 135,000.00797646QR0 06/15/2016 755.00003/08/2012 136,233.90 0.611 0.620136,197.57



BLACKROCK TAX FREE INST33612 467,652.43SYS33612 10.02009/25/2012 467,652.43 0.019 0.020467,652.43


Total Investments and Average 603,850.00 602,652.43 603,886.33 0.153 0.155 17

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Fund PCF - PARK CHARTER FUNDInvestments by Fund Page 16



YTM365

US Treasury Notes

U.S. TREASURY NOTES33529 4,000,000.00912828SM3 03/31/2017 3641.00009/13/2012 4,014,688.00 0.603 0.6114,015,212.35


Money Market

DREYFUS CASH MANAGEMENT FUND33657 7,421,590.39SYS33657 10.04009/30/2012 7,421,590.39 0.039 0.0407,421,590.39



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YTM365

Municipal Bonds

ALASKA ST35082 200,000.00011770Z56 08/01/2019 1,2175.00005/08/2014 225,794.00 1.252 1.270223,982.16ALASKA ST35083 250,000.00011770Z56 08/01/2019 1,2175.00005/08/2014 282,242.50 1.252 1.270279,977.70ARKANSAS ST34919 500,000.00041042UD2 10/01/2017 5485.00003/10/2014 531,480.00 0.562 0.570532,842.62DELAWARE ST34859 750,000.00246381AZ0 07/01/2017 4565.00001/30/2014 790,665.00 0.552 0.560791,168.97DELAWARE ST34872 100,000.00246380B65 03/01/2018 6995.00002/07/2014 108,125.00 0.818 0.830107,842.62FLORIDA STATE BOARD EDUCATION34972 350,000.0034153P3H9 06/01/2019 1,1565.00004/01/2014 393,960.00 1.351 1.370388,709.44FLORIDA STATE BOARD EDUCATION35185 1,065,000.00341150M31 07/01/2020 1,5525.00006/27/2014 1,237,018.80 1.588 1.6101,210,686.68GEORGIA ST34845 500,000.00373384N28 12/01/2018 9745.00001/22/2014 554,785.00 1.055 1.070550,922.81GEORGIA ST34915 350,000.00373384YJ9 07/01/2019 1,1865.00003/10/2014 395,941.00 1.035 1.050393,585.71GEORGIA ST35212 485,000.00373384Q82 02/01/2017 3065.00007/10/2014 502,717.05 0.483 0.490503,090.34LOS ANGELES CALIF DEPT WTR & P34702 500,000.00544525RT7 07/01/2018 8215.00012/05/2013 547,790.00 0.946 0.960544,360.54LOS ANGELES CALIF DEPT WTR & P34703 500,000.00544525RS9 07/01/2017 4565.00012/05/2013 527,045.00 0.602 0.610527,097.98MASSACHUSETTS ST35081 530,000.0057582PK74 04/01/2019 1,0955.00005/08/2014 593,939.20 1.242 1.260587,486.75MARYLAND ST34837 500,000.00574193HF8 08/01/2017 4874.50001/22/2014 525,505.00 0.582 0.590525,758.87MARYLAND ST34869 205,000.005741925H9 03/01/2019 1,0645.00002/05/2014 229,425.75 1.114 1.130227,425.61MARYLAND ST34870 100,000.005741927Y0 03/15/2019 1,0785.00002/05/2014 112,073.00 1.114 1.130111,082.37MARYLAND ST35122 440,000.00574193JK5 03/01/2019 1,0645.00006/02/2014 492,426.00 1.095 1.110488,492.43MARYLAND ST35289 700,000.00574193KQ0 08/01/2018 8525.00008/21/2014 768,180.00 0.798 0.810767,218.34METROPOLITAN WATER DISTRICT33072 500,000.0059266THW4 07/01/2016 915.00006/28/2012 505,420.00 0.724 0.734505,340.34MINNESOTA ST34860 1,000,000.00604129P91 10/01/2018 9135.00001/30/2014 1,103,290.00 1.035 1.0501,096,114.22MINNESOTA ST35288 200,000.006041294D5 08/01/2020 1,5835.00008/21/2014 233,386.00 1.410 1.430229,558.36NORTH CAROLINA ST34874 785,000.00658256T77 05/01/2018 7605.00002/07/2014 853,640.40 0.877 0.890850,813.29NORTH CAROLINA ST34900 115,000.00658256B43 03/01/2019 1,0645.00003/03/2014 128,702.25 1.035 1.050127,874.18NORTH CAROLINA ST35131 365,000.00658256T93 05/01/2020 1,4915.00006/05/2014 423,432.85 1.400 1.420416,002.54NEW HAMPSHIRE ST34961 840,000.00644682F27 07/01/2018 8215.00003/27/2014 919,497.60 1.045 1.060912,612.96NEW YORK ST POWER AUTH35132 150,000.00649791BE9 03/01/2017 3343.00006/05/2014 153,328.50 0.523 0.530153,366.60OHIO ST34836 750,000.006775213U8 03/01/2018 6993.00001/22/2014 781,867.50 0.936 0.949778,831.64OHIO ST34841 250,000.006775213T1 03/01/2017 3342.00001/22/2014 253,132.50 0.592 0.600253,173.19OREGON ST32420 500,000.0068608UMS2 11/01/2016 2145.00004/04/2012 512,545.00 1.045 1.060511,187.89SAN FRANCISCO CITY & CNTY CA34839 100,000.0079771TJS7 06/15/2018 8055.00001/23/2014 109,278.00 0.976 0.990108,633.12SAN FRANCISCO CITY & CNTY CA34852 450,000.00797646XK7 06/15/2017 4405.00001/28/2014 473,526.00 0.564 0.572473,883.73SAN FRANCISCO CITY & CNTY CA34853 450,000.00797646XL5 06/15/2018 8055.00001/28/2014 491,958.00 0.925 0.938489,701.76

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Municipal Bonds

TEXAS STATE REFUNDING35100 170,000.00882722D99 10/01/2017 5485.00005/20/2014 180,861.30 0.631 0.640180,981.13VERMONT ST34946 100,000.00924258ZN9 08/15/2019 1,2315.00003/21/2014 113,635.00 1.262 1.280112,082.55WASHINGTON ST34840 250,000.0093974CJH4 01/01/2018 6405.00001/23/2014 268,455.00 0.858 0.870267,723.75WISCONSIN STATE34867 500,000.0097705L3U9 05/01/2017 3955.00002/04/2014 523,255.00 0.612 0.620523,450.13WISCONSIN STATE34880 250,000.0097705L4E4 05/01/2019 1,1255.00002/13/2014 280,987.50 1.198 1.214277,732.27WISCONSIN STATE34881 100,000.0097705L4E4 05/01/2019 1,1255.00002/13/2014 112,395.00 1.169 1.185111,191.61



BLACKROCK TAX FREE INST33615 2,770,090.02SYS33615 10.02009/25/2012 2,770,090.02 0.019 0.0202,770,090.02



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SANTA CLARA COUNTY INVESTMENTSTransaction Activity Report

January 1, 2016 - March 31, 2016Sorted by Transaction Date - Transaction Date

COMMINGLED POOL Fund

TotalCashInterest

PrincipalPaydowns

NewPrincipalFundInvestment # IssuerDealerTransactionTypeInv DescripCUSIP

35482 COMM 32,250.00 32,250.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3P3235483 COMM 21,500.00 21,500.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3P3235488 COMM 53,750.00 53,750.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3P32

Totals for 01/01/2016 107,500.00 107,500.00

35505 COMM 109,375.00 109,375.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3P40

Totals for 01/03/2016 109,375.00 109,375.00

36497 COMM 13,798,421.56 -13,798,421.56FHLMC NOTESDEUTSCHE BANKPurchaseFEDERAL HOME LN3134G76G136496 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3649636494 COMM 200,000,000.00 -200,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3649435475 COMM 10,000,000.00 10,000,000.00FFCB NOTESMIZUHORedemptionFEDERAL FARM CR3133EEEC035481 COMM 10,500,000.00 10,500,000.00FFCB NOTESMIZUHORedemptionFEDERAL FARM CR3133EEEC035496 COMM 50,000,000.00 50,000,000.00FHLB NOTESMIZUHORedemptionFEDERAL HOME3130A3PB435506 COMM 10,000,000.00 10,000,000.00FHLB NOTESMIZUHORedemptionFEDERAL HOME3130A3PB435530 COMM 25,000,000.00 25,000,000.00FHLB NOTESMIZUHORedemptionFEDERAL HOME3130A3PB436403 COMM 35,000,000.00 35,000,000.00FHLB NOTESDEUTSCHE BANKRedemptionFHLB DISC NOTE313384RJ036491 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3649135475 COMM 11,000.00 11,000.00FFCB NOTESMIZUHOInterestFEDERAL FARM CR3133EEEC035481 COMM 11,550.00 11,550.00FFCB NOTESMIZUHOInterestFEDERAL FARM CR3133EEEC035496 COMM 57,500.00 57,500.00FHLB NOTESMIZUHOInterestFEDERAL HOME3130A3PB435506 COMM 11,500.00 11,500.00FHLB NOTESMIZUHOInterestFEDERAL HOME3130A3PB435530 COMM 28,750.00 28,750.00FHLB NOTESMIZUHOInterestFEDERAL HOME3130A3PB436491 COMM 3,333.30 3,333.30U S BANKU S BANKInterestUSB 0.2% MATSYS36491

Totals for 01/04/2016 363,798,421.56 290,500,000.00 123,633.30 -73,174,788.26

36498 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3649836494 COMM 200,000,000.00 200,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3649436496 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3649634271 COMM 37,500.00 37,500.00FNMA NOTESJPMorganChaseInterestFNMA 0.375% MAT3135G0XP334664 COMM 28,125.00 28,125.00FNMA NOTESPIPER JAFFRAY &InterestFNMA 0.375% MAT3135G0XP334692 COMM 46,875.00 46,875.00FNMA NOTESBARCLAYS CAPITALInterestFNMA 0.375% MAT3135G0XP334720 COMM 56,250.00 56,250.00FNMA NOTESBNP PARIBASInterestFNMA 0.375% MAT3135G0XP334739 COMM 46,875.00 46,875.00FNMA NOTESDEUTSCHE BANKInterestFNMA 0.375% MAT3135G0XP334750 COMM 65,625.00 65,625.00FNMA NOTESUBS FINANCEInterestFNMA 0.375% MAT3135G0XP336494 COMM 1,611.11 1,611.11U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS36494

Portfolio SCL2AP

Run Date: 05/09/2016 - 14:00 TA (PRF_TA) 7.1.1Report Ver. 7.3.5

30

Sorted by Transaction Date - Transaction DatePage 2Transaction Activity Report


TotalCashInterest

PrincipalPaydowns


36496 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3649634291 COMM 22,565.15 22,565.15MORGAN STANLEYInterestMSGI 0.%SYS3429134291 COMM 22,565.15 -22,565.15MORGAN STANLEYPurchaseMSGI 0.%SYS3429136105 COMM 44,055.28 44,055.28BLACKROCKInterestBLACKR 0.04%SYS3610536105 COMM 44,055.28 -44,055.28BLACKROCKPurchaseBLACKR 0.04%SYS36105

Totals for 01/05/2016 150,066,620.43 350,000,000.00 350,314.88 200,283,694.45

36500 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3650036499 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3649936406 COMM 35,000,000.00 35,000,000.00FHLB NOTESDEUTSCHE BANKRedemptionFHLB DISC NOTE313384RL536498 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3649835803 COMM 125,000.00 125,000.00FHLB NOTESWELLS FARGOInterestFHLB 1.% MAT3130A4WA635855 COMM 60,000.00 60,000.00FHLB NOTESWELLS FARGOInterestFHLB 1.% MAT3130A4WA635952 COMM 50,000.00 50,000.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A57J236498 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36498

Totals for 01/06/2016 450,000,000.00 185,000,000.00 235,833.34 -264,764,166.66

36502 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3650236501 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3650136427 COMM 10,002,000.00 10,002,000.00FHLMC DISCOUNTUBS FINANCERedemptionFMCDN DISC NOTE313396RM736499 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3649936500 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3650036499 COMM 2,416.67 2,416.67U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3649936500 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36500

Totals for 01/07/2016 450,000,000.00 460,002,000.00 3,250.01 10,005,250.01

36505 COMM 24,984,500.00 -24,984,500.00FNMA NOTESDEUTSCHE BANKPurchaseFEDERAL NATL MTG3135G0H6336504 COMM 75,000,000.00 -75,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3650436503 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3650336501 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3650136502 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3650234291 COMM 50,000,000.00 50,000,000.00MORGAN STANLEYRedemptionMSGI 0.%SYS3429135815 COMM 87,500.00 87,500.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A4WB436501 COMM 2,416.67 2,416.67U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3650136502 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36502

Totals for 01/08/2016 399,984,500.00 500,000,000.00 90,750.01 100,106,250.01

36508 COMM 20,554,400.00 -20,554,400.00FHLB NOTESBREAN CAPITAL LLCPurchaseFEDERAL HOME313375K4836507 COMM 50,000,000.00 -50,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3650736506 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3650636503 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3650336504 COMM 75,000,000.00 75,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS36504

Portfolio SCL2AP


31



TotalCashInterest

PrincipalPaydowns


36503 COMM 7,249.97 7,249.97U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3650336504 COMM 1,250.00 1,250.00U S BANKU S BANKInterestUSB 0.2% MATSYS36504

Totals for 01/11/2016 370,554,400.00 375,000,000.00 8,499.97 4,454,099.97

36511 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3651136510 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.27% MATSYS3651036430 COMM 30,000,000.00 30,000,000.00FHLB DISCODEUTSCHE BANKRedemptionFHLBD DISC NOTE313384RS036434 COMM 25,000,000.00 25,000,000.00FHLB DISCODEUTSCHE BANKRedemptionFHLBD DISC NOTE313384RS036506 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3650636507 COMM 50,000,000.00 50,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3650735207 COMM 37,500.00 37,500.00FHLMC NOTESKEYBANC CAPITALInterestFEDERAL HOME LN3137EADN635643 COMM 5,280.42 5,280.42ROYAL BANK OF RBC CAPITALInterestRBC 0.2917% MAT78009NTJ535760 COMM 37,500.00 37,500.00FHLMC NOTESMORGAN STANLEYInterestFEDERAL HOME LN3137EADN635761 COMM 37,500.00 37,500.00FHLMC NOTESUBS FINANCEInterestFEDERAL HOME LN3137EADN635785 COMM 18,750.00 18,750.00FHLMC NOTESMIZUHOInterestFEDERAL HOME LN3137EADN636506 COMM 2,416.64 2,416.64U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3650636507 COMM 277.78 277.78U S BANKU S BANKInterestUSB 0.2% MATSYS36507

Totals for 01/12/2016 400,000,000.00 405,000,000.00 139,224.84 5,139,224.84

36513 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3651336512 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS3651236510 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.27% MATSYS3651036511 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3651136510 COMM 2,250.01 2,250.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.27% MATSYS3651036511 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36511

Totals for 01/13/2016 400,000,000.00 400,000,000.00 2,805.57 2,805.57

36515 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3651536514 COMM 400,000,000.00 -400,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS3651436512 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3651236513 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3651334291 COMM 175,000,000.00 175,000,000.00MORGAN STANLEYRedemptionMSGI 0.%SYS3429136512 COMM 2,333.35 2,333.35U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3651236513 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36513

Totals for 01/14/2016 550,000,000.00 575,000,000.00 2,888.91 25,002,888.91

36517 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3651736516 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS3651636431 COMM 25,000,000.00 25,000,000.00FHLB DISCOUNTLOOP CAPITALRedemptionFHDN DISC NOTE313384RV336514 COMM 400,000,000.00 400,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3651436515 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3651535045 COMM 109,375.00 109,375.00U.S. TREASURYMERRILL LYNCHInterestUNITED STATES912828VL1

Portfolio SCL2AP


32



TotalCashInterest

PrincipalPaydowns


36514 COMM 3,111.09 3,111.09U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3651436515 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3651534933 COMM 3,957.38 3,957.38TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.67% MAT89231MAC934933 COMM 604,637.90 604,637.90TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.67% MAT89231MAC935311 COMM 1,741.09 1,741.09JOHN DEERE RBC CAPITALInterestJDOT 0.54% MAT477877AB035311 COMM 684,505.15 684,505.15JOHN DEERE RBC CAPITALRedemptionJDOT 0.54% MAT477877AB035375 COMM 711.22 711.22TOYOTA AUTO RECMERRILL LYNCHInterestTAOT 0.51% MAT89190AAB635375 COMM 458,354.84 458,354.84TOYOTA AUTO RECMERRILL LYNCHRedemptionTAOT 0.51% MAT89190AAB635457 COMM 2,316.12 2,316.12HONDA AUTOBNP PARIBASInterestHAROT 0.58% MAT43814JAB035457 COMM 1,158,586.08 1,158,586.08HONDA AUTOBNP PARIBASRedemptionHAROT 0.58% MAT43814JAB035701 COMM 4,654.35 4,654.35TOYOTA AUTO RECJPMorganChaseInterestTAOT 0.71% MAT89236WAB435701 COMM 961,893.70 961,893.70TOYOTA AUTO RECJPMorganChaseRedemptionTAOT 0.71% MAT89236WAB435725 COMM 8,794.82 8,794.82JOHN DEERECITIGROUP GLOBALInterestJDOT 0.87% MAT47787UAB935725 COMM 984,917.09 984,917.09JOHN DEERECITIGROUP GLOBALRedemptionJDOT 0.87% MAT47787UAB935726 COMM 6,600.00 6,600.00JOHN DEERECITIGROUP GLOBALInterestJDOT 1.32% MAT47787UAD535726 COMM 139,445.54 139,445.54JOHN DEERECITIGROUP GLOBALRedemptionJDOT 1.32% MAT47787UAD535953 COMM 28,333.33 28,333.33CHASE ISSUANCEJPMorganChaseInterestCHAIT 1.36% MAT161571GY435953 COMM 481,353.62 481,353.62CHASE ISSUANCEJPMorganChaseRedemptionCHAIT 1.36% MAT161571GY436060 COMM 6,416.67 6,416.67TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.77% MAT89237CAB736060 COMM 407,002.67 407,002.67TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.77% MAT89237CAB736078 COMM 2,445.04 2,445.04NISSAN AUTOBARCLAYS CAPITALInterestNALT 0.99% MAT65473DAB836078 COMM 158,571.98 158,571.98NISSAN AUTOBARCLAYS CAPITALRedemptionNALT 0.99% MAT65473DAB836216 COMM 6,900.00 6,900.00JOHN DEEREROYAL BANK OFInterestJDOT 1.44% MAT47787WAC336216 COMM 120,216.26 120,216.26JOHN DEEREROYAL BANK OFRedemptionJDOT 1.44% MAT47787WAC3

Totals for 01/15/2016 500,000,000.00 581,159,484.83 186,189.45 81,345,674.28

35802 COMM 56,250.00 56,250.00INTL BANK RECON &WELLS FARGOInterestIBRD 0.9% MAT45905URF3

Totals for 01/16/2016 56,250.00 56,250.00

35497 COMM 75,000.00 75,000.00FFCB NOTESKEYBANC CAPITALInterestFEDERAL FARM CR3133EDQM7

Totals for 01/17/2016 75,000.00 75,000.00

36519 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3651936518 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS3651836516 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3651636517 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3651736516 COMM 10,888.89 10,888.89U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3651636517 COMM 3,333.33 3,333.33U S BANKU S BANKInterestUSB 0.2% MATSYS36517

Totals for 01/19/2016 500,000,000.00 500,000,000.00 14,222.22 14,222.22

36521 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3652136520 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS36520

Portfolio SCL2AP


33



TotalCashInterest

PrincipalPaydowns


36518 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3651836519 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3651936289 COMM 22,620.83 -22,620.83 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A5Z7736518 COMM 2,722.22 2,722.22U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3651836519 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3651935064 COMM 7,583.33 7,583.33VOLKSWAGENJPMorganChaseInterestVALET 0.91% MAT92867RAC335064 COMM 298,068.01 298,068.01VOLKSWAGENJPMorganChaseRedemptionVALET 0.91% MAT92867RAC335065 COMM 784.57 784.57VOLKSWAGENJPMorganChaseInterestVALET 0.42% MAT92867RAB535065 COMM 1,550,642.69 1,550,642.69VOLKSWAGENJPMorganChaseRedemptionVALET 0.42% MAT92867RAB535706 COMM 6,432.20 6,432.20VOLKSWAGENBARCLAYS CAPITALInterestVALET 0.98% MAT92867VAB635706 COMM 608,912.01 608,912.01VOLKSWAGENBARCLAYS CAPITALRedemptionVALET 0.98% MAT92867VAB636274 COMM 35,000.01 35,000.01BMW VEHICLECREDIT SUISSEInterestBMWLT 1.4% MAT05581QAD036274 COMM 767,206.89 767,206.89BMW VEHICLECREDIT SUISSERedemptionBMWLT 1.4% MAT05581QAD0

Totals for 01/20/2016 400,000,000.00 503,247,450.43 30,734.84 103,278,185.27

36523 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3652336522 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSB 0.28% MATSYS3652236423 COMM 6,000,000.00 6,000,000.00FHLMC DISCOUNTUBS FINANCERedemptionFMCDN DISC NOTE313396SB036520 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3652036521 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3652136347 COMM 81,250.00 81,250.00FNMA NOTESCITIGROUP GLOBALInterestFEDERAL NATL MTG3135G0A7836347 COMM 50,555.56 -50,555.56 0.00FNMA NOTESCITIGROUP GLOBALAccr IntFEDERAL NATL MTG3135G0A7836361 COMM 162,500.00 162,500.00FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3135G0A7836361 COMM 105,625.00 -105,625.00 0.00FNMA NOTESKEYBANC CAPITALAccr IntFEDERAL NATL MTG3135G0A7836383 COMM 81,250.00 81,250.00FNMA NOTESBARCLAYS CAPITALInterestFEDERAL NATL MTG3135G0A7836383 COMM 55,520.83 -55,520.83 0.00FNMA NOTESBARCLAYS CAPITALAccr IntFEDERAL NATL MTG3135G0A7836384 COMM 81,250.00 81,250.00FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3135G0A7836384 COMM 55,520.83 -55,520.83 0.00FNMA NOTESKEYBANC CAPITALAccr IntFEDERAL NATL MTG3135G0A7836520 COMM 2,333.34 2,333.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3652036521 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS3652135986 COMM 6,066.67 6,066.67HONDA AUTOJPMorganChaseInterestHAROT 1.04% MAT43813NAC035986 COMM 180,788.14 180,788.14HONDA AUTOJPMorganChaseRedemptionHAROT 1.04% MAT43813NAC0

Totals for 01/21/2016 450,000,000.00 406,448,010.36 147,983.35 -43,404,006.29

36525 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3652536524 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.3% MATSYS3652436522 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSB 0.28% MATSYS3652236523 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3652334291 COMM 30,040,000.00 30,040,000.00MORGAN STANLEYRedemptionMSGI 0.%SYS3429135627 COMM 11,254.70 11,254.70U S BANKBARCLAYS CAPITALInterestUSB 0.3767% MAT90331HMF736138 COMM 53,106.25 53,106.25FHLB NOTESINCAPITAL LLCInterestFEDERAL HOME3130A5SS9

Portfolio SCL2AP


34



TotalCashInterest

PrincipalPaydowns


36522 COMM 2,722.25 2,722.25U.S. TREASURYDEUTSCHE BANKInterestUSB 0.28% MATSYS3652236523 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36523

Totals for 01/22/2016 450,000,000.00 480,040,000.00 67,638.76 30,107,638.76

35877 COMM 42,682.50 42,682.50FFCB NOTESKEYBANC CAPITALInterestFEDERAL FARM CR3133EEUT5

Totals for 01/23/2016 42,682.50 42,682.50

36527 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3652736526 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3652636421 COMM 50,000,000.00 50,000,000.00FHLB NOTESUBS FINANCERedemptionFHLB DISC NOTE313384SF736524 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.3% MATSYS3652436525 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3652535942 COMM 50,000.00 50,000.00FHLMC NOTESWELLS FARGOInterestFEDERAL HOME LN3134G3ZH636524 COMM 7,499.99 7,499.99U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.3% MATSYS3652436525 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS3652535376 COMM 1,211.32 1,211.32BMW VEHICLE RBC CAPITALInterestBMWOT 0.53% MAT09658UAB535376 COMM 868,059.94 868,059.94BMW VEHICLE RBC CAPITALRedemptionBMWOT 0.53% MAT09658UAB5

Totals for 01/25/2016 450,000,000.00 500,868,059.94 61,211.32 50,929,271.26

36530 COMM 7,703,850.00 -7,703,850.00FHLB NOTESJEFFERIES & CO,PurchaseFEDERAL HOME3130A6ZD236529 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3652936528 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3652836417 COMM 50,000,000.00 50,000,000.00FHLB DISCOBREAN CAPITAL LLCRedemptionFHLBD DISC NOTE313384SG536418 COMM 50,000,000.00 50,000,000.00FHLB DISCOBREAN CAPITAL LLCRedemptionFHLBD DISC NOTE313384SG536526 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3652636527 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3652736526 COMM 2,819.46 2,819.46U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3652636527 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36527

Totals for 01/26/2016 457,703,850.00 550,000,000.00 3,375.02 92,299,525.02

36535 COMM 14,999,250.00 -14,999,250.00FARMER MACMIZUHOPurchaseFAMCA 0.75% MAT3132X0EW736532 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3653236531 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3653134291 COMM 150,000,000.00 -150,000,000.00MORGAN STANLEYPurchaseMSGI 0.%SYS3429135595 COMM 35,000,000.00 35,000,000.00FHLB NOTESJPMorganChaseRedemptionFNMAC 0.875% MAT3130A3UU635712 COMM 15,008,550.00 15,008,550.00FHLB NOTESJPMorganChaseRedemptionFNMAC 0.875% MAT3130A3UU635712 COMM -8,550.00 -8,550.00FHLB NOTESJPMorganChaseCap G/LFNMAC 0.875% MAT3130A3UU636147 COMM 5,746,550.00 5,746,550.00FHLMC NOTESJEFFERIES & CO,RedemptionFEDERAL HOME LN3134G7GW536147 COMM 3,450.00 3,450.00FHLMC NOTESJEFFERIES & CO,Cap G/LFEDERAL HOME LN3134G7GW536528 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3652836529 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3652935595 COMM 153,125.00 153,125.00FHLB NOTESJPMorganChaseInterestFNMAC 0.875% MAT3130A3UU6

Portfolio SCL2AP


35



TotalCashInterest

PrincipalPaydowns


35712 COMM 65,625.00 65,625.00FHLB NOTESJPMorganChaseInterestFNMAC 0.875% MAT3130A3UU636147 COMM 35,937.50 35,937.50FHLMC NOTESJEFFERIES & CO,InterestFEDERAL HOME LN3134G7GW536528 COMM 2,416.65 2,416.65U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3652836529 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36529

Totals for 01/27/2016 664,999,250.00 505,750,000.00 257,937.49 -158,991,312.51

36536 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3653636534 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3653436531 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3653136532 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3653235556 COMM 125,000.00 125,000.00FHLMC NOTESCITIGROUP GLOBALInterestFEDERAL HOME LN3137EADJ536151 COMM 100,000.00 100,000.00FHLB NOTESUBS FINANCEInterestFEDERAL HOME3130A5XK036505 COMM 19,097.25 19,097.25FNMA NOTESDEUTSCHE BANKInterestFEDERAL NATL MTG3135G0H6336531 COMM 2,819.41 2,819.41U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3653136532 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36532

Totals for 01/28/2016 500,000,000.00 500,000,000.00 247,750.00 247,750.00

36537 COMM 150,000,000.00 -150,000,000.00U S BANKDEUTSCHE BANKPurchaseUSB 0.2% MATSYS3653734291 COMM 75,000,000.00 -75,000,000.00MORGAN STANLEYPurchaseMSGI 0.%SYS3429135541 COMM 15,000,000.00 15,000,000.00FHLB NOTESPIPER JAFFRAY &RedemptionFEDERAL HOME3130A3P8135542 COMM 10,000,000.00 10,000,000.00FHLB NOTESPIPER JAFFRAY &RedemptionFEDERAL HOME3130A3P8135543 COMM 25,000,000.00 25,000,000.00FHLB NOTESPIPER JAFFRAY &RedemptionFEDERAL HOME3130A3P8135544 COMM 25,000,000.00 25,000,000.00FHLB NOTESPIPER JAFFRAY &RedemptionFEDERAL HOME3130A3P8136456 COMM 35,000,000.00 35,000,000.00FHLB DISCOUNTDEUTSCHE BANKRedemptionFHDN DISC NOTE313384SK636534 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3653436536 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3653635541 COMM 18,750.00 18,750.00FHLB NOTESPIPER JAFFRAY &InterestFEDERAL HOME3130A3P8135542 COMM 12,500.00 12,500.00FHLB NOTESPIPER JAFFRAY &InterestFEDERAL HOME3130A3P8135543 COMM 31,250.00 31,250.00FHLB NOTESPIPER JAFFRAY &InterestFEDERAL HOME3130A3P8135544 COMM 31,250.00 31,250.00FHLB NOTESPIPER JAFFRAY &InterestFEDERAL HOME3130A3P8136288 COMM 48,037.50 48,037.50FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A5Z7736288 COMM 23,129.17 -23,129.17 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A5Z7736289 COMM 48,037.50 48,037.50FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A5Z7736298 COMM 48,037.50 48,037.50FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A5Z7736298 COMM 23,637.50 -23,637.50 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A5Z7736308 COMM 96,075.00 96,075.00FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A5Z7736308 COMM 48,800.00 -48,800.00 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A5Z7736310 COMM 48,037.50 48,037.50FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A5Z7736310 COMM 24,400.00 -24,400.00 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A5Z7736534 COMM 3,013.92 3,013.92U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3653436536 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36536

Portfolio SCL2AP


36



TotalCashInterest

PrincipalPaydowns


Totals for 01/29/2016 225,000,000.00 610,119,966.67 265,855.59 385,385,822.26

34738 COMM 187,500.00 187,500.00FNMA NOTESBNP PARIBASInterestFEDERAL NATL MTG3135G0GY335605 COMM 150,000.00 150,000.00FNMA NOTESBARCLAYS CAPITALInterestFNMA 2.% MAT3135G0B7736088 COMM 64,487.50 64,487.50FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3136FTZZ536156 COMM 169,300.00 169,300.00ROYAL BANK OFROYAL BANK OFInterestRBC 1.693% MAT78009NVR436309 COMM 12,500.00 12,500.00FHLMC NOTESINCAPITAL LLCInterestFEDERAL HOME LN3134G34W736309 COMM 5,972.22 -5,972.22 0.00FHLMC NOTESINCAPITAL LLCAccr IntFEDERAL HOME LN3134G34W7

Totals for 01/30/2016 5,972.22 577,815.28 583,787.50

8506 COMM 69,267.07 -69,267.07LOCAL AGENCYPurchaseLAIF 1.65%SYS850635887 COMM 103,125.00 103,125.00U.S. TREASURYCANTORInterestUNITED STATES912828VQ08506 COMM 69,267.07 69,267.07LOCAL AGENCYInterestLAIF 1.65%SYS8506

Totals for 01/31/2016 69,267.07 172,392.07 103,125.00

36539 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3653936538 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3653836537 COMM 150,000,000.00 150,000,000.00U S BANKDEUTSCHE BANKRedemptionUSB 0.2% MATSYS3653734291 COMM 20,000,000.00 20,000,000.00MORGAN STANLEYRedemptionMSGI 0.%SYS3429136537 COMM 2,500.05 2,500.05U S BANKDEUTSCHE BANKInterestUSB 0.2% MATSYS36537

Totals for 02/01/2016 400,000,000.00 170,000,000.00 2,500.05 -229,997,499.95

36542 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3654236541 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3654136538 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3653836539 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3653936538 COMM 2,583.33 2,583.33U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3653836539 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS3653934291 COMM 21,522.85 21,522.85MORGAN STANLEYInterestMSGI 0.%SYS3429134291 COMM 21,522.85 -21,522.85MORGAN STANLEYPurchaseMSGI 0.%SYS3429136105 COMM 87,539.73 87,539.73BLACKROCKInterestBLACKR 0.04%SYS3610536105 COMM 87,539.73 -87,539.73BLACKROCKPurchaseBLACKR 0.04%SYS36105

Totals for 02/02/2016 400,109,062.58 400,000,000.00 112,201.47 3,138.89


Totals for 02/03/2016 400,000,000.00 400,000,000.00 3,138.90 3,138.90

36546 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS36546

Portfolio SCL2AP


37



TotalCashInterest

PrincipalPaydowns


36545 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3654536543 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3654336544 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3654436543 COMM 2,583.36 2,583.36U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3654336544 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36544

Totals for 02/04/2016 400,000,000.00 400,000,000.00 3,138.92 3,138.92

36549 COMM 24,995,513.89 -24,995,513.89EXXONWELLS FARGOPurchaseEX DISC NOTE MAT30229ABQ136550 COMM 15,284,731.25 -15,284,731.25FHLB NOTESDEUTSCHE BANKPurchaseFEDERAL HOME313379EE536548 COMM 75,000,000.00 -75,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3654836547 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3654736545 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3654536546 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3654634291 COMM 100,000,000.00 100,000,000.00MORGAN STANLEYRedemptionMSGI 0.%SYS3429136545 COMM 2,749.99 2,749.99U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3654536546 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36546

Totals for 02/05/2016 265,280,245.14 500,000,000.00 3,305.55 234,723,060.41

35633 COMM 56,250.00 56,250.00IBMCITIGROUP GLOBALInterestIBM 1.125% MAT459200HZ7

Totals for 02/06/2016 56,250.00 56,250.00

35958 COMM 78,750.00 78,750.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A57G8

Totals for 02/07/2016 78,750.00 78,750.00

36552 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3655236551 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3655136426 COMM 40,000,000.00 40,000,000.00BANK OF NOVAUBS FINANCERedemptionBNSHOU 0.4% MAT06417GCG136547 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3654736548 COMM 75,000,000.00 75,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3654835644 COMM 62,500.00 62,500.00IBMJEFFERIES & CO,InterestINTERNATIONAL459200HK036426 COMM 27,111.11 27,111.11BANK OF NOVAUBS FINANCEInterestBNSHOU 0.4% MAT06417GCG136547 COMM 4,000.01 4,000.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3654736548 COMM 1,250.03 1,250.03U S BANKU S BANKInterestUSB 0.2% MATSYS36548

Totals for 02/08/2016 400,000,000.00 265,000,000.00 94,861.15 -134,905,138.85


Totals for 02/09/2016 400,000,000.00 400,000,000.00 3,222.24 3,222.24

Portfolio SCL2AP


38



TotalCashInterest

PrincipalPaydowns


36557 COMM 5,998,636.80 -5,998,636.80NISSAN AUTOMERRILL LYNCHPurchaseNALT 1.34% MAT65478UAD136556 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3655636555 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3655536553 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3655336554 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3655436117 COMM 54,375.00 54,375.00FHLB NOTESINCAPITAL LLCInterestFEDERAL HOME3130A3XL336553 COMM 2,666.64 2,666.64U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3655336554 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36554

Totals for 02/10/2016 305,998,636.80 400,000,000.00 57,597.20 94,058,960.40


Totals for 02/11/2016 300,000,000.00 300,000,000.00 2,166.68 2,166.68

36563 COMM 1,000,735.14 -1,000,735.14FHLMC NOTESKEYBANC CAPITALPurchaseFEDERAL HOME LN3134G7CU336564 COMM 7,977,959.21 -7,977,959.21FNMA NOTESKEYBANC CAPITALPurchaseFEDERAL NATL MTG3135G0GY336562 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3656236561 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3656135643 COMM 15,000,000.00 15,000,000.00ROYAL BANK OF RBC CAPITALRedemptionRBC 0.2917% MAT78009NTJ536559 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3655936560 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3656036559 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3655936560 COMM 1,375.00 1,375.00U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS36560

Totals for 02/12/2016 308,978,694.35 315,000,000.00 2,208.34 6,023,513.99

32308 COMM 375,000.00 375,000.00FNMA NOTESMORGAN STANLEYInterestFNMA 5.% MAT31359M4D235645 COMM 67,500.00 67,500.00FNMA NOTESBNP PARIBASInterestFEDERAL NATL MTG3135G0C27

Totals for 02/13/2016 442,500.00 442,500.00

34456 COMM 47,500.00 47,500.00BERKSHIREGOLDMAN, SACHS &InterestBRK 0.95% MAT084664BX835528 COMM 125,000.00 125,000.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3RW635531 COMM 80,750.00 80,750.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A3SZ835756 COMM 65,625.00 65,625.00FHLMC NOTESKEYBANC CAPITALInterestFEDERAL HOME LN3134G3B9035865 COMM 88,803.75 88,803.75FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A4YA434933 COMM 3,609.90 3,609.90TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.67% MAT89231MAC934933 COMM 551,489.98 551,489.98TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.67% MAT89231MAC935311 COMM 1,457.65 1,457.65JOHN DEERE RBC CAPITALInterestJDOT 0.54% MAT477877AB035311 COMM 977,138.60 977,138.60JOHN DEERE RBC CAPITALRedemptionJDOT 0.54% MAT477877AB0

Portfolio SCL2AP


39



TotalCashInterest

PrincipalPaydowns


35375 COMM 513.85 513.85TOYOTA AUTO RECMERRILL LYNCHInterestTAOT 0.51% MAT89190AAB635375 COMM 416,434.02 416,434.02TOYOTA AUTO RECMERRILL LYNCHRedemptionTAOT 0.51% MAT89190AAB635457 COMM 1,755.57 1,755.57HONDA AUTOBNP PARIBASInterestHAROT 0.58% MAT43814JAB035457 COMM 965,644.42 965,644.42HONDA AUTOBNP PARIBASRedemptionHAROT 0.58% MAT43814JAB035701 COMM 4,084.28 4,084.28TOYOTA AUTO RECJPMorganChaseInterestTAOT 0.71% MAT89236WAB435701 COMM 863,302.70 863,302.70TOYOTA AUTO RECJPMorganChaseRedemptionTAOT 0.71% MAT89236WAB435725 COMM 8,095.32 8,095.32JOHN DEERECITIGROUP GLOBALInterestJDOT 0.87% MAT47787UAB935725 COMM 1,211,679.81 1,211,679.81JOHN DEERECITIGROUP GLOBALRedemptionJDOT 0.87% MAT47787UAB935726 COMM 6,600.00 6,600.00JOHN DEERECITIGROUP GLOBALInterestJDOT 1.32% MAT47787UAD535726 COMM 140,061.90 140,061.90JOHN DEERECITIGROUP GLOBALRedemptionJDOT 1.32% MAT47787UAD535953 COMM 28,333.33 28,333.33CHASE ISSUANCEJPMorganChaseInterestCHAIT 1.36% MAT161571GY435953 COMM 484,529.63 484,529.63CHASE ISSUANCEJPMorganChaseRedemptionCHAIT 1.36% MAT161571GY436060 COMM 6,460.49 6,460.49TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.77% MAT89237CAB736060 COMM 650,133.45 650,133.45TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.77% MAT89237CAB736078 COMM 2,314.66 2,314.66NISSAN AUTOBARCLAYS CAPITALInterestNALT 0.99% MAT65473DAB836078 COMM 163,519.71 163,519.71NISSAN AUTOBARCLAYS CAPITALRedemptionNALT 0.99% MAT65473DAB836216 COMM 6,900.00 6,900.00JOHN DEEREROYAL BANK OFInterestJDOT 1.44% MAT47787WAC336216 COMM 121,083.97 121,083.97JOHN DEEREROYAL BANK OFRedemptionJDOT 1.44% MAT47787WAC3

Totals for 02/15/2016 6,545,018.19 477,803.80 7,022,821.99

36566 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3656636565 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3656535645 COMM 9,999,000.00 9,999,000.00FNMA NOTESBNP PARIBASRedemptionFEDERAL NATL MTG3135G0C2735645 COMM 1,000.00 1,000.00FNMA NOTESBNP PARIBASCap G/LFEDERAL NATL MTG3135G0C2736561 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3656136562 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3656236561 COMM 5,333.34 5,333.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3656136562 COMM 3,333.33 3,333.33U S BANKU S BANKInterestUSB 0.2% MATSYS36562

Totals for 02/16/2016 250,000,000.00 310,000,000.00 8,666.67 60,008,666.67

36569 COMM 12,998,472.50 -12,998,472.50BMW VEHICLEMERRILL LYNCHPurchaseBMWLT 1.34% MAT05581RAD836568 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3656836567 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3656736565 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3656536566 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3656636565 COMM 1,374.99 1,374.99U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3656536566 COMM 555.60 555.60U S BANKU S BANKInterestUSB 0.2% MATSYS36566

Totals for 02/17/2016 312,998,472.50 250,000,000.00 1,930.59 -62,996,541.91

36571 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3657136570 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3657036567 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS36567

Portfolio SCL2AP


40



TotalCashInterest

PrincipalPaydowns


36568 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3656836567 COMM 1,375.01 1,375.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3656736568 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36568

Totals for 02/18/2016 300,000,000.00 300,000,000.00 2,208.35 2,208.35

36573 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3657336572 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3657234848 COMM 10,000,000.00 10,000,000.00FHLB NOTESPIPER JAFFRAY &RedemptionFEDERAL HOME3130A0SD336570 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3657036571 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3657134848 COMM 18,750.00 18,750.00FHLB NOTESPIPER JAFFRAY &InterestFEDERAL HOME3130A0SD336570 COMM 1,333.32 1,333.32U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3657036571 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36571

Totals for 02/19/2016 300,000,000.00 310,000,000.00 20,916.66 10,020,916.66

35064 COMM 7,681.86 7,681.86VOLKSWAGENJPMorganChaseInterestVALET 0.91% MAT92867RAC335064 COMM 500,069.61 500,069.61VOLKSWAGENJPMorganChaseRedemptionVALET 0.91% MAT92867RAC335706 COMM 5,991.67 5,991.67VOLKSWAGENBARCLAYS CAPITALInterestVALET 0.98% MAT92867VAB635706 COMM 799,514.70 799,514.70VOLKSWAGENBARCLAYS CAPITALRedemptionVALET 0.98% MAT92867VAB636274 COMM 35,000.01 35,000.01BMW VEHICLECREDIT SUISSEInterestBMWLT 1.4% MAT05581QAD036274 COMM 771,971.75 771,971.75BMW VEHICLECREDIT SUISSERedemptionBMWLT 1.4% MAT05581QAD0

Totals for 02/20/2016 2,071,556.06 48,673.54 2,120,229.60

36576 COMM 15,500,000.00 -15,500,000.00FNMA NOTESINCAPITAL LLCPurchaseFEDERAL NATL MTG3136G2WX136575 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3657536574 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3657436572 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3657236573 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3657335507 COMM 65,625.00 65,625.00FHLMC NOTESJPMorganChaseInterestFHLMC 0.8753137EADT335643 COMM 7,024.08 7,024.08ROYAL BANK OF RBC CAPITALInterestRBC 0.2917% MAT78009NTJ536572 COMM 4,000.00 4,000.00U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3657236573 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS3657335065 COMM 225.15 225.15VOLKSWAGENJPMorganChaseInterestVALET 0.42% MAT92867RAB535065 COMM 612,085.80 612,085.80VOLKSWAGENJPMorganChaseRedemptionVALET 0.42% MAT92867RAB535986 COMM 6,066.67 6,066.67HONDA AUTOJPMorganChaseInterestHAROT 1.04% MAT43813NAC035986 COMM 181,528.60 181,528.60HONDA AUTOJPMorganChaseRedemptionHAROT 1.04% MAT43813NAC0

Totals for 02/22/2016 315,500,000.00 300,793,614.40 85,440.91 -14,620,944.69

36580 COMM 4,997,850.00 -4,997,850.00APPLE INCJPMorganChasePurchaseAPPLE INC, SR GLBL037833BN936578 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3657836577 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.3% MATSYS3657736368 COMM 40,000,000.00 40,000,000.00BANK OFBMO CAPITALRedemptionBMOCHI 0.32% MAT06427ELG4

Portfolio SCL2AP


41



TotalCashInterest

PrincipalPaydowns


36574 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3657436575 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3657535536 COMM 70,000.00 70,000.00FFCB NOTESUBS FINANCEInterestFEDERAL FARM CR3133EEFZ835537 COMM 105,000.00 105,000.00FFCB NOTESJEFFERIES & CO,InterestFEDERAL FARM CR3133EEFZ836368 COMM 34,133.33 34,133.33BANK OFBMO CAPITALInterestBMOCHI 0.32% MAT06427ELG436574 COMM 1,333.33 1,333.33U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3657436575 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36575

Totals for 02/23/2016 304,997,850.00 340,000,000.00 211,300.00 35,213,450.00

36584 COMM 14,986,700.00 -14,986,700.00FFCB NOTESINCAPITAL LLCPurchaseFEDERAL FARM CR3133EFZN036583 COMM 12,500,000.00 -12,500,000.00FHLMC NOTESINCAPITAL LLCPurchaseFEDERAL HOME LN3134G8JT736582 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3658236581 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3658136549 COMM 25,000,000.00 25,000,000.00EXXONWELLS FARGORedemptionEX DISC NOTE MAT30229ABQ136577 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.3% MATSYS3657736578 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3657836577 COMM 1,250.00 1,250.00U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.3% MATSYS3657736578 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36578

Totals for 02/24/2016 327,486,700.00 325,000,000.00 2,083.34 -2,484,616.66

36587 COMM 13,998,010.60 -13,998,010.60HONDA AUTOJPMorganChasePurchaseHAROT 1.57% MAT43814NAC936586 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3658636585 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3658535416 COMM 10,000,000.00 10,000,000.00FHLB NOTESRAYMOND JAMES &RedemptionFEDERAL HOME3130A3GV036581 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3658136582 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3658233721 COMM 200,000.00 200,000.00FHLMC NOTESGOLDMAN, SACHS &InterestFHLMC 2.% MAT3137EACW735416 COMM 14,500.00 14,500.00FHLB NOTESRAYMOND JAMES &InterestFEDERAL HOME3130A3GV036581 COMM 1,333.34 1,333.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3658136582 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3658235376 COMM 825.27 825.27BMW VEHICLE RBC CAPITALInterestBMWOT 0.53% MAT09658UAB535376 COMM 789,535.80 789,535.80BMW VEHICLE RBC CAPITALRedemptionBMWOT 0.53% MAT09658UAB5

Totals for 02/25/2016 313,998,010.60 310,789,535.80 217,491.95 -2,990,982.85

36590 COMM 5,000,000.00 -5,000,000.00FHLMC NOTESCITIGROUP GLOBALPurchaseFEDERAL HOME LN3134G8L9836591 COMM 5,000,000.00 -5,000,000.00FHLMC NOTESFTN FINANCIALPurchaseFEDERAL HOME LN3134G8L9836592 COMM 5,000,000.00 -5,000,000.00FHLMC NOTESDEUTSCHE BANKPurchaseFEDERAL HOME LN3134G8L9836593 COMM 5,000,000.00 -5,000,000.00FHLMC NOTESWELLS FARGOPurchaseFEDERAL HOME LN3134G8L9836594 COMM 9,000,000.00 -9,000,000.00FNMA NOTESINCAPITAL LLCPurchaseFEDERAL NATL MTG3136G2ZW036589 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3658936588 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.3% MATSYS3658835208 COMM 20,000,000.00 20,000,000.00FFCB NOTESMERRILL LYNCHRedemptionFEDERAL FARM CR3133EDMC3

Portfolio SCL2AP


42



TotalCashInterest

PrincipalPaydowns


36396 COMM 29,290,210.30 29,290,210.30FHLMC NOTESDEUTSCHE BANKRedemptionFEDERAL HOME LN3134G85H836396 COMM 8,789.70 8,789.70FHLMC NOTESDEUTSCHE BANKCap G/LFEDERAL HOME LN3134G85H836478 COMM 25,000,000.00 25,000,000.00FHLB DISCODEUTSCHE BANKRedemptionFHLBD DISC NOTE313384TP436585 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3658536586 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3658634555 COMM 78,125.00 78,125.00FNMA NOTESUBS FINANCEInterestFEDERAL NATL MTG3135G0YE734721 COMM 78,125.00 78,125.00FNMA NOTESMERRILL LYNCHInterestFEDERAL NATL MTG3135G0YE735208 COMM 25,000.00 25,000.00FFCB NOTESMERRILL LYNCHInterestFEDERAL FARM CR3133EDMC336396 COMM 97,988.88 97,988.88FHLMC NOTESDEUTSCHE BANKInterestFEDERAL HOME LN3134G85H836585 COMM 1,333.34 1,333.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3658536586 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36586

Totals for 02/26/2016 329,000,000.00 374,299,000.00 281,405.56 45,580,405.56

36003 COMM 45,000.00 45,000.00FNMA NOTESINCAPITAL LLCInterestFEDERAL NATL MTG3136G2JB4

Totals for 02/27/2016 45,000.00 45,000.00

35447 COMM 56,500.00 56,500.00FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3135G0VC435454 COMM 33,900.00 33,900.00FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3135G0VC435943 COMM 43,750.00 43,750.00FNMA NOTESBNP PARIBASInterestFEDERAL NATL MTG3135G0MZ336143 COMM 37,500.00 37,500.00FHLB NOTESBARCLAYS CAPITALInterestFHLB 0.75% MAT3130A62S536144 COMM 56,250.00 56,250.00FHLB NOTESDEUTSCHE BANKInterestFHLB 0.75% MAT3130A62S5

Totals for 02/28/2016 227,900.00 227,900.00

36595 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3659536482 COMM 23,327,000.00 23,327,000.00FHLB DISCOUNTDEUTSCHE BANKRedemptionFHLB DISC NOTE313384TS836588 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.3% MATSYS3658836589 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3658936393 COMM 12,500.00 12,500.00FHLMC NOTESINCAPITAL LLCInterestFEDERAL HOME LN3134G74S736588 COMM 3,750.01 3,750.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.3% MATSYS3658836589 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS36589

Totals for 02/29/2016 150,000,000.00 323,327,000.00 18,750.02 173,345,750.02

36597 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3659736596 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.3% MATSYS3659635404 COMM 10,000,000.00 10,000,000.00FHLB NOTESJEFFERIES & CO,RedemptionFEDERAL HOME3130A3FM135405 COMM 10,000,000.00 10,000,000.00FHLB NOTES RBC CAPITALRedemptionFEDERAL HOME3130A3FM136595 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3659532542 COMM 553,437.50 553,437.50CALIFORNIA STCITIGROUP GLOBALInterestCAS 5.75% MAT13063BFQ035404 COMM 15,000.00 15,000.00FHLB NOTESJEFFERIES & CO,InterestFEDERAL HOME3130A3FM135405 COMM 15,000.00 15,000.00FHLB NOTES RBC CAPITALInterestFEDERAL HOME3130A3FM136595 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36595

Totals for 03/01/2016 300,000,000.00 170,000,000.00 584,270.84 -129,415,729.16

Portfolio SCL2AP


43



TotalCashInterest

PrincipalPaydowns


36600 COMM 10,498,347.30 -10,498,347.30JOHN DEEREMERRILL LYNCHPurchaseJDOT 1.36% MAT47788MAC436601 COMM 14,999,149.50 -14,999,149.50TOYOTA AUTO RECMERRILL LYNCHPurchaseTAOT 1.25% MAT89237KAD536599 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3659936598 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.3% MATSYS3659836596 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.3% MATSYS3659636597 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3659735694 COMM 68,250.00 68,250.00CHEVRON CORP.BARCLAYS CAPITALInterestCHEVRON CORP166764AV236596 COMM 1,249.99 1,249.99U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.3% MATSYS3659636597 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3659734291 COMM 22,060.45 22,060.45MORGAN STANLEYInterestMSGI 0.%SYS3429134291 COMM 22,060.45 -22,060.45MORGAN STANLEYPurchaseMSGI 0.%SYS3429136105 COMM 95,982.55 95,982.55BLACKROCKInterestBLACKR 0.04%SYS3610536105 COMM 95,982.55 -95,982.55BLACKROCKPurchaseBLACKR 0.04%SYS36105

Totals for 03/02/2016 325,615,539.80 300,000,000.00 188,376.33 -25,427,163.47

36603 COMM 150,000,000.00 -150,000,000.00U S BANKDEUTSCHE BANKPurchaseUSB 0.2% MATSYS3660336602 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3660236598 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.3% MATSYS3659836599 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3659936598 COMM 1,249.99 1,249.99U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.3% MATSYS3659836599 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36599

Totals for 03/03/2016 300,000,000.00 300,000,000.00 2,083.33 2,083.33

36605 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3660536604 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3660436602 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3660236603 COMM 150,000,000.00 150,000,000.00U S BANKDEUTSCHE BANKRedemptionUSB 0.2% MATSYS3660336602 COMM 1,291.66 1,291.66U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3660236603 COMM 833.34 833.34U S BANKDEUTSCHE BANKInterestUSB 0.2% MATSYS36603

Totals for 03/04/2016 300,000,000.00 300,000,000.00 2,125.00 2,125.00

35710 COMM 326,250.00 326,250.00EXXON MOBILJPMorganChaseInterestEXXON MOBIL30231GAL635847 COMM 61,250.00 61,250.00FNMA NOTESBREAN CAPITAL LLCInterestFEDERAL NATL MTG3135G0UU535856 COMM 127,610.00 127,610.00FNMA NOTESBREAN CAPITAL LLCInterestFEDERAL NATL MTG3135G0UU5

Totals for 03/06/2016 515,110.00 515,110.00

36607 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3660736606 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3660636604 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3660436605 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3660536604 COMM 3,875.01 3,875.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3660436605 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS36605

Portfolio SCL2AP


44



TotalCashInterest

PrincipalPaydowns


Totals for 03/07/2016 300,000,000.00 300,000,000.00 6,375.02 6,375.02

36609 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3660936608 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3660836606 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3660636607 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3660735508 COMM 84,585.00 84,585.00FHLMC NOTESJPMorganChaseInterestFHLMC 1.% MAT3137EADC035546 COMM 84,250.00 84,250.00FHLMC NOTESJPMorganChaseInterestFHLMC 1.% MAT3137EADC035867 COMM 93,750.00 93,750.00FHLB NOTESUBS FINANCEInterestFEDERAL HOME313378QK036606 COMM 1,291.66 1,291.66U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3660636607 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36607

Totals for 03/08/2016 300,000,000.00 300,000,000.00 264,710.00 264,710.00

36611 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3661136610 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.31% MATSYS3661036608 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3660836609 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3660935879 COMM 37,500.00 37,500.00FHLB NOTESMIZUHOInterestFEDERAL HOME3130A4KD335922 COMM 68,750.00 68,750.00FHLB NOTESBREAN CAPITAL LLCInterestFEDERAL HOME313378A4336053 COMM 34,375.00 34,375.00FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME313378A4336059 COMM 34,375.00 34,375.00FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME313378A4336608 COMM 1,291.66 1,291.66U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3660836609 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36609

Totals for 03/09/2016 300,000,000.00 300,000,000.00 177,125.00 177,125.00

36613 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3661336612 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3661235548 COMM 30,000,000.00 30,000,000.00FHLB NOTESWELLS FARGORedemptionFEDERAL HOME3130A2Y7536610 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.31% MATSYS3661036611 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3661135516 COMM 109,375.00 109,375.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3133782N035517 COMM 153,125.00 153,125.00FHLB NOTESMERRILL LYNCHInterestFEDERAL HOME3133782N035548 COMM 60,000.00 60,000.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME3130A2Y7536610 COMM 1,291.66 1,291.66U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.31% MATSYS3661036611 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36611

Totals for 03/10/2016 300,000,000.00 330,000,000.00 324,625.00 30,324,625.00

36615 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3661536614 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3661435020 COMM 15,000,000.00 15,000,000.00FHLB NOTESDaiwa Capital MarketRedemptionFEDERAL HOME313375RN936148 COMM 15,032,550.00 15,032,550.00FHLMC NOTESUBS FINANCERedemptionFEDERAL HOME LN3134G6FY436148 COMM -32,550.00 -32,550.00FHLMC NOTESUBS FINANCECap G/LFEDERAL HOME LN3134G6FY4

Portfolio SCL2AP


45



TotalCashInterest

PrincipalPaydowns


36612 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3661236613 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3661335020 COMM 75,000.00 75,000.00FHLB NOTESDaiwa Capital MarketInterestFEDERAL HOME313375RN936148 COMM 56,250.00 56,250.00FHLMC NOTESUBS FINANCEInterestFEDERAL HOME LN3134G6FY436612 COMM 1,333.33 1,333.33U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3661236613 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36613

Totals for 03/11/2016 300,000,000.00 330,000,000.00 133,416.67 30,133,416.67

35826 COMM 94,600.00 94,600.00FHLB NOTESWELLS FARGOInterestFEDERAL HOME313383VN835827 COMM 251,550.00 251,550.00FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME313383VN8

Totals for 03/13/2016 346,150.00 346,150.00

36617 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3661736616 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.32% MATSYS3661636614 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3661436615 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3661536228 COMM 33,906.25 33,906.25FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A6AE736228 COMM 6,093.75 -6,093.75 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A6AE736440 COMM 55,000.00 55,000.00FFCB NOTESDaiwa Capital MarketInterestFEDERAL FARM CR3133EFSG336441 COMM 41,250.00 41,250.00FFCB NOTESWELLS FARGOInterestFEDERAL FARM CR3133EFSG336508 COMM 200,000.00 200,000.00FHLB NOTESBREAN CAPITAL LLCInterestFEDERAL HOME313375K4836508 COMM 130,000.00 -130,000.00 0.00FHLB NOTESBREAN CAPITAL LLCAccr IntFEDERAL HOME313375K4836614 COMM 4,000.01 4,000.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3661436615 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS36615

Totals for 03/14/2016 300,000,000.00 300,136,093.75 200,562.52 336,656.27

36620 COMM 4,996,200.00 -4,996,200.00BERKSHIREJPMorganChasePurchaseBERKSHIRE084664CG436619 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3661936618 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3661836616 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3661636617 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3661734942 COMM 46,050.00 46,050.00EXXON MOBILMORGAN STANLEYInterestXOM 0.921% MAT30231GAA036616 COMM 1,333.34 1,333.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3661636617 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3661734933 COMM 3,303.86 3,303.86TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.67% MAT89231MAC934933 COMM 561,983.32 561,983.32TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.67% MAT89231MAC935311 COMM 986.35 986.35JOHN DEERE RBC CAPITALInterestJDOT 0.54% MAT477877AB035311 COMM 601,933.73 601,933.73JOHN DEERE RBC CAPITALRedemptionJDOT 0.54% MAT477877AB035375 COMM 337.60 337.60TOYOTA AUTO RECMERRILL LYNCHInterestTAOT 0.51% MAT89190AAB635375 COMM 428,745.21 428,745.21TOYOTA AUTO RECMERRILL LYNCHRedemptionTAOT 0.51% MAT89190AAB635457 COMM 1,289.43 1,289.43HONDA AUTOBNP PARIBASInterestHAROT 0.58% MAT43814JAB035457 COMM 1,168,373.93 1,168,373.93HONDA AUTOBNP PARIBASRedemptionHAROT 0.58% MAT43814JAB0

Portfolio SCL2AP


46



TotalCashInterest

PrincipalPaydowns


35701 COMM 3,573.79 3,573.79TOYOTA AUTO RECJPMorganChaseInterestTAOT 0.71% MAT89236WAB435701 COMM 895,540.98 895,540.98TOYOTA AUTO RECJPMorganChaseRedemptionTAOT 0.71% MAT89236WAB435725 COMM 7,183.93 7,183.93JOHN DEERECITIGROUP GLOBALInterestJDOT 0.87% MAT47787UAB935725 COMM 701,329.63 701,329.63JOHN DEERECITIGROUP GLOBALRedemptionJDOT 0.87% MAT47787UAB935726 COMM 6,600.00 6,600.00JOHN DEERECITIGROUP GLOBALInterestJDOT 1.32% MAT47787UAD535726 COMM 140,609.33 140,609.33JOHN DEERECITIGROUP GLOBALRedemptionJDOT 1.32% MAT47787UAD535953 COMM 28,333.33 28,333.33CHASE ISSUANCEJPMorganChaseInterestCHAIT 1.36% MAT161571GY435953 COMM 487,468.45 487,468.45CHASE ISSUANCEJPMorganChaseRedemptionCHAIT 1.36% MAT161571GY436060 COMM 6,061.55 6,061.55TOYOTA AUTO RECCITIGROUP GLOBALInterestTAOT 0.77% MAT89237CAB736060 COMM 921,017.70 921,017.70TOYOTA AUTO RECCITIGROUP GLOBALRedemptionTAOT 0.77% MAT89237CAB736078 COMM 2,180.26 2,180.26NISSAN AUTOBARCLAYS CAPITALInterestNALT 0.99% MAT65473DAB836078 COMM 169,139.96 169,139.96NISSAN AUTOBARCLAYS CAPITALRedemptionNALT 0.99% MAT65473DAB836216 COMM 6,900.00 6,900.00JOHN DEEREROYAL BANK OFInterestJDOT 1.44% MAT47787WAC336216 COMM 121,892.42 121,892.42JOHN DEEREROYAL BANK OFRedemptionJDOT 1.44% MAT47787WAC336557 COMM 7,816.66 7,816.66NISSAN AUTOMERRILL LYNCHInterestNALT 1.34% MAT65478UAD136557 COMM 104,847.32 104,847.32NISSAN AUTOMERRILL LYNCHRedemptionNALT 1.34% MAT65478UAD1

Totals for 03/15/2016 304,996,200.00 306,302,881.98 122,783.44 1,429,465.42

36623 COMM 22,996,660.40 -22,996,660.40MERCEDES-BENZBARCLAYS CAPITALPurchaseMBALT 1.52% MAT58768FAD836622 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3662236621 COMM 150,000,000.00 -150,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3662136618 COMM 150,000,000.00 150,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3661836619 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3661936618 COMM 1,375.00 1,375.00U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3661836619 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36619

Totals for 03/16/2016 322,996,660.40 300,000,000.00 2,208.34 -22,994,452.06


Totals for 03/17/2016 450,000,000.00 300,000,000.00 2,208.34 -149,997,791.66

36627 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3662736626 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3662636041 COMM 10,098,500.00 10,098,500.00FHLB NOTESDEUTSCHE BANKRedemptionFEDERAL HOME3130A4HT236041 COMM -98,500.00 -98,500.00FHLB NOTESDEUTSCHE BANKCap G/LFEDERAL HOME3130A4HT236624 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.32% MATSYS3662436625 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3662535814 COMM 234,375.00 234,375.00FNMA NOTESBMO CAPITALInterestFEDERAL NATL MTG3135G0YM9

Portfolio SCL2AP


47



TotalCashInterest

PrincipalPaydowns


36041 COMM 87,500.00 87,500.00FHLB NOTESDEUTSCHE BANKInterestFEDERAL HOME3130A4HT236624 COMM 2,666.65 2,666.65U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.32% MATSYS3662436625 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3662536587 COMM 10,912.22 10,912.22HONDA AUTOJPMorganChaseInterestHAROT 1.57% MAT43814NAC936587 COMM 297,724.21 297,724.21HONDA AUTOJPMorganChaseRedemptionHAROT 1.57% MAT43814NAC9

Totals for 03/18/2016 450,000,000.00 460,297,724.21 336,287.21 10,634,011.42

36407 COMM 55,000.00 55,000.00FHLB NOTESKEYBANC CAPITALInterestFEDERAL HOME3130A4PA436407 COMM 22,611.11 -22,611.11 0.00FHLB NOTESKEYBANC CAPITALAccr IntFEDERAL HOME3130A4PA4

Totals for 03/19/2016 22,611.11 32,388.89 55,000.00

35750 COMM 81,825.00 81,825.00FNMA NOTESKEYBANC CAPITALInterestFEDERAL NATL MTG3135G0PP235064 COMM 7,313.14 7,313.14VOLKSWAGENJPMorganChaseInterestVALET 0.91% MAT92867RAC335064 COMM 553,674.67 553,674.67VOLKSWAGENJPMorganChaseRedemptionVALET 0.91% MAT92867RAC335706 COMM 5,411.18 5,411.18VOLKSWAGENBARCLAYS CAPITALInterestVALET 0.98% MAT92867VAB635706 COMM 629,009.10 629,009.10VOLKSWAGENBARCLAYS CAPITALRedemptionVALET 0.98% MAT92867VAB636274 COMM 35,000.01 35,000.01BMW VEHICLECREDIT SUISSEInterestBMWLT 1.4% MAT05581QAD036274 COMM 776,357.34 776,357.34BMW VEHICLECREDIT SUISSERedemptionBMWLT 1.4% MAT05581QAD0

Totals for 03/20/2016 1,959,041.11 129,549.33 2,088,590.44

36629 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3662936628 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS3662836626 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3662636627 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3662736626 COMM 7,249.98 7,249.98U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3662636627 COMM 2,500.01 2,500.01U S BANKU S BANKInterestUSB 0.2% MATSYS3662735986 COMM 6,066.67 6,066.67HONDA AUTOJPMorganChaseInterestHAROT 1.04% MAT43813NAC035986 COMM 182,179.50 182,179.50HONDA AUTOJPMorganChaseRedemptionHAROT 1.04% MAT43813NAC0

Totals for 03/21/2016 450,000,000.00 450,182,179.50 15,816.66 197,996.16

36631 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3663136630 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.25% MATSYS3663035627 COMM 10,004,900.00 10,004,900.00U S BANKBARCLAYS CAPITALRedemptionUSB 0.3767% MAT90331HMF735627 COMM -4,900.00 -4,900.00U S BANKBARCLAYS CAPITALCap G/LUSB 0.3767% MAT90331HMF736628 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3662836629 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3662935627 COMM 12,355.00 12,355.00U S BANKBARCLAYS CAPITALInterestUSB 0.3767% MAT90331HMF736628 COMM 2,333.33 2,333.33U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3662836629 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36629

Totals for 03/22/2016 450,000,000.00 460,000,000.00 15,521.67 10,015,521.67

36633 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MAT90349TSB436632 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.28% MATSYS36632

Portfolio SCL2AP


48



TotalCashInterest

PrincipalPaydowns


36630 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.25% MATSYS3663036631 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3663136630 COMM 2,083.34 2,083.34U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.25% MATSYS3663036631 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS3663136569 COMM 16,452.23 16,452.23BMW VEHICLEMERRILL LYNCHInterestBMWLT 1.34% MAT05581RAD836569 COMM 459,362.75 459,362.75BMW VEHICLEMERRILL LYNCHRedemptionBMWLT 1.34% MAT05581RAD8

Totals for 03/23/2016 450,000,000.00 450,459,362.75 19,368.91 478,731.66

36635 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MAT90349TSD036634 COMM 300,000,000.00 -300,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3663436632 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.28% MATSYS3663236633 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MAT90349TSB436632 COMM 2,333.36 2,333.36U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.28% MATSYS3663236633 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MAT90349TSB4

Totals for 03/24/2016 450,000,000.00 450,000,000.00 3,166.70 3,166.70

35678 COMM 50,000.00 50,000.00FFCB NOTESBNP PARIBASInterestFEDERAL FARM CR3133EEQX135683 COMM 75,000.00 75,000.00FFCB NOTESKEYBANC CAPITALInterestFEDERAL FARM CR3133EEQX135757 COMM 100,000.00 100,000.00FFCB NOTESBNP PARIBASInterestFEDERAL FARM CR3133EEQX135872 COMM 50,000.00 50,000.00FFCB NOTESDaiwa Capital MarketInterestFEDERAL FARM CR3133EEQX135376 COMM 475.41 475.41BMW VEHICLE RBC CAPITALInterestBMWOT 0.53% MAT09658UAB535376 COMM 756,252.80 756,252.80BMW VEHICLE RBC CAPITALRedemptionBMWOT 0.53% MAT09658UAB5

Totals for 03/25/2016 756,252.80 275,475.41 1,031,728.21

34398 COMM 156,250.00 156,250.00FNMA NOTESGOLDMAN, SACHS &InterestFEDERAL NATL MTG3135G0VX834414 COMM 156,250.00 156,250.00FNMA NOTESGOLDMAN, SACHS &InterestFEDERAL NATL MTG3135G0VX8

Totals for 03/26/2016 312,500.00 312,500.00

35755 COMM 100,000.00 100,000.00FHLMC NOTESMERRILL LYNCHInterestFEDERAL HOME LN3134G3M31

Totals for 03/27/2016 100,000.00 100,000.00

36637 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3663736636 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3663636634 COMM 300,000,000.00 300,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3663436635 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MAT90349TSD035892 COMM 20,500.00 20,500.00FFCB NOTESPIPER JAFFRAY &InterestFEDERAL FARM CR3133ECBX136634 COMM 11,000.01 11,000.01U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3663436635 COMM 3,333.33 3,333.33U S BANKU S BANKInterestUSB 0.2% MAT90349TSD0

Totals for 03/28/2016 500,000,000.00 450,000,000.00 34,833.34 -49,965,166.66

36642 COMM 39,910,711.11 -39,910,711.11FHLB DISCOUNTMIZUHOPurchaseFHDN DISC NOTE313384F3836641 COMM 19,990,000.00 -19,990,000.00FHLB NOTESINCAPITAL LLCPurchaseFEDERAL HOME3130A7HM036640 COMM 19,974,000.00 -19,974,000.00FHLMC NOTESBARCLAYS CAPITALPurchaseFEDERAL HOME LN3134G8NS4

Portfolio SCL2AP


49



TotalCashInterest

PrincipalPaydowns


36644 COMM 7,000,000.00 -7,000,000.00FHLMC NOTESINCAPITAL LLCPurchaseFHLMC 1.22% MAT3134G8TV136643 COMM 45,000,000.00 -45,000,000.00INTL BANK RECON &BMO CAPITALPurchaseIBRD 1.17% MAT45905UVR236639 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3663936638 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.33% MATSYS3663835783 COMM 7,499,250.00 7,499,250.00FHLB NOTESINCAPITAL LLCRedemptionFEDERAL HOME3130A4NZ135783 COMM 750.00 750.00FHLB NOTESINCAPITAL LLCCap G/LFEDERAL HOME3130A4NZ136636 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3663636637 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3663735783 COMM 60,000.00 60,000.00FHLB NOTESINCAPITAL LLCInterestFEDERAL HOME3130A4NZ136636 COMM 3,208.31 3,208.31U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3663636637 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36637

Totals for 03/29/2016 631,874,711.11 507,500,000.00 64,041.65 -124,310,669.46

36652 COMM 44,752,005.00 -44,752,005.00FFCB DISCOUNTMIZUHOPurchaseFCDN ZERO CPN313313BK336648 COMM 20,000,000.00 -20,000,000.00FHLMC NOTESINCAPITAL LLCPurchaseFEDERAL HOME LN3134G8S8336649 COMM 19,996,000.00 -19,996,000.00FHLMC NOTESINCAPITAL LLCPurchaseFEDERAL HOME LN3134G8PD536650 COMM 3,714,257.00 -3,714,257.00FHLMC NOTESINCAPITAL LLCPurchaseFEDERAL HOME LN3134G8PD536651 COMM 6,375,000.00 -6,375,000.00FHLMC NOTESINCAPITAL LLCPurchaseFEDERAL HOME LN3134G8PD536654 COMM 12,498,125.00 -12,498,125.00FHLMC NOTESSUNTRUSTPurchaseFEDERAL HOME LN3134G8PD536653 COMM 19,938,800.00 -19,938,800.00INTL BANK RECON &MERRILL LYNCHPurchaseIBRD 1.375% MAT459058FA636646 COMM 100,000,000.00 -100,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3664636645 COMM 350,000,000.00 -350,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3664536647 COMM 50,000,000.00 -50,000,000.00U.S. TREASURYDEUTSCHE BANKPurchaseUSTN 0.29% MATSYS3664735782 COMM 6,875,000.00 6,875,000.00FHLB NOTESINCAPITAL LLCRedemptionFEDERAL HOME3130A4MS836463 COMM 25,000,000.00 25,000,000.00FHLB DISCOUNTDEUTSCHE BANKRedemptionFHLB DISC NOTE313384UY336490 COMM 5,000,000.00 5,000,000.00FHLMC NOTESINCAPITAL LLCRedemptionFEDERAL HOME LN3134G8FC836638 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.33% MATSYS3663836639 COMM 150,000,000.00 150,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3663935782 COMM 34,375.00 34,375.00FHLB NOTESINCAPITAL LLCInterestFEDERAL HOME3130A4MS836490 COMM 26,250.00 26,250.00FHLMC NOTESINCAPITAL LLCInterestFEDERAL HOME LN3134G8FC836638 COMM 3,208.33 3,208.33U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.33% MATSYS3663836639 COMM 833.34 833.34U S BANKU S BANKInterestUSB 0.2% MATSYS36639

Totals for 03/30/2016 627,274,187.00 536,875,000.00 64,666.67 -90,334,520.33

36656 COMM 44,771,250.00 -44,771,250.00FFCB DISCOUNTMIZUHOPurchaseFCDN ZERO CPN313313BA536655 COMM 150,000,000.00 -150,000,000.00U S BANKU S BANKPurchaseUSB 0.2% MATSYS3665536645 COMM 350,000,000.00 350,000,000.00U.S. TREASURYDEUTSCHE BANKRedemptionUSTN 0.29% MATSYS3664536646 COMM 100,000,000.00 100,000,000.00U S BANKU S BANKRedemptionUSB 0.2% MATSYS3664636645 COMM 2,819.46 2,819.46U.S. TREASURYDEUTSCHE BANKInterestUSTN 0.29% MATSYS3664536646 COMM 555.56 555.56U S BANKU S BANKInterestUSB 0.2% MATSYS36646

Totals for 03/31/2016 194,771,250.00 450,000,000.00 3,375.02 255,232,125.02

Portfolio SCL2AP


50



TotalCashInterest

PrincipalPaydowns


Grand Total 22,924,052,529. 23,435,457,816. 10,171,646.90 521,576,933.67

Portfolio SCL2AP


51

E-1

APPENDIX E

PROPOSED FORM OF BOND COUNSEL OPINION FOR THE BONDS

Upon issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, Bond Counsel, proposes to render its final approving opinion with respect to the Bonds substantially in the following form:

[Closing Date]

California Community College Financing Authority 2017 “O” Street Sacramento, California 95811

Ladies and Gentlemen:

We have examined a record of proceedings relating to the issuance by the California Community College Financing Authority (the “Authority”) of $___________ aggregate principal amount of California Community College Financing Authority Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the “Bonds”). The Bonds are issued pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California and a Trust Indenture, dated as of August 1, 2016 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds are secured by Revenues of the Authority consisting of Lease Payments to be made by Gavilan Joint Community College District (the “District”) pursuant to a Lease/Purchase Agreement, dated as of August 1, 2016 (the “Lease”), by and between the Authority, as lessor, and the District, as lessee. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Lease, opinions of counsel to the Authority, the District and the Trustee, certificates of the Authority, the District, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies). We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in such documents.

Based on and subject to the foregoing and in reliance thereon, we are of the opinion that:

1. The Bonds have been duly authorized, executed and issued.

2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Authority. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Revenues and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established pursuant to the Indenture except

E-2

the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. The Indenture also creates a valid assignment to the Trustee, for the benefit of the holders from time to time of the Bonds, of the right, title and interest of the Authority in the Lease (to the extent more particularly described in the Indenture).

3. The Bonds are the valid and binding limited obligations of the Authority.

4. Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations.

5. Interest on the Bonds is exempt from State of California personal income tax.

6. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond Owner will increase the Bond Owner’s basis in the applicable Bond. Original issue discount that accrues to the Bond Owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations (as described above), and is exempt from State of California personal income tax.

The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than ourselves. Other than expressly stated herein, we express no opinion regarding tax consequences with respect to the Bonds.

The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the District and others and are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements.

It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur.

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In addition, we call attention to the fact that the rights and obligations under the Bonds, the Indenture, and the Lease may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relative to or affecting creditors’ rights, to the application of equitable principles to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against public agencies in the State of California. We express no opinion with respect to any indemnification or contribution provisions contained in the foregoing documents.

Respectfully submitted,


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APPENDIX F

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

The following is a summary of certain provisions of certain legal documents related to the Bonds which are not described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to the fully-executed Lease/Purchase Agreement, the Indenture, the Site Lease, and the Assignment Agreement for a full and complete statement of their respective provisions. All capitalized terms not defined in the Official Statement have the meanings set forth in the Lease/Purchase Agreement, the Indenture, the Site Lease or the Assignment Agreement.

DEFINITIONS

“Acquisition and Construction Costs” means the cost of constructing, acquiring, rehabilitating, remodeling, installing and improving the Project and the contract price paid or to be paid to the Contractors therefor upon acquisition, construction, rehabilitation, remodeling or installation of any portion of the Project and related equipment, in accordance with the purchase order or contract therefor. Acquisition and Construction Costs include the costs of site preparation necessary for the installation of the Project, as well as the administrative, engineering, legal, financial and other costs incurred by the Lessee, the Lessor (on behalf of the Lessee) and the Contractors in connection with the acquisition, construction, rehabilitation, remodeling or installation of the Project.

“Act” means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4, Chapter 5, Division 7, Title 1 (commencing with Section 6584) of the California Government Code, as amended.

“Additional Bonds” means Bonds authorized by a supplemental Indenture that are executed and delivered by the Trustee pursuant to the Indenture.

“Agreement” means that certain Joint Exercise of Powers Agreement, dated as of May 18, 1995, and amended as of May 14, 1997 and May 22, 2003,by and between the State Center Community College District, Palomar Community College District, and Butte Community College District, as duly amended and supplemented from time to time.

“Authorized Denomination” means $5,000 principal amount, and any integral multiple thereof.

“Authorized Officer” or “Authorized Representative” means: (i) in the case of the Issuer, any person authorized by resolution of the Board of the Issuer to perform such act or to execute such documents; (ii) in the case of the Lessee, the person or persons identified in the Lease, or identified as such in the records or by resolution of the Lessee, and (iii) in the case of the Trustee, any person authorized to perform any act or sign any document by or pursuant to the by-laws or any resolution of the governing body of the Trustee.

“Beneficial Owner” means a person who has a beneficial ownership interest in the Bonds purchased through a participant in the book-entry system of Cede & Co., as nominee of The Depository Trust Company, or its registered assigns.

“Board” or “Governing Board” means, with respect to the Issuer, its governing board established pursuant to the bylaws thereof.

“Bond” or “Bonds” means the Bonds as designated and issued pursuant to the Indenture.

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“Bond Counsel” means Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, or any other attorney or firm of attorneys nationally recognized for expertise in municipal finance matters including tax matters related thereto.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banks are authorized to be closed for business in the Cities of New York, New York, Los Angeles or San Francisco, California or such other city in which a successor Trustee is located.

“Certificate of Completion” means a certificate of the Authorized Representative of the Lessee certifying that the Project has been acquired, constructed, rehabilitated, remodeled or installed and accepted by the Lessee, and that all Acquisition and Construction Costs have been paid.

“Closing Date” means the date on which the Bonds are authenticated and delivered to the Underwriter pursuant to the Indenture.

“Code” means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder, as the same may be amended from time to time, and any successor provisions of law. Reference to a particular section of the Code will be deemed to be a reference to any successor to any such section.

“Contractors” means the contractors or vendors from whom the Lessee has ordered or caused to be ordered or with whom the Lessee has contracted or caused to be contracted for the acquisition, construction, rehabilitation, remodeling and installation of the Project.

“Cost” or “Costs” means (i) the costs of any Public Capital Improvement, including Costs of Issuance, and (ii) any other costs approved by an opinion of Bond Counsel as being permitted under the Act.

“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the Issuer and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, title insurance premiums, bond insurance premiums (if any), fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds.

“Costs of Issuance Account” means the account within the Project Fund so designated and established pursuant to the Indenture.

“Costs of Issuance Disbursement” means an amount actually disbursed from the Project Fund for Costs of Issuance pursuant to the provisions of the Indenture.

“Costs of Issuance Requisition” means a requisition, substantially in the form attached to the Indenture, required to be submitted to the Trustee in connection with each Costs of Issuance Disbursement from the Project Fund.

“Counsel” means an attorney at law or law firm (who or which may be Bond Counsel or counsel for the Issuer, the Trustee or the Lessee) satisfactory to the Issuer.

“Dated Date” means _________, 2016.

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“Debt Service Fund” means the fund so designated which is established pursuant to the Indenture.

“Debt Service Reserve Fund” means the fund so designated which is established pursuant to the Indenture.

“DTC” means The Depository Trust Company, New York, New York.

“Estimated Cost” means the estimated cost of the Project.

“Event of Bankruptcy” will mean: (i) the Issuer will be adjudicated a bankrupt or become subject to an order for relief under federal bankruptcy law; (ii) the Issuer will institute any proceedings seeking an order for relief under federal bankruptcy law or seeking to be adjudicated a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy or insolvency; (iii) there will be appointed a receiver, trustee, examiner, liquidator or similar official for the Issuer under any law relating to bankruptcy or insolvency; (iv) without the application, approval or consent of the Issuer, a receiver, trustee, examiner, liquidator or similar official will be appointed for the Issuer or any substantial part of the Issuer’s property and such appointment will continue undischarged or such proceedings will continue undismissed or unstayed for a period of 60 consecutive days; (v) the Issuer will make an assignment for the benefit of creditors; (vi) the Issuer will apply for or seek the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property; (vii) the Issuer will fail to file an answer or other pleading denying the material allegations of any proceeding filed against it described under clause (iv) above; (viii) the Issuer will take any action to authorize or effect any of the actions set forth in clauses (i) or (ii) of this definition; (ix) the Issuer will fail to contest in good faith any appointment or proceeding described in clauses (i) or (ii) of this definition.

“Event of Default” means any of the events specified in the Indenture to be an Event of Default.

“Governing Body” means the Board of Trustees of the Lessee.

“Government Obligations” means direct and general obligations of the United States of America (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips) or obligations that are unconditionally guaranteed as to principal and interest by the United States of America. In the case of direct and general obligations of the United States of America, Government Obligations shall include evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed at least as high as direct and general obligations of the United States of America by either S&P Global Ratings or by Moody’s Investors Service.

“Indenture” means the Trust Indenture with respect to the Bonds, as amended and supplemented from time to time.

“Information Services” means Financial Information, Inc.’s “Daily Called Bond Service,” 1 Cragwood Road, 2nd Floor, South Plainfield, New Jersey, 07083, Attention: Editor; Mergent, Inc., 585 Kingsley Park Drive, Fort Mill, South Carolina 29715, Attention: Called Bond Department; and Standard

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& Poor’s J.J. Kenny Information Services’ “Called Bond Record,” 55 Water Street, New York, New York 10041; or to such other addresses and/or such other services providing information with respect to called bonds as the Issuer may designate.

“Insurance and Condemnation Fund” means the fund so designated which is created pursuant to the Indenture.

“Interest Component” means the interest owed on the Bonds.

“Interest Payment Account” means the account of the Debt Service Fund so designated which is created pursuant to the Indenture.

“Interest Payment Date” means June 1 and December 1, of each year, commencing December 1, 2016.

“IRS” means the Internal Revenue Service of the United States Department of the Treasury

“Issuer” means the California Community College Financing Authority, a joint powers agency, duly organized and existing under the laws of the State, and its successors and assigns.

“Lease” means the Lease/Purchase Agreement, dated as of August 1, 2016, entered into by and between the Issuer and the Lessee, as the same may be amended and supplemented from time to time in accordance with the terms thereof.

“Lease Payment Date” means the 15th day of each May and November, commencing November 15, 2016.

“Lease Payment” means the payments and prepayments by the Lessee of amounts payable pursuant to the Lease, either respectively or in the aggregate as dictated by the context, as described in the Indenture.

“Leased Property” means, respectively or collectively, the site or sites, together with the buildings thereon, if any, described in the Lease.

“Lessee” means the Gavilan Joint Community College District, or its successors and assigns.

“Lessor” means the California Community College Financing Authority, a joint powers agency duly organized and existing under the laws of the State of California, and its successors and assigns.

“Local Agency” means a local agency as defined in Section 6585(f) of the Act.

“Member” means a member of the Issuer which has executed, and at the time in question is a party to, the Agreement creating the Issuer.

“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation will be dissolved or liquidated or will no longer perform the functions of a securities rating agency, “Moody’s” will be deemed to refer to any other nationally recognized securities rating agency designated by the Lessee, with notice to the Trustee and the Issuer.

“Net Proceeds” means any insurance or condemnation proceeds, paid with respect to the Leased Property, remaining after payment therefrom of all expenses incurred in the collection thereof.

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“Outstanding” when used as of any particular time with reference to Bonds, means all Bonds theretofore (including Additional Bonds), or thereupon being, authenticated and delivered by the Trustee under the Indenture except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds with respect to which all or any portion of the liability of the Issuer will have been discharged in accordance with the Indenture; and (3) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds will have been authenticated and delivered by the Trustee pursuant to the Indenture.

“Owner” means the registered owner of any Bond.

“Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as depository.

“Payments” means Lease Payments and any other payments made or eligible to be made to the Issuer or the Trustee by the Lessee pursuant to the Lease.

“Permitted Encumbrances” means, as of any particular time: (i) liens for general ad valorem taxes

and assessments, if any, not then delinquent, or which the Lessee may, pursuant to the provisions of the Indenture, permit to remain unpaid; (ii) the Lease, as it may be amended from time to time; (iii) the Assignment; (iv) the Site Lease; (v) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (vi) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Dated Date and which Lessee certifies in writing will not materially impair the use of the Leased Property by the Lessee; (vii) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease and to which the Lessor and the Lessee consent in writing (and which consent will not be unreasonably withheld).

“Person” means any natural person, firm, association, partnership, corporation or public body.

“Principal Component” means the original principal amount of the Bonds.

“Principal Office” means, with respect to the Trustee, the corporate trust office of the Trustee in Los Angeles, California, or any other office so designated by the Trustee.

“Principal Payment Account” means the account of the Debt Service Fund so designated which is created pursuant to the Indenture.

“Principal Payment Date” means June 1 of each year, commencing June 1, 2017.

“Program” means the Issuer’s program of financing Public Capital Improvements by entering into the Lease as provided therein and permitted by the Act.

“Project” means the Public Capital Improvements defined as the project in the Lease, and which are to be acquired, constructed or refinanced by the Lessee.

“Project Accounts” means any of the accounts of the Project Fund from which Project Disbursements shall be made and attributable to the Project.

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“Project Cost Requisition” means a requisition, substantially in the form attached as an exhibit to the Indenture, required to be submitted to the Trustee in connection with each Project Disbursement from the Project Fund.

“Project Disbursement” means an amount actually disbursed from the Project Accounts for the Project pursuant to the provisions of the Indenture.

“Project Fund” means the fund so designated which is created pursuant to the Indenture.

“Public Capital Improvement” means public capital improvements as defined in Section 6585(g) of the Act and any other projects of the Lessee that in the opinion of Bond Counsel may be financed with the proceeds of the Bonds.

“Qualified Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

(a) For all purposes, including defeasance investments, any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

(i) Cash (fully insured by the Federal Deposit Insurance Corporation),

(ii) Government Obligations.

(b) For all purposes other than defeasance investments, any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

(i) Federal Housing Administration debentures.

(ii) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America:

-Federal Home Loan Mortgage Corporation (“FHLMC”) Senior Debt Obligations Participation certificates (but not including stripped mortgage securities which are purchased at prices exceeding their principal amounts)

-Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system-wide bonds and notes

-Federal Home Loan Banks (“FHL Banks”) Consolidated debt obligations

-Federal National Mortgage Association (“FNMA”) Senior debt obligations Mortgage-backed securities (but not including stripped mortgage securities which are purchased at prices exceeding their principal amounts)

(iii) Unsecured certificates of deposit, time deposits, and bankers’ acceptances (having maturities of not more than 365 days) of any bank the short-term obligations of which are rated “A-1+” or better by S&P and “Prime-1” by Moody’s, which may include the Trustee and its affiliates.

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(iv) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (“FDIC”), in banks which have capital and surplus of at least $15 million.

(v) Commercial paper (having original maturities of not more than 270 days) rated at the time of purchase “A-1+” by S&P and “Prime-1” by Moody’s.

(vi) Money market funds rated “AA” by S&P, or better, and if rated by Moody’s rated “Aa2” or better, including funds for which the Trustee, its parent company, if any, or any affiliates or subsidiaries of the Trustee provide investment advising or other management services.

(vii) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A3” by Moody’s and “A-” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated.

(viii) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (vii) above and rated “A-1+” by S&P and “MIG-1” by Moody’s.

(ix) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (vii) above and rated “AA-” or better by S&P and “Aa3” or better by Moody’s.

(x) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements:

(1) such municipal obligations are (A) not subject to redemption prior to maturity or (B) the trustee for such municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of such municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions;

(2) such municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations;

(3) the principal of and interest on the U.S. Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on such municipal obligations (“Verification Report”);

(4) the cash or U.S. Treasury Obligations serving as security for such municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations;

(5) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification Report; and

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(6) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent.

(xi) Deposits in the Local Agency Investment Fund of the California State Treasurer, to the extent the Trustee is authorized to register such investments in its name.

“Rating Agency” means Moody’s.

“Rebate Fund” means the fund so designated which is created pursuant to the Indenture.

“Record Date” means the fifteenth day of the month immediately preceding each Interest Payment Date, whether or not said day is a Business Day.

“Reserve Facility” means any line of credit, letter of credit, insurance policy, surety bond or other credit source deposited with the Trustee pursuant to the Indenture.

“Reserve Requirement” means the least of (1) the maximum aggregate annual principal and interest payments payable with respect to the Bonds, (2) 125% of the average annual aggregate principal and interest payments payable with respect to the Bonds, and (3) 10% of the face amount of the Bonds (less original issue discount if in excess of two percent (2%) of the stated redemption amount at maturity).

“Resolution” means each of those certain resolutions duly adopted by the Governing Board of the Issuer and the Board of Trustees of the Lessee authorizing the issuance and sale of the Bonds and the execution of the Indenture (if applicable) and the Lease.

“Revenues” means (a) all amounts payable by the Lessee pursuant to the Lease, including all extensions and renewals of the term thereof, if any, including all amounts realized upon the enforcement of the Lease and all payments to be made thereunder (including prepayments); (b) Subsidy Payments, (c) any proceeds of Bonds originally deposited with the Trustee and all moneys deposited and held from time to time by the Trustee in the funds and accounts established hereunder (except the Rebate Fund); (d) investment income with respect to any moneys held by the Trustee in the funds and accounts established hereunder (except the Rebate Fund); and (e) any insurance proceeds or condemnation awards received by or payable to the Trustee with respect to property leased pursuant to the Lease, including rental interruption insurance.

“Securities Depositories” means: The Depository Trust Company, 55 Water Street, New York, NY 10041; or to such other addresses and/or such other securities depositaries as the Issuer may designate.

“Series” means, whenever used in the Indenture with respect to Bonds, all of the Bonds designated as being of the same series, regardless of variations in maturity, interest rate and other provisions.

“Project Account” means the account within the Project Fund so designated and established pursuant to the Indenture.

“Site Lease” means the Site Lease, dated as of the date thereof, by and between the Lessee and the Lessor, as amended and supplemented from time to time.

“Standard & Poor’s” means S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC, as organized and existing under the laws of the State of New York, its successors and their

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assigns, and, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Standard & Poor’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Lessee with written notice to the Trustee and the Issuer.

“State” means the State of California.

“Tax Certificate” means that certain Tax Certificate dated the Closing Date concerning certain matters pertaining to the use and investment of proceeds of the Bonds, dated the date of issuance of the Bonds, executed by the Issuer and the Lessee, on the date of issuance thereof, including any and all exhibits attached thereto.

“Term of the Lease” or “Term” means the time during which the Lease is in effect, as provided for in the Lease.

“Termination Date” means June 1, 20__, being the date on which the Term of the Lease ends, unless extended pursuant to the Lease or unless terminated prior thereto as provide in the Lease.

“Trust Estate” means the property pledged to the Trustee pursuant to the Granting Clauses of the Indenture.

“Trustee” means U.S. Bank National Association in its capacity as trustee thereunder, and its successors in the trust thereunder.

LEASE/PURCHASE AGREEMENT

Acquisition, Construction and Installation of the Project. The Lessee will enter into purchase orders and contracts, and will supervise and provide for, or cause to be supervised and provided for, the complete acquisition, construction, rehabilitation, remodeling and installation of the Project. The Lessee agrees that it will cause the work under said contracts to be diligently performed and that the Project will be acquired, constructed, rehabilitated, remodeled and installed in accordance with the specifications approved by the Lessee. The Lessee may change the specifications of the Project, so long as such change does not substantially alter the nature of the Project as a project financeable pursuant to the Act or adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes, the exemption of interest on the Bonds from State of California personal income taxes, or the treatment of such interest with respect to the determination of an Owner’s alternative minimum tax obligations. Upon completion of the Project, the Lessee will send a Certificate of Completion to the Trustee.

Payment of Acquisition and Construction Costs. Payment to the Contractors or reimbursement to the Lessee of the cost of acquiring, constructing, rehabilitating, remodeling and installing the Project will be made from the monies deposited in the Project Fund as provided in the Indenture upon delivery of a Requisition to the Trustee.

Removal or Substitution. (a) The Lessee may amend, change or release the Leased Property at any time by delivering an amended property description to the Trustee and the Lessor. All costs and expenses incurred in connection with any such removal or substitution will be borne by the Lessee. Notwithstanding any modification to the Leased Property pursuant to the Lease, there will be no reduction in or abatement of Lease Payments due from the Lessee, except as required by the Lease. The Lessee has reserved the right at any time to remove all or any portion of the Leased Property, or to substitute public

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facilities, equipment and/or real property owned by the Lessee for all or any portion of the Leased Property, provided that:

(i) the Lessor and provides written notice to each Rating Agency;

(ii) the Lessee finds (and delivers a certificate to the Lessor and the Trustee setting forth its findings) that (i) the portion of the Leased Property remaining, or (ii) the substituted public facility, equipment and/or real property, as the case may be, has a fair market value such that the Lease Payments being made by the Lessee pursuant to the Lease will not be reduced;

(iii) the Lessee certifies that (i) the remaining portion of the Leased Property or the substituted public facility, equipment and/or real property, as the case may be, has a useful life not less than the remaining term of the Lease and (ii) no liens of the State of California or other public agency exist affecting the remedy of repossession with respect to the substituted Leased Property;

(iv) in the event the substituted Leased Property consists of real property, the Lessee obtains or causes to be obtained a title insurance policy with endorsement so as to be payable to the Trustee for the benefit of the Owners. Such policy will be in the amount equal to the principal component (the “Principal Component”) of Lease Payments attributable to the remaining portion of the Leased Property or the substituted facility and/or real property, as the case may be, and will insure the leasehold interest of the Lessor to the remaining portion of the Leased Property or the substituted facility and/or real property; and

(v) the Lessee provides the Lessor and the Trustee with an opinion of Bond Counsel that such removal or substitution, as the case may be, is authorized and in compliance with the Act and the Indenture and does not in and of itself adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes or the exemption of interest on the Bonds from State of California personal income taxes or the treatment of such interest with respect to the determination of an Owner’s alternative minimum tax obligations..

Upon the removal or substitution of any real property and improvements thereon for all or a portion of the Leased Property then existing, the Lessee, the Lessor and the Trustee will execute and record with the Office of the County Recorder of the County in which the Leased Property is located, any document necessary to reconvey to the Lessee the Leased Property being removed or substituted and to include the remaining or substituted real property and/or improvements thereon as all or a portion of the Leased Property.

(b) The Lessee may amend or change the Project at any time by delivering an amended Exhibit C to the Trustee and the Lessor.

Term of Lease. The Term of the Lease will commence on the date of recordation thereof and will terminate on June 1, 20__, unless extended pursuant to the Lease or unless terminated prior thereto upon the earliest of any of the following events (the “Termination Date”):

(a) the payment or prepayment by the Lessee of all Lease Payments due during the Term of the Lease and all other amounts due and payable by the Lessee under the Indenture;

(b) the occurrence of an event of default under the Lease and the termination of the Lease by the Lessor or its assignee pursuant to the Lease thereof; or

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(c) the Leased Property are taken in whole pursuant to the power of condemnation and termination of the Lease pursuant to the Lease.

If on June 1, 20__, the Lease Payments will not be fully paid, then the Term will be extended until all Lease Payments will be fully paid, except that the Term will in no event be extended for a period of more than ten (10) years after such date. On each Lease Payment Date during the extended Term, the Lessee will provide the Trustee with a schedule of payments showing the portion representing principal and the portion representing interest.

Lease Payments. The Lessee agrees to pay to the Lessor, or its successors and assigns, as rental for the use and possession of the Leased Property, the Lease Payments on the dates when due and in the amounts described in the Lease, provided that the Lessee will receive credits toward such Lease Payments as provided in the Indenture and provided further that Lease Payments are subject to abatement as provided in the Lease.

Lease Payments for each annual rental period during the Term of the Lease will constitute the total rental for said rental period and will be paid by the Lessee in each rental period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Property during each such period for which said rental is to be paid. The parties thereto have agreed and determined that such total rental will represent the fair rental value of the Leased Property. In making such determination, consideration has been given to the fair market value of the Leased Property, other obligations of the parties under the Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the Lessee and the general public.

Each Lease Payment shall be paid in lawful money of the United States of America to or upon the order of the Lessor at the Principal Office of the Trustee. Any such installment of rental accruing under this Lease which shall not be paid when due shall, subject to applicable law, bear interest at a rate equal to the interest rates on the Bonds. Lease Payments will be paid from any source of legally available funds of the Lessee, and so long as the Leased Property is available for the Lessee’s use, the Lessee has covenanted to take such action as may be necessary to include all Lease Payments due under the Lease in its budgets and to maintain such items to the extent unpaid for that fiscal year in its budgets, and to make the necessary appropriations and supplemental appropriations to the extent necessary, for all such Lease Payments; which covenants of the Lessee shall be deemed to be, and shall be, ministerial duties imposed by law, and it shall be the duty of each and every public official of the Lessee to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the Lessee to carry out and perform the covenants made by the Lessee in the Lease. During the Term of the Lease, the Lessee will furnish to the Trustee, no later than 20 days following adoption of the budget for that fiscal period a certificate of the Authorized Representative of the Lessee that Lease Payments, in an amount calculated by the Lessor to be due in that fiscal period, have been included in the budget approved by the Governing Body of the Lessee for such fiscal period, which amount included in the budget shall be sufficient in and of itself to pay such estimated Lease Payments without interest or other investment earnings thereon. In the event that any appropriation made by the Lessee in its annual budget is insufficient to pay all such Lease Payments, the Lessee further agrees and covenants to make a supplemental appropriation during the fiscal year of any such deficiency in an amount sufficient to make up any such deficiency.

Possession and Enjoyment. During the Term of the Lease, the Lessor will provide the Lessee with quiet use and enjoyment of the Leased Property, and the Lessee will, during such Term, peaceably and quietly have and hold and enjoy the Leased Property, without suit, trouble or hindrance from the Lessor, except as expressly set forth in the Lease. The Lessor will, at the request of the Lessee and at the Lessee’s cost, join in any legal action in which the Lessee asserts its right to such possession and

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enjoyment to the extent the Lessor may lawfully do so. Notwithstanding the foregoing, the Lessor will have the right to inspect the Leased Property as provided in the Lease.

Title to the Leased Property. During the Term of the Lease, the Lessor will hold a leasehold interest in the Leased Property and any and all additions, replacements or modifications, except as provided below and except for those modifications which are added to the Leased Property by the Lessee and which may be removed without damaging the Leased Property.

If the Lessee has paid all Lease Payments during the Term of the Lease and the Bonds are no longer Outstanding under the Indenture, and all amounts due and owing to the Trustee have been made, or upon deposit of the security deposit as provided in the Lease, all right, title and interest of the Lessor in and to the Leased Property will be transferred to and vest in the Lessee. Additionally, if necessary, the Lessor will authorize, execute and deliver to the Lessee a bill of sale in order to release any and all liens created under the provisions of the Lease and the Indenture, and any other documents required to terminate the Lease and consummate such transfer of title and release of liens. The Lessor agrees to defend and eliminate any claims adverse to the title to the Leased Property, and to save and hold the Lessee harmless therefrom; provided that the Lessor’s obligations under this sentence will not extend to claims arising out of actions by the Lessee or persons asserting claims under it; provided that the Lessee will reimburse the Lessor for any costs incurred by the Lessor in defending or eliminating such claims, including reasonable attorneys’ fees.

Security Deposit. Notwithstanding any other provision of the Lease, the Lessee may, on any date, secure the payment of Lease Payments by a deposit with the Trustee of: (a) an amount which, together with amounts on deposit under the Indenture which are to be credited to the Lessee’s obligations thereunder to make Lease Payments, is sufficient to pay all unpaid Lease Payments required by the Lease, when due or (b) Government Obligations, together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon, be fully sufficient to pay all unpaid Lease Payments required by the Lease, when due. Such deposit will then be used to redeem or defease Bonds pursuant to the Indenture. In the event of a deposit pursuant to the Lease, all obligations of the Lessee under the Lease and all security provided by the Lease for said obligations, will cease and terminate, excepting only the obligation of the Lessee to make, or cause to be made, Lease Payments required by the Lease, from the deposit made by the Lessee pursuant to the Lease and the obligation of the Lessee to make the payments, if any, required by the Lease. All Lessor’s right, title and interest to the Leased Property will vest in the Lessee on the date of said deposit automatically and without further action by the Lessee or the Lessor, provided that such right, title and interest will be subject to the subsequent payment of Lease Payments required by the Lease, from said deposit and the payment of the payments required by the Lease in accordance with the provisions of the Lease. Said deposit will be deemed to be and will constitute a special fund for the payment of Lease Payments in accordance with the provisions of the Lease.

Abatement of Rental in the Event of Failure to Have Use and Possession of the Leased Property. The Lease Payments will be abated in whole or in part during any period during which by reason of damage or destruction (other than by condemnation which is provided for in the Lease) there is substantial interference with the use and possession of the Leased Property by the Lessee. The extent of such abatement will be in proportion to the portions of the Leased Property damaged or destroyed based upon the fair market value of the Leased Property on the Dated Date or the date of such abatement, whichever is greater; provided, however, that in the event such damage or destruction results in redemption of Bonds pursuant to the Indenture, the remaining Lease Payments (including credits to be applied thereto as provided in the Indenture) will be sufficient to pay all of the principal and interest on the remaining Outstanding Bonds. Such abatement will not result to the extent moneys are held by the Trustee under the Indenture which are to be credited toward the Lessee’s Lease Payments under the terms

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of the Indenture (including, particularly, without limitation, the Debt Service Reserve Fund, Principal Payment Account(s) and Interest Payment Account(s)) and Net Proceeds of insurance and rental interruption insurance (plus unabated Lease Payments) are sufficient to make Lease Payments when and as due, it having been declared that such moneys and Net Proceeds constitute special funds for the payment of the Lessee’s Lease Payments. Subject to the preceding sentence, such abatement or adjustment, if any, will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction, if any. In the event of any such damage or destruction, the Lease will continue in full force and effect and the Lessee has waived any right to terminate the Lease by virtue of any such damage and destruction.

No Withholding. Notwithstanding any dispute between the Lessor and the Lessee, including a dispute as to the failure of any portion of the Leased Property in use by or possession of the Lessee to perform the task for which it is leased, the Lessee will make all Lease Payments when due and will not withhold any Lease Payments pending the final resolution of such dispute.

Maintenance and Taxes. Throughout the Term of the Lease, as part of the consideration for the rental of the Leased Property, all improvement, repair and maintenance of the Leased Property will be the responsibility of the Lessee, and the Lessee will pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Property resulting from ordinary wear and tear or want of care on the part of the Lessee thereof. The Lessee will comply with the manufacturer’s and vendor’s requirements with respect to proper maintenance of the Leased Property, if any. In exchange for the Lease Payments therein provided, the Lessor agrees to provide only the Leased Property, as thereinbefore more specifically set forth. The Lessee waives the benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such waiver will not limit any rights of the Lessee under the terms of the Lease.

The Lessee will also pay or cause to be paid to the Lessor all taxes of any type or nature charged to the Lessor or affecting the Leased Property or the respective interests or estates therein, including any sales and property taxes, or affecting the amount available to the Trustee from Lease Payments received under the Lease for the payment of the Bonds (including taxes or assessments assessed or levied by any governmental agency or district having power to levy taxes or assessments); provided, that with respect to governmental charges that may lawfully be paid in installments over a period of years, the Lessee will be obligated to pay only such installments as are required to be paid during the Term of the Lease as and when the same will become due.

The Lessee, at the Lessee’s expense and in its name, may in good faith contest any such taxes and other charges and, in the event of any such contest, may permit the taxes or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Lessor will notify the Lessee that, in the opinion of Counsel, by nonpayment of any such items, the interest of the Lessor in the Leased Property will be materially endangered or the Leased Property or any part thereof will be subject to loss or forfeiture, in which event the Lessee will promptly pay such taxes or charges or provide the Lessor with full security against any loss which may result from nonpayment, in form satisfactory to the Lessor.

Modification of Leased Property. The Lessee will, at its own expense, have the right to remodel the Leased Property or to make additions and modifications thereto. All such additions and modifications will thereafter comprise part of the Leased Property and be subject to the provisions of the Lease. Such additions and modifications will not adversely affect the exclusion of interest on the Bonds from gross income for purposes of Federal income tax purposes, the exemption of interest on the Bonds from State of California personal income taxes or the treatment of such interest with respect to the determination of an Owner’s alternative minimum tax obligations, and will not in any way damage the Leased Property,

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substantially alter its nature or cause it to be used for purposes other than those authorized under the provisions of State and federal law, and the Leased Property, upon completion of any additions and modifications made pursuant to the Lease, will be of a value which is not substantially less than the value of the Leased Property immediately prior to the making of such additions or modifications and will not result in a decrease in the amount of Lease Payments payable thereunder.

The Lessee will not permit any mechanic’s or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, repairs, renewals or replacements made by the Lessee pursuant to the Lease, provided that if any such lien is established and the Lessee will first notify the Lessor of the Lessee’s intention to do so, the Lessee may, in good faith, contest any lien filed or established against the Leased Property and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom, and will provide the Lessor with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Lessor. The Lessor will cooperate fully in any such contest, upon the request and at the expense of the Lessee.

Public Liability and Property Damage Insurance. The Lessee will maintain or cause to be maintained, throughout the Term of the Lease, a standard comprehensive general insurance policy or policies in protection of the Lessee and its Board members, officers, agents and employees. Said policy or policies will provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or operation of the Leased Property. Said policy or policies will provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event (subject to a deductible clause of not to exceed $500,000) and $500,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of not less than $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried or required to be carried by the Lessee, and may be maintained in the form of self-insurance by the Lessee, so long as (a) the Lessee provides evidence to the Lessor and the Trustee that the Lessee has segregated amounts in a special insurance reserve meeting the requirements of the Lease, and (b) the Lessor and the Trustee receive annually a certificate of an Insurance Consultant that such reserve is actuarially sound. In such event, the Lessee covenants to maintain such reserve until the Termination Date.

Fire and Extended Coverage Insurance. The Lessee will procure, or cause to be procured, and maintain throughout the Term of the Lease, insurance against loss or damage to any part of the Leased Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, sprinkler damage, boiler explosion and such other hazards as are normally covered by such insurance. Such insurance will be in an amount equal to 100% of the replacement cost of the Leased Property or the Principal Component of the Bonds then Outstanding, whichever is greater (subject to a deductible clause of not to exceed the lesser of 10% of such amount or $250,000). Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried or required to be carried by the Lessee, and may be maintained in the form of self-insurance by the Lessee, so long as (a) the Lessee provides evidence to the Lessor and the Trustee that the Lessee has segregated amounts in a special insurance reserve meeting the requirements of the Lease, and (b) the Lessor and the Trustee receive annually (within 120 days after the end of the Lessee’s fiscal year) a certificate of an Insurance Consultant that such reserve is actuarially sound. In such event, the Lessee covenants to maintain such reserve until the Termination Date.

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Rental Interruption Insurance. The Lessee will procure, and maintain throughout the Term of the Lease, rental interruption insurance to cover loss, total or partial, of the use of any part of the Leased Property as the result of any of the hazards covered in the insurance required by the Lease and the resulting loss of rental income to the Trustee, as assignee of the Lessor, in an amount sufficient to pay the maximum remaining principal and interest portions of Lease Payments due under the Lease during a period of twenty-four (24) months. The Net Proceeds of such insurance will be paid to the Trustee for deposit in the Debt Service Fund and will be credited towards the payment of the Lease Payments of the Lessee in the order in which such Lease Payments become due and payable. The Lessee may not provide self-insurance in lieu of the insurance required by the Lease.

Net Proceeds of Insurance; Form of Policies; Retaining of Insurance Consultant.

(a) The policies of insurance required by the Lease will provide that all proceeds thereunder will be payable to the Trustee pursuant to a lender’s loss payable endorsement. The Net Proceeds of policies of insurance under the Lease will be paid to the Trustee to be applied as provided in the Indenture. All policies of insurance required by the Lease and any statements of self-insurance will be in form satisfactory to the Lessor. The Lessee will pay or cause to be paid when due the premiums for all insurance policies required by the Lease and will promptly furnish or cause to be furnished evidence of such payments to the Lessor. All such policies will provide that the Lessor and the Trustee will be given thirty (30) days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby; provided that if the Lessee will have delivered to the Trustee a written report of an Insurance Consultant stating that the cost of obtaining an insurance policy or policies containing such 30-day notice provision is prohibitively expensive or that such policy may not be obtained, failure of the Lessee to comply with this covenant will not constitute a default thereunder. The Lessee will deliver to the Trustee on or before each anniversary of the Dated Date a certificate of the Authorized Representative of the Lessee that all insurance required under the Lease is in full force and effect. In the event that the Lessee obtains insurance through a pooled insurance program of governmental entities, an annual statement of memorandum of coverage delivered to the Trustee will satisfy the requirements of the Lease. All insurance policies required under the Lease will be provided by a commercial insurer rated “A” by Best or in the two highest rating categories of S&P and Moody’s. All policies will name the Lessee, and the Trustee as insureds and the Trustee as loss payee.

(b) The Lessee may elect to self-insure for Public Liability and Property Damage Insurance and for Fire and Extended Coverage Insurance, pursuant to the Lease, if and to the extent such self-insurance method or plan of protection will afford reasonable protection to the Lessor and the Trustee, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by community college districts in the State of California other than the Lessee. If the Lessee chooses to self-insure, it must on at least an annual basis provide to the Trustee and the Lessor a certificate of an Insurance Consultant to the effect that the Lessee’s general insurance reserves are adequate to provide the required amount of coverage.

The Trustee and the Lessor will not be responsible for the sufficiency of any insurance therein required or payment of premium and will be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Lessee.

Advances. If the Lessee shall fail to perform any of its obligations described in this subsection, the Lessor may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money on behalf of the Lessee, and the Lessee shall be obligated to repay all such advances as soon as possible, with interest at the rate of twelve percent (12%) per annum from the date of the advance to the date of repayment, but in no event shall such rate exceed the maximum legal rate of interest.

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Liens. The Lessee will not, directly or indirectly, create, incur, assume or suffer to exist any pledge, lien, charge, encumbrance or claim on or with respect to the Leased Property, other than the respective rights of the Lessor, the Trustee and the Lessee as provided therein and in the Indenture and Permitted Encumbrances. Except as expressly provided, the Lessee will promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim for which it is responsible, if the same will arise at any time. The Lessee will reimburse the Lessor for any expense incurred by it in order to discharge or remove any such pledge, lien, charge, encumbrance or claim.

Condemnation. If all or part of the Leased Property is taken under the power of condemnation, the Net Proceeds from any award resulting therefrom will be deposited with the Trustee pursuant to the Lease. If the Leased Property is taken in whole pursuant to such condemnation proceedings or is taken in part to such extent that the remaining portion of the Leased Property is no longer useful for the purposes originally intended, the remaining Lease Payment obligations of the Lessee will be abated in full and the Lease will thereupon be terminated. Otherwise, (a) the Lease will continue in full force and effect and will not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there will be a proportionate abatement of Lease Payments such that the resulting Lease Payments will be sufficient to pay all of the principal and interest with respect to the Outstanding Bonds. If the Lease is terminated pursuant to the second sentence of the Lease and the amount of the related condemnation award would not be sufficient to cause a termination of the Lease pursuant to the Lease, the Lessee will appeal the award pursuant to the applicable administrative and legal procedures and the obligation to pay any amount thereunder will survive the termination of the Lease.

Application of Net Proceeds.

(a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Leased Property by fire or other casualty will be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to the Indenture. Upon such deposit, the Authorized Representative of the Lessee will file a certificate with the Trustee as provided in the Lease and the Lessee will repair and rebuild as provided in the Lease and such Net Proceeds will be applied by the Trustee as provided in the Lease.

(b) From Condemnation or Eminent Domain Award. The Net Proceeds of any condemnation or eminent domain award resulting from any event described in the Lease will be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to the Indenture. Upon such deposit, the Authorized Representative of the Lessee will file a certificate with the Trustee as provided in the Lease and such Net Proceeds will be applied by the Trustee as provided in the Lease.

Title Insurance. The Lessee will obtain and, throughout the term thereof, maintain or cause to be maintained title insurance on the Leased Property, in the form of an ALTA or CLTA leasehold title policy, in an amount equal to the Principal Component of the Bonds. Such policy of title insurance will include an endorsement making amounts payable under the policy payable to the Trustee for the benefit of the Owners.

Agreement to Pay Program Expenses. The Lessee agrees to pay to the Trustee, as the assignee of the Lessor, the Program fees of the Lessor charged to the Lessee and Program expenses charged to the Lessee by the Trustee or the Lessor as provided in the Indenture.

Assignment and Subleasing by the Lessee. The Lease may be assigned or the Leased Property may be subleased by the Lessee, provided, that any such assignment or sublease will be subject to all of the following conditions:

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(a) The Lease and the obligation of the Lessee to make Lease Payments under the Lease will remain obligations of the Lessee; and

(b) The sublessee or assignee will become primarily liable on the obligations of the Lessee under the Lease to the extent of the interest subleased or assigned; and

(c) The Lessee will, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Lessor and the Trustee a true and complete copy of such sublease or assignment; and

(d) No such sublease or assignment by the Lessee will cause the Leased Property to be used for a purpose other than a governmental function authorized under the provisions of the Constitution and laws of the State; and

(e) The Lessee will have delivered to the Trustee an opinion of Bond Counsel to the effect that such sublease or assignment will not affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes, the exemption of interest on the Bonds from State of California personal income taxes or the treatment of such interest with respect to the determination of an Owner’s alternative minimum tax obligations; and

(f) Notice is provided to each Rating Agency.

Release and Indemnification Covenants. The Lessee will and thereby agrees to the extent permitted by law to indemnify and save the Lessor, the members of the Lessor, and the Trustee and the Board members, officers and employees of each of the foregoing harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Property or the Project by the Lessee or at its direction or request, (b) any breach or default on the part of the Lessee in the performance of any of its obligations under the Lease, (c) any act or negligence of the Lessee or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Property or the Project, (d) any act or negligence of any assignee or sublessee of the Lessee, or of any agents, contractors, servants, employees or licensees of any assignee or sublessee of the Lessee with respect to the Leased Property or the Project, (e) the acquisition, construction and installation of the Project or the authorization of payment of the Acquisition and Construction Costs by the Lessee or authorization of payment of costs of repairs to the Leased Property or the Project, (f) the Trustee’s acceptance or administration of the trust, or performance of its duties under the Indenture, (g) the sale of any Bonds and the carrying out of any of the transactions contemplated by the Bonds, or (h) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other disclosure document utilized in connection with the sale of the Bonds. No indemnification to the Lessor or the Trustee is required to be made by the Lessee under the Lease or elsewhere in the Lease for willful misconduct, negligence, or breach of duty under the Lease by the Lessor, the Trustee, their officers, agents, employees, successors or assigns. To the extent that the Lease confers upon or gives or grants the Trustee any right, remedy or claim under or by reason of this Lease, the Trustee is explicitly recognized as being a third-party beneficiary and may enforce any such right, remedy or claim conferred, given or granted under the Lease.

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Events of Default and Remedies.

Events of Default Defined. The following will be “events of default” under the Lease and the terms “events of default” and “default” will mean, whenever they are used in the Lease, any one or more of the following events:

(a) Failure by the Lessee to pay any Lease Payment at the time specified therein.

(b) Failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed therein or in the Site Lease, other than as referred to in the Lease, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the Lessee by the Lessor, the Trustee, or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Lessor, the Trustee, and such Owners will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Lessee within the applicable period and diligently pursued until the default is corrected.

(c) The filing by the Lessee of a voluntary petition in bankruptcy, or failure by the Lessee promptly to lift any execution, garnishment or attachment, or the filing of an involuntary petition in bankruptcy against the Lessee which petition will not have been withdrawn within thirty (30) days, or assignment by the Lessee for the benefit of creditors, or the entry by the Lessee into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Lessee in any proceedings instituted under the provisions of the federal bankruptcy law or under any similar acts which may thereafter be enacted.

Remedies on Default. Whenever any event of default referred to in the Lease will have happened and be continuing, it will be lawful for the Lessor to exercise any and all remedies available pursuant to law or granted pursuant to the Lease; provided, however, that notwithstanding anything therein or in the Indenture to the contrary, THERE WILL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN IN DEFAULT TO BE IMMEDIATELY DUE AND PAYABLE. After the occurrence of an event of default thereunder, the Lessee will surrender possession of the Leased Property to the Lessor, if requested to do so by the Lessor, or by the Trustee or the Owners in accordance with the provisions of the Indenture.

No Termination: Repossession and Re-Lease on Behalf of Lessee. In the event the Lessor does not elect to terminate the Lease in the manner thereinafter provided for in the Lease, the Lessor may, with the consent of the Lessee, which consent is thereby irrevocably given, repossess the Leased Property and re-lease it for the account of the Lessee, in which event the Lessee’s obligation will accrue from year to year in accordance with the Lease and the Lessee will continue to receive the value of the use of the Leased Property from year to year in the form of credits against its obligation to pay Lease Payments. The obligations of the Lessee will remain the same as prior to such default, to pay Lease Payments whether the Lessor re-enters or not. The Lessee agrees to and will remain liable for the payment of all Lease Payments and the performance of all conditions contained therein and will reimburse the Lessor for any deficiency arising out of the re-leasing of the Leased Property, or, in the event the Lessor is unable to re-lease the Leased Property, then for the full amount of all Lease Payments to the end of the Term of the Lease, but said Lease Payments and/or deficiency will be payable only at the same time and in the same manner as provided above for the payment of Lease Payments thereunder, notwithstanding such repossession by the Lessor or any suit, brought by the Lessor for the purpose of effecting such repossession of the Leased Property and the Project or the exercise of any other remedy by the Lessor.

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The Lessee thereby irrevocably appoints the Lessor as the agent and attorney-in-fact of the Lessee to repossess and re-lease the Leased Property in the event of default by the Lessee in the performance of any covenants contained therein to be performed by the Lessee and to remove all personal property whatsoever situated upon the Leased Property, to place such property in storage or other suitable place in the County in which the Lessee is located, for the account of and at the expense of the Lessee, and the Lessee thereby exempts and agrees to save harmless the Lessor from any costs, loss or damage whatsoever arising or occasioned by any such repossession and re-leasing of the Leased Property. The Lessee thereby waives any and all claims for damage caused or which may be caused by the Lessor in repossessing the Leased Property as provided therein and all claims for damages that may result from the destruction of or the injury to the Leased Property and all claims for damages to or loss of any property belonging to the Lessee that may be in or upon the Leased Property.

The Lessee agrees that the terms of the Lease constitute full and sufficient notice of the right of the Lessor to re-lease the Leased Property in the event of such repossession without effecting a surrender of the Lease, and further agrees that no acts of the Lessor in effecting such re-leasing will constitute a surrender or termination of the Lease irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise, but that, on the contrary, in the event of such default by the Lessee the right to terminate the Lease will vest in the Lessor to be effected in the sole and exclusive manner provided for in subparagraph (b) below. The Lessee further waives the right to any rental obtained by the Lessor in excess of the Lease Payments and thereby conveys and releases such excess to the Lessor as compensation to the Lessor for its services in re-leasing the Leased Property.

Termination: Repossession and Re-Lease. In the event of the termination of the Lease by the Lessor at its option and in the manner thereinafter provided on account of default by the Lessee (and notwithstanding any repossession of the Leased Property by the Lessor in any manner whatsoever or the re-leasing of the Leased Property), the Lessee nevertheless agrees to pay to the Lessor all costs, losses or damages howsoever arising or occurring payable at the same time and in the same manner as is provided therein in the case of payment of Lease Payments. Any proceeds of the re-lease or other disposition of the Leased Property by the Lessor will be delivered to the Trustee for deposit first into the Interest Payment Account, and to the extent such account is funded to the extent then required under the Indenture, in the Principal Payment Account and will be applied in accordance with the provisions of the Indenture. Any surplus received by the Lessor from such re-leasing will be the absolute property of the Lessor and the Lessee will have no right thereto, nor will the Lessee be entitled to any credit in the event of a surplus in the rentals received by the Lessor. Neither notice to pay rent or to deliver up possession of the Leased Property given pursuant to law nor any proceeding taken by the Lessor to recover possession of the Leased Property will of itself operate to terminate the Lease, and no termination of the Lease on account of default by the Lessee will be or become effective by operation of law, or otherwise, unless and until the Lessor will have given written notice to the Lessee of the election on the part of the Lessor to terminate the Lease. The Lessee covenants and agrees that no surrender of the Leased Property for the remainder of the Term thereof or any termination of the Lease will be valid in any manner or for any purpose whatsoever unless stated or accepted by the Lessor by such written notice. No such termination will be effected either by operation of law or act of the parties thereto, except only in the manner therein expressly provided.

Opinion of Bond Counsel. The re-leasing of the Leased Property as provided therein will be subject to the written consent of the Lessor and the opinion of Bond Counsel addressed to the Lessor to the effect that such re-leasing will not affect the exclusion of interest on the Bonds from gross income for purposes of Federal income taxation, the exemption of interest on the Bonds from State of California personal income taxes or the treatment of such interest with respect to the determination of an Owner’s alternative minimum tax obligation.

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TRUST INDENTURE

Establishment of Funds and Accounts within Funds. There are thereby established with the Trustee the following funds and accounts within funds, each of which will be held by the Trustee, for the term of the Indenture, in accounts segregated from all other moneys of the Trustee:

the Project Fund, and within such fund,

the Costs of Issuance Account; and

the Project Account

a Debt Service Fund, and within such fund,

an Interest Payment Account

a Principal Payment Account

a Debt Service Reserve Fund;

an Insurance and Condemnation Fund; and

a Rebate Fund.

The Trustee may also, from time to time, establish additional funds and/or accounts to hold moneys on behalf of the Lessee and the Owners.

Project Fund.

(a) Within the Project Fund, the Trustee will establish the accounts designated above, and the Trustee will keep such accounts separate and apart from all other funds and accounts held by it, and will administer such accounts as provided in the Indenture.

(b) The Trustee will apply moneys in the Project Fund in accordance with the Indenture. Disbursements from the Project Account will be made as provided in the Indenture.

(c) Disbursements from the Project Account to pay Project Costs of the Lessee will be made by the Trustee upon receipt by the Trustee of a Project Cost Requisition for such Project Disbursements signed by an Authorized Representative of the Lessee. Such disbursements will be made only for Costs of the Project of the Lessee.

(d) Disbursements from the Costs of Issuance Account to pay Costs of Issuance will be made by the Trustee upon receipt by the Trustee of a Requisition for Costs of Issuance, substantially in the form attached to the Indenture, signed by an Authorized Representative of the Lessee. Such disbursements will be made only for Costs of Issuance associated with the Bonds. On February 1, 2017, the Trustee will withdraw funds remaining on deposit in the Costs of Issuance Account (other than moneys retained therein to pay Costs of Issuance not then due and payable but certified to by an Authorized Representative) and will transfer such monies to the Debt Service Fund or at the written request of an Authorized Officer of the Lessee, to such Lessee for any lawful purpose, and will close the Costs of Issuance Account.

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(e) If any funds remain on deposit in the Project Accounts on the date on which the the Certificate of Completion (as defined in the Lease) is filed with the Trustee, the Trustee will transfer such funds to the Debt Service Reserve Fund if the amount on deposit therein is less than the Reserve Requirement, and thereafter will, at the written direction of the Lessee, do any of the following: (i) transfer such funds to the Interest Payment Account, or (ii) disburse such funds to the Lessee for any lawful purpose. Following such transfers the Trustee will close the Project Account.

Rebate Fund.

(a) Establishment. The Trustee will establish a separate fund for the Bonds designated the “Rebate Fund” as designated in the Indenture. The Trustee will keep such Fund and accounts separate and apart from all other funds and accounts held by it, and will administer such Fund as provided in the Indenture. Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds, will not be adversely affected, the Issuer will cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Indenture and the Tax Certificate. All money at any time deposited in the Rebate Fund will be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the Bonds will be governed by the Indenture and the Tax Certificate, unless and to the extent that the Issuer delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds, will not be adversely affected if such requirements are not satisfied.

(i) Computation. Within 75 days of the end of each fifth Bond Year (as such term is defined in the Tax Certificate), the Issuer will calculate or cause to be calculated the amount of the rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), the “small governmental issuer exception” of Section 148(f)(4)(D) of the Code and Section 1.148-8 of the Treasury Regulations, and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The Issuer may obtain expert advice as to the amount of the Rebatable Arbitrage to comply with the Indenture.

(ii) Transfer. Within 65 days of the end of each fifth Bond Year, upon the written request of the Issuer, an amount will be deposited to the Rebate Fund by the Trustee from any Revenues legally available for such purpose (as specified by the Issuer in the aforesaid written request), if and to the extent required so that the balance in the Rebate Fund will equal the amount of the Lessee’s Rebatable Arbitrage so calculated in accordance with the Indenture. In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon written request of the Issuer, the Trustee will withdraw the excess from the Rebate Fund and then credit the excess to the Lease Payment Fund.

(iii) Payment to the Treasury. The Trustee will pay, as directed by request of the Issuer, to the United States Treasury, out of amounts in the Rebate Fund,

(A) Not later than 60 days after the end of (X) the fifth Bond Year, and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and

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(B) Not later than 60 days after the payment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to such Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code.

In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Issuer will calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to the Indenture will be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and will be accompanied by Internal Revenue Service Form 8038-T, or will be made in such other manner as provided under the Code,

(b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment in full of the Bonds and the payments described in the Indenture being made may be withdrawn upon written direction provided to the Trustee by the Issuer and utilized in any lawful manner by the Issuer.

(c) Survival of Defeasance. Notwithstanding anything in the Indenture to the contrary, the obligation to comply with the requirements of the Indenture will survive the defeasance or payment in full of the Bonds.

The Trustee will not be responsible for calculating rebate amounts or for the adequacy or correctness or any rebate report or rebate calculations. The Trustee will be deemed conclusively to have complied with the provisions of the Indenture and any other agreement relating to the Bonds regarding calculation and payment of rebate if it follows the directions or request of the Issuer and it will have no independent duty to review such calculations or enforce the Issuer’s compliance with such rebate requirements.

Revenues to be Paid Over to Trustee. The Issuer has caused the Revenues to be paid directly to Trustee. If, notwithstanding these arrangements, the Issuer receives any Payments under the Lease, the Issuer will immediately pay over the same to the Trustee.

Application of Revenues. The Trustee will deposit Revenues, immediately upon receipt thereof, in the funds and accounts established under the Indenture.

(a) The original proceeds of the Bonds will be deposited as provided in the Indenture.

(b) Income earned on the investment of the funds and accounts established under this Indenture will be applied as provided in the Indenture.

(c) The Trustee will pay that portion of any Payments received from the Lessee which represent fees, expenses and indemnification payments payable to the Issuer, the Trustee or any other person or entity, as directed by the Issuer (provided no direction will be required for amounts payable to the Trustee).

(d) The principal portion of any Payments (including mandatory sinking fund payments) will be deposited by the Trustee in the Principal Payment Account of the Debt Service Fund.

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(e) The interest portion of any Payments will be deposited by the Trustee in the Interest Payment Account of the Debt Service Fund.

(f) The portion of any Payment required as a result of a drawing on the Debt Service Reserve Fund (or decrease in market value thereof) as provided in the Indenture will be deposited by the Trustee in the Debt Service Reserve Fund.

(g) The portion of any Payment received which is not required to be deposited or expended pursuant to subsections (c), (d), (e), (f) or (g) summarized above will be deposited by the Trustee in the Interest Payment Account of the Debt Service Fund.

(h) Any proceeds realized upon the enforcement of remedies with respect to the Lease after the occurrence of an Event of Default will be deposited in the Principal Payment Accounts or Interest Payment Accounts of the Debt Service Fund, as applicable.

(i) Any moneys received upon the prepayment of the Lease Payments will be deposited in the Principal Payment Account or Interest Payment Account of the Debt Service Fund, as applicable.

(j) Any insurance proceeds or condemnation awards paid to the Trustee upon the damage, destruction or condemnation of all or a portion of the Leased Property or the Project will be applied as provided in the Indenture.

(k) Prior to any Event of Default, if the amount of any regularly scheduled Payment (or payment pursuant to a respective performance bond or respective rental interruption insurance pursuant to the Indenture) is not sufficient to make all of the deposits and payments required by the Indenture, the Trustee will FIRST, make the deposit with respect to interest required by the Indenture; SECOND, make the deposit with respect to principal required by the Indenture; THIRD, make the deposit with respect to the Debt Service Reserve Fund required by the Indenture; FOURTH make the payments with respect to fees and expenses required by the Indenture and summarized in subsection (c) above; and FIFTH make the deposit required by the Indenture and summarized in subsection (h) above.

Debt Service Fund.

(a) Within the Debt Service Fund, the Trustee will establish the Interest Payment Account and Principal Payment Account, as identified in the Indenture, and the Trustee will keep such accounts separate and apart from all other funds and accounts held by it, and will administer such accounts as provided in the Indenture.

(b) Trustee will pay interest on the Bonds as it shall become due and payable from moneys on deposit in the Interest Payment Account.

(c) The Trustee will apply monies on deposit in the Principal Payment Account to pay the redemption price of that portion of the Bonds called for redemption on the redemption date thereof or the principal of the Bonds at maturity, as provided in the Indenture.

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Debt Service Reserve Fund.

(a) The Trustee will establish the Debt Service Reserve Fund as provided in the Indenture, and the Trustee will keep such fund separate and apart from all other funds and accounts held by it, and will administer such fund as provided in the Indenture.

(b) If one day after any Lease Payment Date the amount on deposit in the Interest Payment Account is less than the aggregate amount of interest payable on the Bonds under the Lease during the period commencing on the immediately preceding Interest Payment Date and ending on such Lease Payment Date, the Trustee will transfer from the Debt Service Reserve Fund to the Interest Payment Account an amount equal to such deficiency.

(c) If one day after any Lease Payment Date the amount on deposit in the Principal Payment Account is less than the aggregate amount of principal payable on the Bonds under the Lease during the period commencing on the immediately preceding Principal Payment Date and ending on such Lease Payment Date, the Trustee will transfer from the Debt Service Reserve Fund to the Principal Payment Account an amount equal to such deficiency.

(d) If at any time the aggregate of the amounts on deposit in the Debt Service Reserve Fund (including amounts available under a Reserve Facility deposited in such account), the Interest Payment Account, Principal Payment Account, and Insurance and Condemnation Fund, equals or exceeds the Principal Component of the Bonds coming due on the next Interest Payment Date, and the interest payable on such Principal Amount, the amount on deposit in the Debt Service Reserve Fund will be transferred to the Principal Payment Account and Interest Payment Account and will be applied as a credit against the obligation of the Lessee to make Lease Payments with respect to the Bonds.

(e) Except as otherwise provided in the Indenture, within two Business Days of the date of each valuation of funds and accounts pursuant to the Indenture, the Trustee will transfer any amount in excess of the Reserve Requirement on deposit in the Debt Service Reserve Fund to the Interest Payment Account.

(f) If (i) any amounts are transferred from the Debt Service Reserve Fund to the Interest Payment Account or the Principal Payment Account as provided in the Indenture, or (ii) the amount on deposit in the Debt Service Reserve Fund (including amounts available under a Reserve Facility deposited in such account) shall be less than the Reserve Requirement as a result of a decrease in the market value of the Qualified Investments held therein as of a valuation date, pursuant to the Indenture, the Lessee will be required, to the extent permitted by law, to include in its Lease Payment on the next Lease Payment Date the amount necessary to bring the amount in the Debt Service Reserve Fund up to the Reserve Requirement. Any such portion of such Payment will be deposited in the Debt Service Reserve Fund.

(g) In lieu of funding the Debt Service Reserve Fund with cash, the Issuer may at any time and with the prior written approval of the Trustee and with prior notice to the Rating Agency then providing a Rating on the Bonds, obtain a Reserve Facility issued by a financial institution having unsecured debt obligations rated at least as high as the Lessee by each Rating Agency, in an amount, together with moneys, Qualified Investments or other Reserve Facilities on deposit in the Debt Service Reserve Fund, equal to the Reserve Requirement. Such Reserve Facility will have an original term of not less than three (3) years or, if less, the final Interest Payment Date of the Bonds and such Reserve Facility will provide by its terms that it may be drawn upon as provided in the Indenture. At least one year prior to the stated expiration of such Reserve Facility, and unless such Reserve Facility expires on the final Interest Payment Date of the Bonds, the Issuer will either (i) obtain a replacement Reserve Facility, (ii)

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obtain an extension thereof for at least an additional year, or if less, the final Interest Payment Date of the Bonds, or (iii) obtain a surety bond or an insurance policy satisfying the requirements of the Indenture. If the Issuer will fail to obtain a replacement Reserve Facility, extended Reserve Facility or surety bond or insurance policy, the Issuer will commence to make monthly deposits of additional Lease Payments collected pursuant to the Lease so that an amount equal to the Reserve Requirement will be on deposit in the Debt Service Reserve Fund no later than the stated expiration date of such Reserve Facility. If an amount equal to the Reserve Requirement as of the date following the expiration of the letter of credit or financial instrument is not on deposit in the Debt Service Reserve Fund one week prior to the stated expiration date of the letter of credit or financial instrument (excluding from such determination the letter of credit or financial instrument), the Trustee will draw on the Reserve Facility to fund the deficiency resulting therefrom in the Debt Service Reserve Fund.

Revenues to Be Held for All Owners; Certain Exceptions. Revenues will, until applied as provided in the Indenture, be held by the Trustee for the benefit of the Owners of all Outstanding Bonds as their interests may appear. The amounts on deposit in each fund and account held under the Indenture (other than the Rebate Fund) will be held for the benefit of the Owners, as their respective interests may appear. The amount on deposit in the Rebate Fund will be held for the benefit of the United States Treasury.

Monthly Reports By Trustee. On or about the fifteenth day of each month, the Trustee shall prepare and deliver to the Issuer and the Lessee, a report with respect to the preceding month setting forth with respect to the Lessee: (i) amounts withdrawn from and deposited into each fund and account maintained by the Trustee under this Indenture relevant to the Lessee; (ii) the balance on deposit in each fund and account relevant to the Lessee as of the month for which such report is prepared, and (iii) a brief description of all obligations held as investments in each fund and account relevant to the Lessee. Copies of such reports may be mailed or delivered to any Owner of at least 5% in aggregate principal amount of Bonds upon the Owner’s written request at a cost not to exceed the Trustee’s actual costs of duplication and mailing or delivery. The Issuer acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory agency grants the Issuer and the Lessee’s the right to receive brokerage confirmations of security transactions as they occur, the Issuer, on its own behalf and on behalf of the Lessee, specifically waives receipt of such confirmations to the extent permitted by law. The Trustee shall furnish to the Issuer and the Lessee periodic statements of account which include detail of all investment transactions made by the Trustee.

Lease Defaults. Upon the occurrence of an event of default under any Lease, written notice of which is received by the Trustee from the Issuer, the Lessee, or the Owners of not less than twenty-five percent in aggregate principal amount of the Outstanding Bonds, the Trustee will give notice thereof to the Issuer, and the Rating Agency.

Subject to the Indenture, upon the occurrence of any event of default under the Lease, the Trustee will pursue the remedies against the Lessee thereunder available to it as assignee of the rights of the Issuer under the Lease.

Application of Excess Amounts. All amounts remaining in the funds and accounts created under the Indenture, after payment in full of the Bonds (or making provision for such payment in accordance with the Indenture) and after payment in full of the fees and expenses of the Trustee and all other amounts required to be paid hereunder and under the Tax Certificate will be paid to the Lessee.

Insurance and Condemnation Fund. The Trustee will establish the Insurance and Condemnation Fund, and the Trustee will keep such fund separate and apart from all other funds and accounts held by it, and will administer such funds and accounts as provided in this section. All Net Proceeds (as defined in

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the Lease) of insurance or condemnation awards with respect to the Lease which are received by the Trustee will be deposited in the Insurance and Condemnation Fund; provided, however, that any Net Proceeds of rental interruption insurance or a performance bond will be deposited first in the Interest Payment Account, and, second, in the Principal Payment Account as required to make payments of principal of and interest on the Bonds. The Trustee will promptly give notice of the receipt of Net Proceeds of insurance or awards to the Lessee and the Issuer.

(a) Application of Net Proceeds of Insurance.

(i) The Net Proceeds of any insurance paid pursuant to the Lease resulting from any damage or destruction to the Leased Property (except rental interruption insurance) will be deposited with the Trustee in the Insurance and Condemnation Fund. Within 60 days of such deposit the Lessee will certify to the Trustee (A) as to whether the Leased Property has been damaged or destroyed in whole or in part, (B) as to whether Net Proceeds are to be utilized for the repair, replacement or improvement of all or specified components (the “Repairable Components”) of the damaged or destroyed portion of the Leased Property and, if so, that sufficient funds, together with the Net Proceeds related to the Repairable Components, have been appropriated by the Lessee to pay the total cost of such repair, replacement or improvement, and (C) as to whether repair, replacement or improvement of all or specified components (the “Unrepairable Components”) of the damaged or destroyed portion of the Leased Property is not economically feasible or in the best interest of the Lessee, or, in the event that damage, destruction or taking results in an abatement of Lease Payments, whether such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds will be available to pay in full all Lease Payments coming due in such period as described in the Lease. Notwithstanding the foregoing, if the Leased Property has been damaged in whole, but the Net Proceeds, together with funds then on hand in the respective Project Account, Interest Payment Account, Principal Payment Account and Debt Service Reserve Fund (which may include funds voluntarily deposited therein by the Lessee for such purpose) are not sufficient to redeem all of that portion of the outstanding Bonds, then the Lessee will not be permitted to certify that repair, replacement. or improvement of the Leased Property is not economically feasible or in the best interest of the Lessee. In such event, the Lessee will proceed to repair, replace or improve the Leased Property and will make the required certification to the Trustee as described above; provided, that this covenant will not be interpreted in a manner which would make any obligation thereunder a debt for purposes of any debt limitation contained in the California Constitution or other California law.

(ii) If the certification described in the Indenture is to the effect that Net Proceeds are to be utilized for the repair, replacement or improvement of Repairable Components of the damaged or destroyed portion of the Leased Property and the Lessee further certifies that (A) sufficient funds, together with the Net Proceeds related to such Repairable Components, have been appropriated to pay the total cost of such repair, replacement or improvement, and (B) in the event that the damage, destruction or taking results in an abatement of Lease Payments, that such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds will be available to pay in full all Lease Payments coming due in such period, the Trustee will disburse the Net Proceeds related to the Repairable Components to the Lessee upon receipt of its Requisitions therefor (substantially in the form in the Indenture) in order for the Lessee to cause the Repairable Components to be repaired, replaced or improved to at least the same good order, repair and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished with said funds, and upon receipt of certification by the Lessee that such repairs, replacements and improvements are completed, the Trustee will transfer any excess Net Proceeds related to the Repairable Components to the Principal PaymentAccount to be credited against the Lessee’s next Lease Payment. If such certification is also, or alternatively, as the case may be, to the effect that repair, replacement or improvement of the Unrepairable Components is not economically feasible or in the best interest of the Lessee or not able to

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be accomplished in the period for which rental interruption insurance proceeds will be available to pay in full Lease Payments coming due in such period or that sufficient funds, together with the Net Proceeds related to the Unrepairable Components, have not been appropriated by the Lessee to pay the total costs of such repair, replacement or improvement (and such a certification is permitted by the requirements of the Indenture), the Trustee will transfer the Net Proceeds designated in writing by the Lessee as related to the Unrepairable Components to the Insurance and Condemnation Fund to be applied to the redemption of Bonds as provided in the Indenture.

(b) Application of Proceeds of Condemnation Award.

(i) If any part of the Leased Property is taken by eminent domain proceedings, the Net Proceeds therefrom will be deposited in the Insurance and Condemnation Fund. Within 60 days of such deposit the Lessee will certify to the Trustee (A) as to whether the Leased Property has been taken in whole or in part pursuant to such proceedings, (B) as to whether the remaining portion of the Leased Property is still useful for the purposes originally intended and (C) as to whether it desires that any available Net Proceeds from such eminent domain proceedings be applied for repair or replacement of the Leased Property and, if so, that sufficient funds, together with such Net Proceeds, have been appropriated by the Lessee to pay the total cost of such repair and replacement and, that in the event such taking results in an abatement of Lease Payments obligated to be paid by the Lessee, that such repair or replacement is able to be accomplished in the period for which rental interruption insurance proceeds will be available to pay in full all Lease Payments obligated to be paid by the Lessee coming due in such period. If such certification is to the effect that the Leased Property has been taken in whole pursuant to such eminent domain proceedings or has been taken in part to such extent that the remaining portion of the Leased Property of the Lessee is no longer useful for the purposes originally intended or if the necessary replacement or repair is not able to be accomplished in the period for which rental interruption insurance proceeds will be available to pay in full all Lease Payments obligated to be paid by the Lessee coming due in such period, the Trustee will transfer all of such Net Proceeds to the Insurance and Condemnation Fund to be applied to the redemption of that portion of the Bonds as provided in the Indenture. If such certification is to the effect that the Leased Property has been taken in part pursuant to such eminent domain proceedings and that the remaining portion of the Leased Property is still useful for the purposes originally intended, the Trustee will, at the direction of the Lessee, either (1) transfer such Net Proceeds to the Lessee’s Insurance and Condemnation Fund to be applied to the redemption of that portion of the Bonds as provided in the Indenture; or (2) if such certification is also to the effect that the Lessee desires that any available Net Proceeds be applied for repair or replacement of the Leased Property, and that sufficient funds, together with such Net Proceeds, have been appropriated by the Lessee to pay the total cost of such repair and replacement and that such repair and replacement is able to be accomplished in the period for which rental interruption insurance proceeds will be available as described above, disburse such Net Proceeds to the Lessee upon receipt of its requisitions therefor (substantially in the form in the Indenture) in order for the Lessee to cause the Leased Property to be repaired, replaced or improved to at least the same good order, repair and condition as it was in prior to the eminent domain proceedings, insofar as the same may be accomplished with said funds, and transfer any excess Net Proceeds to the Principal Payment Account to be credited against the Lessee’s next Lease Payment.

(ii) The Lessee may obtain the report of an independent engineer or other independent consultant in order to verify the conclusions stated in any certificate submitted to the Trustee as provided in the Indenture or to make any determination with respect to the application of such Net Proceeds. The Trustee may rely conclusively on such reports.

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Investment and Deposit of Funds

Deposits and Security Therefor. All Revenues received by the Trustee under the Indenture for deposit in any fund or account established thereunder will, except as thereinafter provided, be deposited with the Trustee, until or unless expended or invested or deposited as provided in the Indenture.

Investment or Deposit of Funds.

(a) Moneys in the funds and accounts thereunder will be invested, to the extent permitted by law, in Qualified Investments at the direction of the Lessee given to the Trustee by facsimile at least two Business Days in advance of the investment date and promptly confirmed by mailing the original of such direction to the Trustee. The Trustee will be entitled to rely conclusively upon the directions received by facsimile thereunder. In the absence of such written investment direction from the Lessee, the Trustee will invest moneys in the funds and accounts held thereunder solely in Qualified Investments set forth in item B(iv) of the definition thereof provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a written direction from the Lessee specifying a specific money market fund and, if no such written direction from the Lessee is so received, the Trustee shall hold such moneys uninvested. The Trustee shall be entitled to rely upon any investment Request of the Lessee as conclusive certification to the Trustee that the investments described therein are so authorized under the laws of the State of California.. All such investments directed by the Lessee will (i) be made so as to mature or be subject to withdrawal on or prior to the date or dates that moneys therefrom are anticipated to be required, (ii) be made under a binding contract which permits the exchange of such investments for investments which mature on or prior to the date or dates that moneys are so anticipated to be required or (iii) be in obligations subject to a binding contract for purchase on a date which is prior to the date or dates that moneys are so anticipated to be required. Moneys in the Debt Service Reserve Fund will be invested in Qualified Investments which mature not later than 5 years from the date of purchase by the Trustee; provided, however, that the five-year maturity limitation will not apply to investments in Investment Agreements. Moneys in the Debt Service Reserve Fund which are invested in an Investment Agreement will be subject to withdrawal on or prior to the date or dates that moneys therefrom are anticipated to be required.

The Trustee may trade with itself in the purchase and sale of securities for such investment. The Trustee will not be liable or responsible for any loss resulting from any such investments. Investments in Government Obligations under the Indenture may be made through repurchase agreements or Investment Agreements, executed by Trustee at the written direction of the Lessee with banks or other financial institutions or with any securities dealer which is registered as a dealer under the Securities Exchange Act of 1934, as amended, and is monitored by, reports to, and is recognized as a primary dealer by, the Federal Reserve Bank and which has a net capital of at least $75,000,000, provided that each such agreement (a) is acceptable in form to the Trustee, (b) provides for the transfer of certificated Government Obligations to the custody of the Trustee or one of its affiliates or for the registration of title to “book entry” Government Obligations in the Trustee, or one of its nominees in such Federal Reserve Bank, (c) provides that Government Obligations acquired pursuant to such agreements will be valued at least daily at the then current market value thereof, and provided that the provisions thereof result in a transfer to the Trustee or one of its nominees of all securities which are the subject of such repurchase agreements or investment agreements, and (d) the unsecured long term debt obligations of the counterparty to such repurchase agreement must be rated at least “AA” by each Rating Agency, and the value of such Government Obligations must be equal to at least 102% of the cash transferred by the Issuer to the counterparty plus accrued interest, and the maturity of such repurchase agreement must be no longer than one year and marked to market on a daily basis with deficiencies made up in cash or securities within one day.

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(b) Except as provided in the Indenture, the interest and income received upon such investments from their date of purchase, any interest paid by the Trustee or any other depositary of any fund or account and any profit resulting from the sale of any investment in any fund or amount will upon receipt be deposited and credited to the fund or account which produced such interest, income or profit. Any loss resulting from the sale of any investment in any fund or account will be charged to the fund or account in question.

(c) At the direction of the Issuer, or on its own initiative whenever a payment is to be made out of any fund or account, the Trustee will sell such securities as may be required to make the payment and restore the proceeds to the fund or account in which the securities were held.

(d) Neither the Trustee nor the Issuer nor their agents will be accountable for any depreciation in the value of any such security or for any loss resulting from the sale thereof.

(e) The moneys held by the Trustee in the various funds and accounts established under the Indenture may be pooled for the purposes of investment only, and such moneys may be invested as one account; provided, that the Trustee will keep records of the amount allocable to each fund and account which is pooled for investment purposes pursuant to this paragraph (e).

Events of Default and Remedies

Events of Default Defined. Each of the following will be an “Event of Default” thereunder:

(a) If payment will not be made of any interest upon any of the Bonds at any due date expressed therefor; or

(b) If payment of any part of the principal of (including mandatory sinking fund payments), or premium, if any, on any of the Bonds will not be made at maturity as therein expressed or when the same will become due upon call for mandatory sinking fund redemption, or otherwise; or

(c) If any Event of Bankruptcy occurs;

(d) If the Issuer will default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Indenture or any indenture supplemental thereto on the part of the Issuer to be performed, and such default will continue for thirty (30) days after written notice specifying such default and requiring the same to be remedied will have been given to the Issuer by the Trustee, which may give such notice in its discretion and will give such notice at the written request of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding thereunder; or

(e) If an event of default shall occur under any Lease.

Remedies. If any Event of Default occurs and is continuing, the Trustee may enforce each and every right granted to it as assignee of the Lease and may exercise any and all remedies available pursuant to law under the Lease. In exercising such rights and the rights given the Trustee under the Indenture, the Trustee will take such action as, in the judgment of the Trustee applying the standards and subject to satisfactory indemnity described in the Indenture, would best serve the interests of the Owners.

Legal Proceedings by Trustee. If any Event of Default has occurred and is continuing, the Trustee may, and upon the written request of the Owners of twenty-five percent (25%) in aggregate

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principal amount of all Bonds then Outstanding and receipt of satisfactory indemnity pursuant to the Indenture, will, in its own name:

(a) By mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners, including the right to require the Issuer to enforce any rights under the Lease and to require the Issuer to carry out any other provisions of the Indenture for the benefit of the Owners and to perform its duties under the Act;

(b) Bring suit upon the Bonds;

(c) By action or suit in equity require the Issuer to account as if it were the trustee of an express trust for the Owners; and

(d) By action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners.

The Trustee will be entitled as a matter of right to the appointment of a receiver or receivers for the property securing the obligations thereunder, and of the revenues, income, and profit thereof, ex parte, and without notice, and the Issuer and the Lessee consent to the appointment of such receiver upon the occurrence of an Event of Default. In the case of any receivership, insolvency, bankruptcy, reorganization, or other judicial proceedings affecting the Issuer or Lessee, the Trustee will be entitled to file such proofs of claims and other documents as may be necessary or advisable in order to have the claims of the Trustee and of the Owners allowed in such proceedings.

Notwithstanding any other provision therein or in the Lease, the Trustee will not be required to acquire possession of or take any action with respect to the Lease Property or other security thereunder which could cause it to be considered an “owner” or “operator” within the meaning of the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended from time to time, or which could result in personal liability, expense or loss under any other law dealing with environmental matters or hazardous substances. It is acknowledged and agreed that the Trustee has no authority to manage or operate the Leased Property, or any portion thereof, except as necessary to exercise remedies upon default.

Discontinuance of Proceedings by Trustee. If any proceeding commenced by the Trustee on account of any Event of Default is discontinued or is determined adversely to the Trustee, the Issuer, the Trustee and the Owners will be restored to their former positions and rights thereunder as though no such proceedings had been commenced.

Owners May Direct Proceedings. Subject to the Indenture, the Owners of a majority in aggregate principal amount of the Bonds Outstanding thereunder will have the right, after furnishing indemnity satisfactory to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee thereunder, provided that such direction will not be in conflict with any rule of law or with the Indenture or unduly prejudice the rights of minority Owners. In determining whether such conflict exists, the Trustee will be entitled to rely on an Opinion of Counsel.

Limitations on Actions by Owners. No Owner will have any right to pursue any remedy thereunder unless:

(a) the Trustee will have been given written notice of an Event of Default;

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(b) the Owners of at least twenty-five percent (25%) in aggregate principal amount of all Bonds then Outstanding will have requested the Trustee, in writing, to exercise the powers thereinabove granted or to pursue such remedy in its or their name or names;

(c) the Trustee will have been offered indemnity satisfactory to it against costs, expenses and liabilities;

(d) the Trustee will have failed to comply with such request within a reasonable time; and

(e) no direction inconsistent with such written request has been given to the Trustee by holders of a majority in principal amount of Outstanding Bonds.

Notwithstanding the foregoing provisions of the Indenture or any other provision of the Indenture, the obligation of the Issuer will be absolute and unconditional to pay thereunder, but solely from the Revenues and other funds pledged under the Indenture, the principal or redemption price of, and interest on, the Bonds to the respective Owners thereof on the respective due dates thereof, and nothing in the Indenture will affect, or impair the right of action, which is absolute and unconditional, of such Owners to enforce such payment.

Trustee May Enforce Rights Without Possession of Bonds. All rights under the Indenture and the Bonds may be enforced by the Trustee without the possession of any Bonds or the production thereof at the trial or other proceedings relative thereto, and any proceeding instituted by the Trustee will be brought in its name for the ratable benefit of the Owners of the Bonds.

Remedies Not Exclusive. No remedy therein conferred is intended to be exclusive of any other remedy or remedies, and each remedy is in addition to every other remedy given thereunder or now or thereafter existing at law or in equity or by statute.

Delays and Omissions Not to Impair Rights. No delays or omission in respect of exercising any right or power accruing upon any default will impair such right or power or be a waiver of such default, and every remedy given by the Indenture may be exercised from time to time and as often as may be deemed expedient.

Application of Funds. Anything in the Indenture to the contrary notwithstanding, if at any time the moneys in the applicable funds and accounts are not sufficient to pay the interest on or the principal of the Bonds as the same become due and payable such moneys, together with any moneys then available or thereafter becoming available for such purposes, whether through the exercise of the remedies provided for in the Indenture or otherwise, will be applied as follows:

FIRST: to the payment of the fees, costs and expenses of the Trustee incurred in connection with an Event of Default, including the reasonable compensation of its agents, attorneys and counsel, to the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners and to the payment of any outstanding fees and expenses due to the Trustee;

SECOND: to the payment of the interest then due and payable on the entire principal amount of the Bonds, and, if the amount available will not be sufficient to pay in full all such interest then due and payable on each such Interest Payment Date, then to the payment thereof ratably, according to the amounts due thereon without any discrimination or preference; and

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THIRD: to the payment of the unpaid principal amount of the Bonds which has become due and payable, with interest on the overdue principal and interest amounts of the unpaid Bonds at the rate or rates of interest then applicable to such Bonds if paid in accordance with their terms, and, if the amount available will not be sufficient to pay in full all the amounts due with respect to the Bonds on any date, together with such interest, then to the payment thereof ratably, according to the principal amount due on such date, without any discrimination or preference.

The Trustee

Resignation of Trustee. The Trustee may at any time resign and be discharged of the trusts created by the Indenture by giving written notice of such resignation to the Issuer not less than 45 days before the date when it is to take effect. Such resignation will take effect only upon the appointment and acceptance of appointment of a successor trustee. If no successor Trustee will have been appointed and have accepted appointment within 45 days after the giving of notice of resignation as aforesaid, the resigning Trustee or any Owner (on behalf of himself and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee.

Removal of Trustee. Any Trustee thereunder may be removed at any time by an instrument appointing a successor, and evidencing the acceptance of such successor, to the Co-Trustee so removed, executed by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding or (so long as the Issuer is not in default thereunder or the Lessee is not in default under the Lease) by the Issuer and filed with the Trustee and the Issuer.

Appointment of Successor Trustee. If the Trustee or any successor trustee resigns or is removed or dissolved, or if its property or business is taken under the control of any state or federal court or administrative body, the Issuer will appoint a successor. If the Issuer fails to make such appointment promptly, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding may do so, with notice to the Issuer. Notwithstanding any other provision of the Indenture, no removal, resignation or termination of the Trustee will take effect until a successor will be appointed.

Amendments and Supplements

Amendments and Supplements Without Owners’ Consent. The Indenture may be amended or supplemented at any time and from time to time, without the consent of any Owners, by a supplemental indenture authorized by a resolution of the Issuer filed with the Trustee, for one or more of the following purposes:

(a) to add additional covenants of the Issuer or to surrender any right or power therein conferred upon the Issuer; or

(b) for any purpose not inconsistent with the terms of the Indenture or to cure any ambiguity or to correct or supplement any provision contained therein or in any supplemental indenture which may be defective or inconsistent with any other provision contained therein or in any indenture, or to make such other changes and amendments which will not materially adversely affect the interests of the Owners of the Bonds; or

(c) to grant to or confer upon the Trustee for the benefit of the Owners any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Owners or the Trustee; or

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(d) to evidence the appointment of a separate Trustee or a co-trustee or to evidence the appointment of a successor Trustee; or

(e) to comply with the requirements of the Trust Indenture Act of 1939 or the Code, as each is from time to time amended, or any other provision of applicable law; or

(f) to subject to the Indenture additional revenues, properties or collateral; or

(g) to provide for additional paying agents or authenticating agents in addition to the Trustee; or

(h) to make any changes or amendments requested by each Rating Agency as a condition to the issuance or maintenance of a rating; or

(i) to maintain the exclusion of interest on the Bonds from gross income for purposes of Federal income taxation and the exemption of interest on the Bonds from State of California personal income taxes, or to maintain the treatment of interest on the Bonds with respect to the determination of an Owner’s alternative minimum tax obligation.

Each Rating Agency will be given notice of any amendment made pursuant to the Indenture.

Amendments With Owners’ Consent. The Indenture may be amended from time to time except with respect to (i) the principal, premium or interest payable upon any Bonds, (ii) the Interest Payment Dates, the date of maturity or the redemption of any Bonds and (iii) the Indenture, by a supplemental indenture approved by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Amendments with respect to matters listed in clauses (i), (ii) or (iii) will be permitted only with the prior written consent of the Owners of one hundred percent (100%) of the Bonds Outstanding. Notice of any such amendment, and of any amendment effected pursuant to the Indenture, will be promptly given by the Issuer to any Rating Agency.

Amendment of Lease. The Lease may be amended in writing as may be mutually agreed by the Issuer and the Lessee, subject to the prior written consent of the Trustee; provided, that no such amendment which materially adversely affects the rights of the Owners will be effective unless it will have been consented to by the Owners of a majority of aggregate principal amount of Bonds Outstanding. At the reasonable request of the Trustee, the Issuer will provide an Opinion of Counsel regarding whether the proposed amendment materially/adversely affects the rights of the Owners.

The Lease and the rights and obligations of the Issuer and the Lessee thereunder may also be amended or supplemented by an amendment or supplement thereto which will become binding upon execution without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes --

(a) to add to the agreements, conditions, covenants and terms required by the Issuer or the Lessee to be observed or performed therein other agreements, conditions, covenants and terms thereafter to be observed or performed by the Issuer or the Lessee, or to surrender any right or power reserved therein to or conferred therein on the Issuer or the Lessee, and which in either case will not materially adversely affect the interests of the Owners;

(b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained therein or in regard to questions arising thereunder which the Issuer or the Lessee may deem desirable or necessary and not inconsistent

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therewith, and to make any other amendments or changes which will not materially adversely affect the interest of the Owners;

(c) to effect a removal or substitution of property subject to the Lease in accordance with the provisions of the Lease; or

(d) to change the payment terms of the Lease provided that a certificate is delivered assuming that such change is made and demonstrating that the remaining Lease Payments after such change are sufficient to pay the principal and interest on the Bonds when due.

Notice of any such amendment will be promptly given by the Issuer to each Rating Agency.

No amendment to the Lease will be effective until the Trustee has received an opinion of Bond Counsel to the effect that such amendment (i) is authorized and in compliance with the Act and the Indenture; (ii) is a legal valid and binding obligation of the Lessee enforceable against the Lessee in accordance with its terms (subject to standard enforceability exceptions) and (iii) will not adversely affect the validity and enforceability of such Lease, the exclusion of interest on the Bonds from gross income for purposes of Federal income taxation.

Defeasance.

(a) When principal or redemption price (as the case may be) of, and interest on, all Bonds issued thereunder have been paid as provided therein, or provision has been made for payment of the same to such maturity or earlier redemption date, together with such Lessee’s allocable share of the compensation and expenses of the Trustee and all other sums payable thereunder by the Issuer that are allocable to the Lessee (including any rebate amount pursuant to the Indenture), the right, title and interest of the Trustee will thereupon cease and the Trustee, on demand of the Issuer or such Lessee, will release the Lease and, if all Bonds issued thereunder have been paid as provided therein, the Indenture, and will execute such documents to evidence such release as may be reasonably required by the Issuer and the Lessee and will turn over to the Issuer, the Lessee or to such person, body or authority as may be entitled to receive the same all balances then held by it thereunder and thereunder with respect to such Lessee. If payment or provision for payment is made with respect to less than all of the Bonds, the particular Bonds (or portions thereof) for which provision for payment will have been considered made will be determined by a verification report delivered to the Trustee, and thereupon the Trustee will take similar action for the release of the Indenture with respect to such Bonds.

(b) Provision for the payment of Bonds will be deemed to have been made when the Trustee, as Trustee under the Indenture, or the Trustee or such other financial institution as the Lessee may select, as escrow agent pursuant to an escrow agreement by and between the Lessee and the Trustee or such other financial institution, holds (A) moneys in an amount sufficient to make all payments specified above with respect to the Bonds to be no longer entitled to the lien of the Indenture, or (B) Government Obligations, maturing on or before the date or dates when the payments specified above will become due, the principal amount of which and the interest thereon, when due, is or will be, in the aggregate, in the opinion of an independent certified public accountant sufficient to make all such payments, or (C) any combination of such moneys and such Government Obligations the amounts of which and interest thereon, when due, are or will be, in the aggregate, in the opinion of an independent certified public accountant sufficient to make all such payments.

(c) Neither the Government Obligations nor the moneys deposited with the Trustee pursuant to the provisions summarized under this subheading, shall be withdrawn or used for any purpose other than, and will be segregated and held in trust for, the payment of the principal or redemption price

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of, and interest on, said Bonds or portions thereof. Whenever moneys or Government Obligations will be deposited with the Trustee for the payment or redemption of Bonds more than sixty (60) days prior to the date that such Bonds are to mature or be redeemed, the Trustee will mail a notice stating that such moneys or obligations have been deposited and identifying the Bonds for the payment of which such moneys or obligations are being held, to all registered Owners of Bonds for the payment of which such moneys or Government Obligations are being held.

(d) Any escrow agreement entered into pursuant to this section shall provide that (i) any substitution of Government Obligations shall require a verification by an independent certified public accountant, an opinion of Bond Counsel that such substitution will not affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and (ii) the Lessee will not exercise any optional redemption of Bonds secured by the escrow agreement not expressly provided for by such escrow agreement or any other redemption other than mandatory sinking fund redemptions unless the right to make any such redemption has been expressly reserved in the escrow agreement and such reservation has been disclosed in detail in the official statement for any related refunding bonds.

Miscellaneous Provisions

No Personal Recourse.

No recourse will be had for any claim based on the Lease, the Indenture or the Bonds against any Member of the Issuer or any Board member, officer or employee, past, present or future, of the Issuer or of any successor body as such, either directly or through the Issuer or any such successor body, under any constitutional provision, statute or rule of law or by the enforcement of any assessment or penalty or otherwise and all such liability of any such Member, officer or employee as such is expressly waived and released as a condition of and in consideration for the execution of the Indenture and the issuance of any of the Bonds.

Interested Parties.

Parties Interested Herein. Nothing in the Indenture expressed or implied is intended or shall be construed to confer upon, or to give grant to any person or entity, other than the Issuer, the Lessee, the Trustee, and the Owners of the Bonds, any right, remedy or claim under or by reason of the Indenture or any covenant, condition or stipulation of the Trust Indenture, and all covenants, stipulations, promises and agreements in the Indenture contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Lessee, the Trustee, and the registered owners of the Bonds.

THE ASSIGNMENT AGREEMENT

The Assignment Agreement provides for the transfer, assignment and setting over by the Authority to the Trustee, for the benefit of the Owners of Bonds, all of the Authority’s rights under the Lease (excepting only the Authority’s rights to recover attorneys’ fees and expenses in the event the Authority is a non-defaulting party to a Lease after a default), including, without limitation, (1) the right to receive and collect all of the Lease Payments and prepayments from the District under the Lease; (2) the right to receive and collect any proceeds of any insurance maintained pursuant to the Lease, or any condemnation award rendered with respect to the Leased Property or of any lease or sale of the Leased Property in the event of a default by the District under the Lease; (3) the right to take all actions and give all consents under the Lease; (4) the right to exercise such rights and remedies conferred on the Authority under the Lease as may be necessary or convenient (a) to enforce payment of the Lease Payments, prepayments, and any other amounts required to be deposited in the funds and accounts established under the Indenture (other than the Rebate Fund), or (b) otherwise to protect the interests of the Authority in the

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event of a default by the District under the Lease; and (5) the right of the Authority to receive rentals in excess of Lease Payments as compensation for re-leasing the Leased Property upon events of default under the Lease. The Trustee accepts such assignment for the benefit of the Owners of the Bonds, subject to the provisions of the Indenture.

THE SITE LEASE

Pursuant to the Site Lease, the District, as lessor, leases to the Authority, as lessee, right, title and interest in the Leased Property. The term of the Site Lease will commence as of the date of the Lease to the Site Lease and will remain in effect until the expiration of the term of the Lease. The Leased Property will be simultaneously leased back to the District under the Lease, and title will remain in the District.

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APPENDIX G

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) is executed and delivered by the Gavilan Joint Community College District (the “District”) in connection with the issuance by the California Community College Financing Authority (the “Authority”) of its $_________ Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture, dated as of August 1, 2016 (the “Trust Indenture”), between the Authority and U.S. Bank National Association (the “Trustee”). The District covenants as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The District acknowledges that the Authority has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Certificate and has no liability to any person, including any Holders and Beneficial Owners of the Bonds, with respect to the Rule.

SECTION 2. Definitions. The definitions set forth in the Trust Indenture apply to any capitalized term used in this Disclosure Certificate, unless such terms are otherwise defined in this Section 2 below:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” shall initially mean Dale Scott & Company Inc., or any successor Dissemination Agent designated in writing by the District (which may be the District) and which has filed with the District a written acceptance of such designation.

“Holders” shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in its depository system.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“Participating Underwriter” shall mean the original Underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

“Repository” shall mean the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

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“State” shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The District shall, not later than nine months after the end of the District’s fiscal year (presently ending June 30), commencing with the 2015-16 Fiscal Year, prepare an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate and shall (or shall cause the Dissemination Agent, if applicable, to) provide such Annual Report to Repository not later than nine months after the end of the District’s fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the District’s fiscal year changes, the District shall give notice of such change in the same manner as for a Listed Event under Section 5.

(b) Not later than thirty (30) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the District shall provide the Annual Report to the Dissemination Agent (if other than the District).

(c) If the District is unable to provide the Repositories an Annual Report as required in subsection (a), the District shall send a notice to Repository in substantially the form attached as Exhibit A hereto.

(d) The Dissemination Agent shall:

(i) determine year prior to the date for providing the Annual Report the name and address of National Repository and the State Repository, if any, and (if the Dissemination Agent is other than the District);

(ii) file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided.

SECTION 4. Content and Form of Annual Reports. (a) The District’s Annual Report shall contain or incorporate by reference the following:

(i) The District’s audited financial statements prepared in accordance with generally accepted accounting principles in effect from time to time and

(ii) Material financial information and operating data with respect to the District of the type included in the Official Statement in the following categories (to the extent not included in the District’s audited financial statements):

(A) State funding received by the District for the last completed fiscal year;

(B) Full-time equivalent student count of the District for the last completed fiscal year;

(C) outstanding District indebtedness; and

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(D) summary financial information on revenues, expenditures and fund balances for the District’s general fund reflecting adopted budget for the current fiscal year.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the District is an “obligated person” (as defined by the Rule), which have been submitted to the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify such other document so included by reference.

(b) The Annual Report shall be filed in an electronic format accompanied by identifying information prescribed by the Municipal Securities Rulemaking Board

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not in excess of 10 business days after the occurrence of the event:

1. principal and interest payment delinquencies.

2. tender offers.

3. defeasances.

4. rating changes.

5. the issuance by the Internal Revenue Service of proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB).

6. unscheduled draws on the debt service reserves reflecting financial difficulties.

7. unscheduled draws on credit enhancement reflecting financial difficulties.

8. substitution of the credit or liquidity providers or their failure to perform.

9. bankruptcy, insolvency, receivership or similar event of the District. For the purposes of the event identified in this Section 5(a)(9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

(b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

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1. non-payment related defaults.

2. modifications to rights of Bondholders.

3. optional, contingent or unscheduled bond calls.

4. unless described under Section 5(a)(5) above, adverse tax opinions, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

5. release, substitution or sale of property securing repayment of the Bonds.

6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

7. Appointment of a successor or additional trustee or paying agent with respect to the Bonds or the change of name of such a trustee or paying agent.

(c) Whenever the District obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the District shall as soon as possible determine if such event would be material under applicable federal securities laws.

(d) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) hereof would be material under applicable federal securities laws, the District shall (i) file a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the District’s determination of materiality pursuant to Section 5(c).

SECTION 6. Termination of Reporting Obligation. The obligations of the District under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of the Bonds attributable to the District.

SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate.

SECTION 8. Amendment. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate provided the following conditions are satisfied:

(a) the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the District or type of business conducted; and

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(b) this Disclosure Certificate, as amended, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances.

(c) the amendment does not materially impair the interests of Bondholders, as determined by nationally recognized bond counsel; and

(d) in the event of any amendment of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not have any obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent, if applicable, to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District or the Authority or the Dissemination Agent (if applicable), as the case may be, to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Authority to comply with this Disclosure Certificate shall be an action to compel substantial performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent (if one is appointed by the District) shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of the disclosure of information pursuant to this Disclosure Certificate or out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the gross negligence or willful misconduct of the Dissemination Agent. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent, termination of Disclosure Certificate and payment of the Bonds. The Dissemination Agent (if not the District) shall not have any responsibility or liability for the failure to report any Listed Event or any financial information or as to which the District did not prepare a report in a format suitable for filing with the Repositories.

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SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given as follows:

To the District: Vice President of Administrative Services Gavilan Joint Community College District 50455 Santa Teresa Blvd. Gilroy, CA 95020

To the Authority: Secretary California Community College Financing Authority 2017 “O” Street Sacramento, CA 95811

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 14. Signature. This Disclosure Certificate has been executed by the undersigned on the date hereof, and such signature binds the District to the undertaking herein provided.

Dated: ____________ __, 2016


By: Vice President of Administrative Services

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party: Gavilan Joint Community College District (the “District”)

Name of Bond Issue: $_________ California Community College Financing Authority Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District

Date of Delivery: ____________ __, 2016

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Certificate with respect to the Bonds. The District anticipates that the Annual Report will be filed by _____________.

Dated: _______________


By: [form only; no signature required]


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APPENDIX H

BOOK-ENTRY ONLY SYSTEM

General

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District and the Authority believe to be reliable, but neither the District nor the Authority take any responsibility for the accuracy or completeness thereof. The District and the Authority cannot and do not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each issue of the Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect

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Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Prepayment notices shall be sent to DTC. If less than all of the Bonds within an issue are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of, premium, if any and interest evidenced by the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds, distributions and any other payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

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The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

Discontinuance of Book-Entry System

DTC may discontinue providing its services with respect to the Bonds at any time by giving notice to the Trustee and discharging its responsibilities with respect thereto under applicable law or, the District may terminate its participation in the system of book-entry transfers through DTC or any other securities depository at any time. In the event that the book-entry system is discontinued, the provisions of the Trust Agreement will govern the delivery, replacement, transfer and payment of the Bonds. See also Appendix F – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Transfer and Exchange,” “—Payment,” and “—Book-Entry Only System” attached hereto.

Transfer Fees

For every transfer and exchange of Bonds, Owners requesting such transfer or exchange may be charged a sum sufficient to cover any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed by the Trustee, DTC or the DTC Participant in connection with such transfers or exchanges.

Documents

$7,500,000* CALIFORNIA COMMUNITY COLLEGE ......The California Community College Financing Authority Lease Revenue Bonds, Series 2016A for Gavilan Joint Community College District (the