Qualified School Construction Bonds

1. Qualified School Construction Bonds Presentation Slides - www.dacbond.com DAC Bond Webinar - Apr 22, 1:00 PM EST Confidential & Proprietary

2. Qualified School Construction Bonds (QSCBs) and Qualified Zone Academy Bonds (QZABs) • Overview of Tax Credit Bonds (K-12) • IRS Notice 2009-35 (QSCBs) • IRS Notice 2009-30 (QZABs) • Investor Considerations • San Diego Unified School District POS Confidential & Proprietary

3. Overview A. QSCBs are new financing vehicles created by the American Recovery & Reinvestment Act of 2009 • Authorized $11B of QSCBs in each of 2009 and 2010, program sunsets thereafter • Promotes construction and improvement of schools B. QZABs created in 1997 with limited use and amended thereafter • Authorizes $1.4B (up from $400M in 2008) • Does not allow new construction C. General Tax Requirements • Issuer must expend 100% of proceeds • Proceeds must be expended within 36 months • If 100% not expended, issuer must redeem bonds • Proceeds may be used for reimbursement (if paid after issuer received allocation) D. Unlike bonds with interest exempt from gross income, QSCBs and QZABs • No interest cost to issuer (issuer pays bondholder a tax credit) • Credit must be used within specific time period (bondholder); applied to federal taxes or AMT (bondholder) • Tax credit “computed” by Treasury by setting the “credit rate” (www.treasurydirect.gov) • Credit rate x principal outstanding = tax credit amount • The credit amount is included in the gross income of the holder as interest • Maximum maturity set by Treasury on sale date of bonds (Treasury) E. High Level of Audit Coverage Confidential & Proprietary

4. IRS Notice 2009-35 (irs.gov) QSCBs A. Allots Maximum Dollars for 2009 • Caps States at $6.6B • Caps Local Agencies at $4.4B (LARGE LEA ALLOCATIONS) • Caps U.S. Bureau of Indian Affairs at $200M B. Allocation Based 60% on Federal Grant for Disadvantaged Children; 40% to 100 Largest School Districts in U.S. C. Proceeds for Construction, Rehabilitating, Repairing or Acquiring Land & Related Equipment Within Jurisdiction of Issuer D. Timely Report in Line 20c of 8038 That bonds Are QSCBs E. Subject to Tax-Exempt Bond Requirements on Arbitrage & Record Retention • Yield Restrictions • Rebate • Record Retention (Life of Bonds + 3 Years) Confidential & Proprietary

5. III. IRS Notice 2009-30 (QZABs) A. 2009 Allocation $1.4B in 2009 + $1.4B in 2010 B. Allocation by State Population Below Poverty Level C. Proceeds for Renovations, Equipment, Course Materials, Staff Training at Existing Schools Designated as QZABs D. Proceeds May NOT Fund New Construction E. Requires 10% Match of Contributions (Private Match) F. Subject to Arbitrage & Record Retention Requirements • Yield Restrictions • Rebate • Record Retention (Life of Bonds + 3 Years) Confidential & Proprietary

6. IV. Investor Considerations A. Issue for bondholders “will issuer redeem bonds” B. Investors request timely filing of Final Expenditure Certification C. San Diego USD example • Revise MEN List • FTP Report Confidential & Proprietary

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10. Tax Credit Bonds Monitoring Dashboard DAC has enhanced our system to assist issuers and investors with post-issuance compliance communications for BABs, QSCBs, QZABs, as well as other tax-exempt or tax credit bonds.Tax credit bonds subject to the 100% expenditure requirement are managed as follows:For Tax Credit Bonds, DAC has added an event notice in our system for assisting the issuer in notifying the market once 100% of the available proceeds have been expended titled “Final Expenditure Certification”. DAC will begin requesting information after the first 18 months have expired and continue those requests until the certification of expenditure of proceeds has been made or the 36 month period has ran. This allows investors a “thumbs up” or “thumbs down” process as to the issuer’s requirement to redeem bonds (a mandatory process required within 90 days after the end of the 36 months unless an extension is allowed). If an extension is granted, DAC will tract the new dates and notice the market of the extension and monitor the certification requirement until all dollars are expended or the bonds are to be redeemed. For Direct Payment BABs, where the issuer receives payments directly from the Treasury, DAC has added both the Final Expenditure Certification process and a database system for assisting issuers with filing IRS Form 8038-CP by preparing the payment request in advance of the due date, obtaining signatures, and filing on the first allowable date (90 days prior to the interest payment date) for fixed rate bonds. This allows issuers to not only remember when to file but assumes the responsibility for accurately preparing the filing in a timely manner to allow issuers the advantage of earning interest at the earliest possible date (note: for variable rate bonds, the 8038-CP must be submitted within 45 days after the last interest payment date in each quarterly period for interest paid in the preceding quarter). A record retention screen is also attached to support the uploading of all bank statements, draw schedules and expenditure receipts as required by IRS record retention rules. DAC will hold these documents for the life of the bonds, plus 3 years. DAC also has private use monitoring for issuers in need of fulfilling the 10% use requirement. Note: RZEDBs are provided for and DAC has built a provision that reflects the 45% tax credit payment computation into the payment processing module.Both QSCBs and QZABs are covered by the Final Expenditure Certification process detailed under Tax Credit Bonds above. The Final Expenditure Certification process informs investors on a timely basis whether bonds will be redeemed early based on a failure to expend proceeds within the 36 month expenditure period. DAC developed and deployed this process in the San Diego USD 2009 GO Bonds. The CDA has been attached for your review. Confidential & Proprietary