NEW ISSUE BOOK ENTRY ONLY

Ratings: Moodys: Aa3 Standard & Poors: AA See Ratings herein In the opinion of Dorsey & Whitney LLP, Bond Counsel, assuming compliance with certain requirements, under current law, interest on the Series 2009A Bonds (including any original issue discount) (i) will be excluded from gross income of the owners thereof for federal income tax purposes and (ii) is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and is not included in adjusted current earnings for purposes of the federal alternative minimum tax imposed on corporations. Interest on the Series 2009B Bonds will be includable in the gross income of the owners thereof for federal income tax purposes. The holders of the Series 2009B Bonds are not entitled to a tax credit as a result of ownership of the Series 2009B Bonds. Interest on the Bonds is exempt from State of Iowa personal and corporate (but not franchise) income taxes. See Tax Exemption herein. $380,120,000 STATE OF IOWA IJOBS Program Special Obligation Bonds Series 2009A Dated: Date of Delivery $220,950,000 STATE OF IOWA IJOBS Program Special Obligation Bonds Taxable Series 2009B (Build America Bonds-Direct Payment) Due as shown on the inside cover

The IJOBS Program Special Obligation Bonds, Series 2009A (the Series 2009A Bonds) and the IJOBS Program Special Obligation Bonds, Taxable Series 2009B (Build America Bonds-Direct Payment) (the Series 2009B Bonds and, together with the Series 2009A Bonds, the Bonds) are to be issued by the State of Iowa (the State) pursuant to a Master Indenture of Trust dated as of July 1, 2009 (the Master Indenture) and a Series 2009 Supplemental Master Indenture of Trust dated as of July 1, 2009 (the Supplemental Indenture) (the Master Indenture, as supplemented by the Supplemental Indenture, is referred to as the Indenture) between the State and Wells Fargo Bank, National Association, Des Moines, Iowa (the Trustee), for the purpose of providing funding for (i) certain infrastructure projects of the State, (ii) certain grant and loan programs of the State, (iii) capitalized interest on a portion of the Bonds through June 1, 2010, (iv) a Bond Reserve Fund established under the Master Indenture, and (v) certain costs of issuance. The Bonds are secured by certain amounts to be deposited in the Revenue Bonds Debt Service Fund, including a Standing Appropriation of the first $55,000,000 received annually by the State for the fiscal year beginning July 1, 2010 and each fiscal year thereafter from Gaming Revenues which would otherwise be deposited in the General Fund of the State, and, to the extent of any shortfall in Gaming Revenues, Beer and Liquor Revenues. The direction to deposit Gaming Revenues into the Revenue Bonds Debt Service Fund is a Standing Appropriation. A Standing Appropriation is made automatically under State law without further action by the General Assembly. It may only be changed by a subsequent act adopted by a majority of both houses of the General Assembly and approved by the Governor of the State. The Bonds are also payable from the Bond Reserve Fund, including any amounts appropriated to replenish such fund in accordance with the Reserve Fund Replenishment Procedure described herein. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Appendix B. The Bonds are issuable only as fully registered bonds and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (DTC), New York, New York, which will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing their beneficial ownership interests in the Bonds. Purchases and sales by the Beneficial Owners of Bonds shall be made in book-entry form in $5,000 denominations or integral multiples thereof. See THE BONDS Book Entry Only System herein. Payments of principal, redemption price and interest with respect to the Bonds are to be made to DTC by the Trustee so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to DTC Participants (as defined herein) is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants as more fully described herein. Interest on the Bonds is payable on December 1, 2009 and semiannually on each June 1 and December 1 thereafter, until maturity or earlier redemption. The Bonds are subject to redemption prior to maturity as set forth herein. The Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Bonds do not directly, indirectly, or contingently obligate the State or a political subdivision of the State to apply moneys from or to levy or pledge any form of taxation whatsoever to, or to continue the appropriation of funds for the payment of the Bonds. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the Pledged Funds. The Bonds are offered when, as and if issued and received by the Underwriters, subject to the approval of Dorsey & Whitney LLP, Des Moines, Iowa, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriters by their counsel, Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, Iowa. It is expected that the Bonds in definitive form will be available for delivery in New York, New York through the facilities of DTC, on or about July 22, 2009. Senior Manager BARCLAYS CAPITAL Co-Senior Managers MERRILL LYNCH & CO. Co-Managers CITI GOLDMAN, SACHS & CO J.P. MORGAN MORGAN STANLEY RBC CAPITAL MARKETS WILLIAM BLAIR & COMPANY

The date of this Official Statement is July 16, 2009

#1681815 v.19

SERIES 2009A MATURITY SCHEDULE Maturity (June 1) 2011 2011 2012 2012 2013 2013 2014 2014 2015 2016 2016 2017 2018 2019 2019 2020* 2021* 2022* 2023* 2024* 2024 2025* 2026* 2027* 2028* 2029
*Priced to call date

Principal Amount $8,750,000 5,000,000 9,335,000 5,000,000 2,745,000 12,210,000 9,975,000 5,605,000 16,300,000 10,175,000 6,945,000 17,835,000 18,725,000 14,660,000 5,000,000 20,595,000 21,625,000 22,705,000 23,840,000 16,910,000 8,125,000 26,225,000 27,535,000 28,915,000 30,360,000 5,025,000

Interest Rate 5.000% 3.000% 5.000% 3.000% 5.000% 4.000% 5.000% 4.000% 5.000% 5.000% 3.000% 5.000% 5.000% 5.000% 4.000% 5.000% 5.000% 5.000% 5.000% 5.000% 4.250% 5.000% 5.000% 5.000% 5.000% 4.625%

Yield 1.200% 1.200% 1.480% 1.480% 1.930% 1.930% 2.400% 2.400% 2.670% 2.930% 2.930% 3.200% 3.400% 3.570% 3.570% 3.720% 3.870% 4.010% 4.130% 4.230% 4.250% 4.330% 4.400% 4.440% 4.510% 4.640%

SERIES 2009B MATURITY SCHEDULE Maturity (June 1) 2034 Principal Amount $220,950,000 Interest Rate 6.750% Yield 6.798%

No dealer, broker, or other person has been authorized by the State of Iowa or the Underwriters to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by either the State or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy by any person, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is i

unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the State and from other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the State since the date hereof. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION BY REASON OF THE PROVISIONS OF SECTION 3(a)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRATION OR QUALIFICATION OF THESE SECURITIES UNDER THE SECURITIES OR BLUE SKY LAWS OF THE JURISDICTIONS IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER JURISDICTIONS SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THESE SECURITIES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATIONS TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THE PRICE AT WHICH THE BONDS ARE OFFERED TO THE PUBLIC BY THE UNDERWRITERS (AND THE YIELD RESULTING THEREFROM) MAY VARY FROM THE PUBLIC OFFERING PRICE APPEARING ON THE COVER PAGE HEREOF. IN ADDITION, THE UNDERWRITERS MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICE TO DEALERS AND OTHERS. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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Cautionary Statements Regarding Forward-Looking Statements This Official Statement, including APPENDIX A, contains statements which should be considered "forward-looking statements," meaning they refer to possible future events or conditions. Such statements are generally identifiable by the words such as "plan," "expect," "estimate," "budget" or similar words. 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 STATE DOES NOT EXPECT OR INTEND TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

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TABLE OF CONTENTS Page Introduction ..................................................................................................................................................................1 General ............................................................................................................................................................1 Build America Bonds ......................................................................................................................................3 Financial Information ......................................................................................................................................3 Authorization .................................................................................................................................................................4 Sources of Payment and Security ..................................................................................................................................4 General ............................................................................................................................................................4 Bond Fund .......................................................................................................................................................5 Capitalized Interest Account ...........................................................................................................................6 Scheduled Draws on the Bond Reserve Fund; Replenishment........................................................................7 Bond Reserve Fund and Reserve Fund Replenishment Procedure..................................................................8 Cash Funded Reserve Account........................................................................................................................9 Gaming Revenues .........................................................................................................................................10 Beer and Liquor Revenues ............................................................................................................................10 Flow of Funds................................................................................................................................................12 Standing Appropriations................................................................................................................................14 Application of Subsidy Payments .................................................................................................................14 Additional Bonds...........................................................................................................................................14 Racing and Gaming In Iowa ........................................................................................................................................15 Background ...................................................................................................................................................15 Referendum Requirements ............................................................................................................................16 Revenue Sources ...........................................................................................................................................18 Historic Revenues .........................................................................................................................................20 Iowa Alcoholic Beverages Division ............................................................................................................................23 History and Operations..................................................................................................................................23 Current Operations, Gross Revenues and Profit............................................................................................24 The Interdepartmental Agreement ...............................................................................................................................25 Iowa Jobs Program ......................................................................................................................................................26 Background ...................................................................................................................................................26 Iowa Jobs Board ............................................................................................................................................26 Projects Funded From Bond Proceeds...........................................................................................................27 Other Projects................................................................................................................................................29 Sources and Uses of Funds ..........................................................................................................................................30 The Bonds....................................................................................................................................................................31 Description ....................................................................................................................................................31 Optional Redemption ....................................................................................................................................31 Mandatory Redemption.................................................................................................................................31 Extraordinary Optional Redemption of Series 2009B Bonds........................................................................32 Selection of Bonds for Redemption ..............................................................................................................32 Notice of Redemption ...................................................................................................................................33 Book-Entry System .......................................................................................................................................33 Investment Considerations...........................................................................................................................................36 Limited Special Obligations ..........................................................................................................................36 Possible Changes in Law...............................................................................................................................36 Referendum Requirements ............................................................................................................................36 Revenue Variations .......................................................................................................................................37 Competition for Gaming Revenues ...............................................................................................................38 Subsidy Payments .........................................................................................................................................38 Additional Bonds...........................................................................................................................................39 Secondary Market for Bonds.........................................................................................................................39 Litigation. ....................................................................................................................................................................39 Legal Matters...............................................................................................................................................................39 Tax Exemption ............................................................................................................................................................39

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Original Issue Discount ...............................................................................................................................................41 Original Issue Premium ...............................................................................................................................................42 Underwriting................................................................................................................................................................43 Relationships Among the Parties.................................................................................................................................43 Financial Advisor ........................................................................................................................................................44 Compliance With SEC Rule 15c2-12 ..........................................................................................................................44 Continuing Disclosure. ................................................................................................................................................44 Information to be Disclosed ..........................................................................................................................45 Ratings .......................................................................................................................................................................45 Miscellaneous ..............................................................................................................................................................46 Appendix A - Information Concerning the State Appendix B - Definitions and Summary of Principal Documents Appendix C - Forms of Opinions of Bond Counsel Appendix D - Form of Continuing Disclosure Agreement

OFFICIAL STATEMENT $380,120,000 STATE OF IOWA IJOBS PROGRAM SPECIAL OBLIGATION BONDS SERIES 2009A $220,950,000 STATE OF IOWA IJOBS PROGRAM SPECIAL OBLIGATION BONDS TAXABLE SERIES 2009B (BUILD AMERICA BONDS-DIRECT PAYMENT)

INTRODUCTION General This Official Statement, including the cover page and appendices hereto (the Official Statement), is provided to furnish information with respect to the offer and sale by the State of Iowa (the State) of its IJOBS Program Special Obligation Bonds, Series 2009A (the Series 2009A Bonds) in the aggregate principal amount of $380,120,000 and its IJOBS Program Special Obligation Bonds, Taxable Series 2009B (Build America Bonds-Direct Payment) (the Series 2009B Bonds and, together with the Series 2009A Bonds, the Bonds) in the aggregate principal amount of $220,950,000. The Bonds are being issued pursuant to Senate File 376, 83rd G.A., 1st Sess. (Iowa 2009) (S.F. 376); Iowa Code Section 8.57 (2009), as amended by S.F. 376, Section 26, H.F. 811, Section 100, and Senate File 478, Section 29; Iowa Code Section 123.53 (2009), as amended by S.F. 376; Iowa Code Section 99D.17 (2009); and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104 (collectively, the Act), a Master Indenture of Trust dated as of July 1, 2009 (the Master Indenture) and a Series 2009 Supplemental Master Indenture of Trust dated as of July 1, 2009 (the Supplemental Indenture) (the Master Indenture, as supplemented by the Supplemental Indenture is referred to as the Indenture) between the State and Wells Fargo Bank, National Association, as Trustee (the Trustee). Under the Act, the State is permitted to issue its Bonds in amounts which provide net proceeds of not more than $545,000,000. All capitalized terms used in this Official Statement which are defined in the Indenture and not defined herein shall have the respective meanings set forth in APPENDIX B - DEFINITIONS AND SUMMARY OF PRINCIPAL DOCUMENTS to this Official Statement. The Bonds are issued by the State for the purpose of providing funding for (i) certain infrastructure projects of the State, (ii) certain grant and loan programs of the State, (iii) capitalized interest on a portion of the Bonds through June 1, 2010, (iv) the Bond Reserve Fund in the amount of the original Tax-Exempt Bond Reserve Fund Requirement ($32,111,319) and the original Taxable Bond Reserve Fund Requirement ($22,095,000), and (v) costs of issuance of the Bonds. The infrastructure, grant and loan programs are intended to fund various capital projects related to flood relief, flood control, protection and prevention, local infrastructure, water quality and wastewater improvement, soil conservation, energy production and technology. The funding includes certain projects under the Iowa Jobs Program which will be administered by the Iowa Jobs Board established under the Act (the Iowa Jobs Board). See IOWA JOBS PROGRAM herein.

The Bonds will be payable from and entitled to the protection and security of certain amounts to be deposited in the Revenue Bonds Debt Service Fund and pledged pursuant to the Act and the Indenture to the payment of the Bonds. The Act provides that there shall be deposited in the Revenue Bonds Debt Service Fund a Standing Appropriation (as defined herein) of the first $55,000,000 received annually by the State for the fiscal year beginning July 1, 2010 and each fiscal year thereafter from fees and taxes imposed in connection with horse and dog racing and wagering and taxes imposed in connection with gambling at racetracks and riverboats which would otherwise be deposited in the General Fund of the State (See SOURCES OF PAYMENT AND SECURITY-Gaming Revenues for a definition of Gaming Revenues) and, to the extent of a Gaming Revenues Deficit (as defined herein), revenues from the operation of the Iowa Alcoholic Beverages Division after the payment of certain costs and expenses as provided in Section 123.53(2) (See SOURCES OF PAYMENT AND SECURITY-Beer and Liquor Revenues for a definition of Beer and Liquor Revenues). A Standing Appropriation is made automatically under State law without further action by the General Assembly. It may only be changed by a subsequent act adopted by a majority of both houses of the General Assembly and approved by the Governor of the State. Investment earnings on the Revenue Bonds Debt Service Fund will also be deposited in the Revenue Bonds Debt Service Fund. Earnings on the Bond Reserve Fund may be transferred by the Treasurer to the Bond Fund to the extent the transfer does not reduce the amount in the Bond Reserve Fund below the Bond Reserve Fund Requirement. The Bonds are also payable from the Bond Reserve Fund, including amounts appropriated to replenish such fund in accordance with the Reserve Fund Replenishment Procedure described herein. The Revenue Bonds Debt Service Fund (as further divided into a Revenue Bonds Pledged Funds Account and a Revenue Bonds Unpledged Funds Account) is established and held in the office of the State Treasurer (the Treasurer) and the Bond Reserve Fund is established with and held by the Trustee pursuant to the Master Indenture. The Revenue Bonds Pledged Funds Account, the Bond Fund and the Bond Reserve Fund (the Bond Fund and the Bond Reserve Fund are further divided into a Taxable Bonds Account and a Tax-Exempt Bonds Account) are pledged pursuant to the Master Indenture to the payment of the Bonds. See SOURCES OF PAYMENT AND SECURITY herein. Certain arrangements with respect to the deposit of Gaming Revenues and Beer and Liquor Revenues in the Revenue Bonds Debt Service Fund and related matters are set forth in an Interdepartmental Agreement. See INTERDEPARTMENTAL AGREEMENT herein. The Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Bonds do not directly, indirectly, or contingently obligate the State or a political subdivision of the State to apply moneys from or to levy or pledge any form of taxation whatsoever to, or to continue the appropriation of funds for the payment of the Bonds. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the Pledged Funds.

Build America Bonds Under the American Recovery and Reinvestment Act of 2009 (the Recovery Act), states and political subdivisions, including the State, are authorized to designate taxable bonds as Build America Bonds if the bonds are issued to finance capital expenditures for which the issuer could issue tax-exempt bonds. An issuer of Build America Bonds may elect to receive a subsidy payment from the federal government equal to 35% of the amount of each interest payment on such taxable bonds (the Subsidy Payments). The State has designated the Series 2009B Bonds as Build America Bonds and has elected to receive Subsidy Payments with respect to the Series 2009B Bonds. The receipt of the Subsidy Payments by the State is subject to certain requirements, including the filing of a form with the Internal Revenue Service prior to each Interest Payment Date. The State will covenant in the Indenture that it will direct the Subsidy Payments be paid to the Trustee and has directed the Trustee to deposit the Subsidy Payments in the Bond Fund. A portion of the interest due on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 shall be paid from the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund and a portion of such interest will be payable from a scheduled draw on the Taxable Bonds Account of the Bond Reserve Fund, since the State does not anticipate receiving the applicable Subsidy Payments until subsequent to each Interest Payment Date. The State has directed that Subsidy Payments received relating to the interest payable on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 be deposited in the Taxable Bonds Account of the Bond Reserve Fund in order to replenish that account. See SOURCES OF PAYMENT AND SECURITY-Capitalized Interest Account. In the event that the amounts on deposit in the Bond Fund prior to receipt of a Subsidy Payment are equal to or in excess of the Debt Service Payments due during the then current fiscal year, the Trustee will convey the Subsidy Payment received by it on an Interest Payment Date to the State and the State may use the Subsidy Payment for other purposes. See SOURCES OF PAYMENT AND SECURITY-Application Of Subsidy Payments herein. The State has covenanted that it will take all actions required by law or applicable regulations as necessary to provide for the collection to the fullest extent possible of the Subsidy Payments and will not knowingly take action or omit to take any action, which action or omission will adversely affect the ability of the State to collect the Subsidy Payments to the fullest extent possible. The Subsidy Payments are not full faith and credit obligations of the United States of America. The holders of the Series 2009B Bonds are not entitled to a tax credit as a result of ownership of the Series 2009B Bonds. Financial Information The States Comprehensive Annual Financial Reports, including the States general purpose financial statements, for the fiscal years ending June 30 of 2008, 2007, 2006 and 2005 are available on the States website at http://das.sae.iowa.gov/financial_reports/index.html. Reference is made to such annual reports for financial information with respect to the State. Only the States Comprehensive Annual Financial Reports are incorporated herein by reference, and the State makes no representation with respect to any other information found on its website. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the Pledged Funds. There follows in this Official Statement descriptions of the State, the Revenue Bonds Debt Service Fund, the infrastructure improvements and grant and loan programs to be funded, 3

including the Iowa Jobs Program, the Bonds and the sources of payment and security for the Bonds, together with summaries of certain provisions of the Indenture. All references herein to the Indenture are qualified in their entirety by reference to the definitive form thereof, and all references to the Bonds are further qualified by reference to the information with respect to the Bonds contained in the Indenture. Copies of such documents are available for inspection at the principal corporate trust office of the Trustee.

AUTHORIZATION The Bonds are authorized under the Act. The Act authorizes the Treasurer to issue bonds and to do all things necessary or convenient under the Act in order to provide financing for certain infrastructure projects of the State and to fund certain grant and loan programs of the State. The Act provides that the Treasurer shall have all of the powers which are necessary or convenient to issue, sell and secure bonds and carry out the Treasurers duties under the Act. The Treasurer may issue bonds in such principal amounts as the Treasurer determines are necessary to provide sufficient funds for the infrastructure projects and grant and loan programs, including the Iowa Jobs Program, the payment of interest on the bonds, the establishment of reserves to secure the bonds, the payment of costs of issuance of the bonds, and the payment of other expenditures of the Treasurer incident to and necessary or convenient to carry out the bond issue and the purpose for which the bonds are sold. The Treasurer may issue and sell bonds in amounts which provide aggregate net proceeds of not more than five hundred forty-five million dollars, excluding any bonds issued and sold to refund outstanding bonds issued under the Act.

SOURCES OF PAYMENT AND SECURITY General The Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Bonds do not directly, indirectly, or contingently obligate the State or a political subdivision of the State to apply moneys from or to levy or pledge any form of taxation whatsoever to, or to continue the appropriation of funds for the payment of the Bonds. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the Pledged Funds. Pursuant to the Indenture, the Gaming Revenues and any Beer and Liquor Revenues necessary to make up the Gaming Revenues Deficit, if any, are to be deposited in the Revenue Bonds Debt Service Fund established in the Office of the Treasurer; provided, however, that such Gaming Revenues and Beer and Liquor Revenues are not pledged to the payment of the Bonds unless and until deposited in the Revenue Bonds Pledged Funds Account. Two accounts will be created within the Revenue Bonds Debt Service Fund to be designated as the Revenue Bonds Pledged Funds Account and the Revenue Bonds Unpledged Funds Account. Gaming Revenues and Beer and Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund shall be deposited as follows: (a) Gaming Revenues and Beer and 4

Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund in each Fiscal Year shall first be deposited in the Revenue Bonds Pledged Funds Account in the amount necessary to pay Annual Debt Service for such Fiscal Year; and (b) all remaining Gaming Revenues and Beer and Liquor Revenues shall be deposited into the Revenue Bonds Unpledged Funds Account to pay the fees and expenses of trustees, paying agents, remarketing agents, financial advisors, underwriters, depositories, guarantors, bond insurers, liquidity or credit facility providers, interest rate indexing agents, and other professional service providers, and the administration of the Bonds payable during the Fiscal Year in which such deposit is made. All earnings on the Revenue Bonds Debt Service Fund shall be deposited in the Revenue Bonds Pledged Funds Account; provided that if moneys in the Revenue Bonds Pledged Funds Account are then sufficient to pay Annual Debt Service for the Fiscal Year in which such earnings are to be deposited, such earnings shall be deposited in the Revenue Bonds Unpledged Funds Account. Any funds remaining in the Revenue Bonds Pledged Funds Account and any Gaming Revenues and Beer and Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund after the Treasurer has deposited in the Bond Fund an amount equal to Annual Debt Service for the Fiscal Year during which such deposits were made shall be deposited in the Revenue Bonds Unpledged Funds Account. Any amounts on deposit in the Revenue Bonds Debt Service Fund at the end of each Fiscal Year which are determined by the Treasurer to not be encumbered or obligated or otherwise necessary to make Debt Service Payments or to pay the various fees, expenses and cost authorized under the Act for such Fiscal Year are to be credited to the Rebuild Iowa Infrastructure Fund. The State will also covenant in the Indenture that it will direct that the Subsidy Payments be paid to the Trustee and has directed the Trustee to deposit the Subsidy Payments in the Bond Fund; provided, however, that the Subsidy Payments received relating to the interest payable on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 will be deposited in the Taxable Bonds Account of the Bond Reserve Fund in order to replenish that account. See SOURCES OF PAYMENT AND SECURITY-Application of Subsidy Payments herein. Under the Indenture, the State has pledged and granted a first security interest in the Revenue Bonds Debt Service Fund (other than moneys, assets, revenues and amounts on deposit in the Unpledged Funds Account of the Revenue Bonds Debt Service Fund), the Bond Fund, the Bond Reserve Fund, and all other moneys and securities pledged or assigned to the Trustee under the Indenture in order to secure the payment of the principal of and premium, if any, and interest on the Bonds (the Pledged Funds). Pledged Funds do not include the Rebate Fund. Bond Fund Beginning on the first Transfer Day (a Transfer Day is the day which is two Business Days prior to the 15th day of each calendar month) of each Fiscal Year and continuing on each subsequent Transfer Day thereafter, until an amount sufficient to pay the Annual Debt Service due and payable on the Bonds during such Fiscal Year (or such other amount as specified in a Supplemental Indenture) shall have been transferred to the Bond Fund from the Revenue Bonds Pledged Funds Account, the Treasurer shall pay to the Trustee, as a Debt Service Payment on the Bonds, all funds on deposit in the Revenue Bonds Pledged Funds Account on such Transfer Day.

Notwithstanding the foregoing, the Debt Service Payment due on the Transfer Day immediately prior to a Principal Payment Date shall be an amount equal to the Annual Debt Service due and payable on the Bonds during the Fiscal Year in which such Transfer Day occurs, (or such other amount as specified in a Supplemental Indenture) minus (i) the amounts on deposit in the Bond Fund on such Transfer Day and (ii) any amounts previously paid to Bondholders on any Interest Payment Date occurring during such Fiscal Year and prior to such Transfer Day. The Trustee shall, fifteen days after each Interest Payment Date occurring during a Fiscal Year, transfer any funds held in the Bond Fund (other than amounts deposited in a Capitalized Interest Account of the Bond Fund, which will be disbursed as provided in the Supplemental Indenture authorizing the issuance of Bonds related to such amounts) in excess of the amount needed to pay remaining unpaid Annual Debt Service on all Bonds during such Fiscal Year to the Treasurer for deposit in the Revenue Bonds Unpledged Funds Account. Notwithstanding any provision in the Master Indenture to the contrary, unless otherwise provided in a Supplemental Indenture, any amounts to be deposited in the Bond Fund pursuant to the Indenture or any Supplemental Indenture (other than accrued interest, any amounts intended as capitalized interest and any transfers from the Bond Reserve Fund, which shall be deposited as otherwise provided herein or in a Supplemental Indenture) shall be deposited as follows: (x) in the Tax-Exempt Bonds Account of the Bond Fund in an amount equal to the amount of such deposit multiplied by the percentage determined by dividing (i) the Annual Debt Service on such Tax-Exempt Bonds for the Fiscal Year during which such deposit is made (reduced by the amount, if any, transferred to the Tax-Exempt Bonds Account from the Bond Reserve Fund during such Fiscal Year), less any amounts of Debt Service with respect to such Tax-Exempt Bonds previously paid for such Fiscal Year by (ii) the Annual Debt Service on all Bonds for such Fiscal Year less any amounts of Debt Service with respect to all Bonds previously paid for such Fiscal Year, and (y) the remaining amounts to be so deposited shall be deposited in the Taxable Bonds Account of the Bond Fund. Notwithstanding any provision in the Master Indenture to the contrary and unless otherwise specified in a Supplemental Indenture, amounts on deposit in the Tax-Exempt Bonds Subaccount of the Capitalized Interest Account of the Bond Fund and the Tax-Exempt Bonds Account of the Bond Fund consisting of proceeds of Tax-Exempt Bonds may be used only to pay principal of, premium, if any and interest on Tax-Exempt Bonds, and amounts on deposit in the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund and the Taxable Bonds Account of the Bond Fund consisting of proceeds of Taxable Bonds may be used only to pay principal of, premium, if any and interest on Taxable Bonds. Capitalized Interest Account On the Transfer Days immediately preceding December 1, 2009 and June 1, 2010, there shall be transferred from the Tax-Exempt Bonds Subaccount of the Capitalized Interest Account of the Bond Fund to the Tax-Exempt Bonds Account of the Bond Fund to be used to pay interest due on the Series 2009A Bonds on the next Interest Payment Date an amount equal to the interest payable on the Series 2009A Bonds on December 1, 2009 and June 1, 2010, respectively. Any amounts remaining in the Tax-Exempt Bonds Subaccount of the Capitalized Interest 6

Account of the Bond Fund on or after June 1, 2010 shall be transferred to the Revenue Bonds Capitals Fund. On the Transfer Day immediately preceding December 1, 2009, there shall be transferred from the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund to the Taxable Bonds Account of the Bond Fund an amount equal to $3,473,748 for payment of a portion of the interest due on the Series 2009B Bonds on December 1, 2009. On the Transfer Day immediately preceding June 1, 2010, there shall be transferred from the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund to the Taxable Bonds Account of the Bond Fund an amount equal to $4,847,091 for payment of a portion of the interest due on the Series 2009B Bonds on June 1, 2010. Any amounts remaining in the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund on or after June 1, 2010 shall be transferred to the Revenue Bonds Capitals Fund. Scheduled Draws on the Bond Reserve Fund; Replenishment On December 1, 2009, unless the total amount of the Subsidy Payment for such date has been received by the Trustee, there shall be transferred from the Taxable Bonds Account of the Bond Reserve Fund an amount equal to the amount of such Subsidy Payment not received for payment of a portion of the interest due on the Series 2009B Bonds on December 1, 2009. On June 1, 2010, unless the total amount of the Subsidy Payment for such date has been received by the Trustee, there shall be transferred from the Taxable Bonds Account of the Bond Reserve Fund an amount equal to the amount of such Subsidy Payment not received for payment of a portion of the interest due on the Series 2009B Bonds on June 1, 2010. Any portion of the Subsidy Payments received relating to the interest payable on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 received after each such date shall be deposited in the Taxable Bonds Account of the Bond Reserve Fund in order to replenish the Bond Reserve Fund for the scheduled draws on the Transfer Days immediately preceding December 1, 2009 and June 1, 2010. On July 1, 2027 there shall be transferred from the Tax-Exempt Bonds Account of the Bond Reserve Fund to the Tax-Exempt Bonds Account of the Bond Fund an amount which when subtracted from the amount on deposit in the Tax-Exempt Bonds Account of the Bond Reserve Fund will leave a balance therein equal to the Tax-Exempt Bond Reserve Fund Requirement after July 1, 2027. On July 1, 2028 all amounts on deposit in the Tax-Exempt Bonds Account of the Bond Reserve Fund shall be transferred to the Tax-Exempt Bonds Account of the Bond Fund.

Bond Reserve Fund and Reserve Fund Replenishment Procedure In connection with the issuance of the Bonds, a Bond Reserve Fund has been established under the Master Indenture. An amount equal to $32,111,319 (the Tax-Exempt Bond Reserve Fund Requirement and known in the Indenture as the Series 2009A Bond Reserve Fund Requirement) from the proceeds of the Series 2009A Bonds will be deposited in the Tax7

Exempt Bonds Account of the Bond Reserve Fund and an amount equal to $22,095,000 (the Taxable Bond Reserve Fund Requirement and known in the Indenture as the Series 2009B Bond Reserve Fund Requirement, together with the Tax-Exempt Bond Reserve Fund Requirement, the Bond Reserve Fund Requirement) from the proceeds of the Series 2009B Bonds will be deposited in the Taxable Bonds Account of the Bond Reserve Fund. These amounts represent the original Tax-Exempt Bond Reserve Fund Requirement and the original Taxable Bond Reserve Fund Requirement. After July 1, 2027, the Tax-Exempt Bond Reserve Fund Requirement decreases to $5,257,406 and the Taxable Bond Reserve Fund Requirement increases to $44,655,598. After July 1, 2028, the Taxable Bond Reserve Fund Requirement increases to $45,982,694. These increases will be funded by transfers from the Cash Funded Reserve Account which is discussed further below. Unless otherwise specified in the Indenture, all earnings on funds in the Bond Reserve Fund shall be deposited as received in the Bond Fund unless the Treasurer (in consultation with Bond Counsel) directs the Trustee to deposit such earnings in the Bond Reserve Fund or into another fund; provided, however, that if the amount on deposit in the Bond Reserve Fund is less than the Bond Reserve Fund Requirement, such earnings shall be retained in the Bond Reserve Fund. Moneys deposited in the Bond Reserve Fund are available only to pay principal, interest, redemption premium, if any, and the Debt Service Payments on the Bonds if there are insufficient moneys in the Bond Fund to make such payments. Amounts on deposit in the TaxExempt Bonds Account of the Bond Reserve Fund may be used only to pay principal of and premium, if any, and interest on Tax-Exempt Bonds or transferred to the Tax-Exempt Bonds Account of the Bond Fund for such purpose, and amounts on deposit in the Taxable Bonds Account of the Bond Reserve Fund may be used only to pay principal of and premium, if any, and interest on Taxable Bonds or transferred to the Taxable Bonds Account of the Bond Fund for such purpose. The Bond Reserve Fund has been authorized pursuant to the Act. Under the Act, in order to assure maintenance of the Bond Reserve Fund in an amount equal to the Bond Reserve Fund Requirement, the Treasurer shall, on or before January 1 of each calendar year, make and deliver to the Governor of the State and to both houses of the General Assembly of the State a certificate stating the sum, if any, required to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement and requesting that the budget and appropriation bills approved for such fiscal year include amounts sufficient to restore the bond reserve fund to the bond reserve fund requirement. Within thirty days after the beginning of the session of the General Assembly next following the delivery of the certificate, the Governor may submit to both houses of the General Assembly printed copies of a budget including the sum, if any, required to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement. Any sums appropriated by the General Assembly shall be paid by the Treasurer to the Trustee pursuant to the Act and shall be deposited in the Bond Reserve Fund. The procedures set forth above for replenishment of the Bond Reserve Fund are referred to herein as the Reserve Fund Replenishment Procedure. Bondholders have no right to require the General Assembly to appropriate sums to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement. Funds deposited to replenish the Bond Reserve Fund shall be deposited as follows: (x) in the Tax-Exempt Bonds Account of the Bond Reserve Fund in an amount equal to the amount of 8

such deposit multiplied by the percentage determined by dividing (i) (A) the excess of the sum of the Series Bond Reserve Fund Requirements for all Tax-Exempt Bonds Outstanding over (B) the amount then on deposit in the Tax-Exempt Bonds Account of the Bond Reserve Fund by (ii) (A) the excess of the sum of the Series Bond Reserve Fund Requirements for all Bonds Outstanding over (B) the amount then on deposit in the Bond Reserve Fund, and (y) the remaining amounts to be so deposited shall be deposited in the Taxable Bonds Account of the Bond Reserve Fund. Cash Funded Reserve Account Beginning with the Fiscal Year commencing on July 1, 2010 and continuing for each subsequent Fiscal Year to and including the Fiscal Year commencing July 1, 2027, the Treasurer shall transfer moneys available in the Revenue Bonds Unpledged Funds Account of the Revenue Bonds Debt Service Fund to the Cash Funded Reserve Account during each such Fiscal Year until there has been accumulated in the Cash Funded Reserve Account the following required balances (each the Cash Funded Reserve Requirement as of the end of the corresponding Fiscal Year) as of the end of the following Fiscal Years: For the Fiscal Year Beginning July 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Required Balance at the end of the Fiscal Year $1,327,094 $2,654,188 $3,981,282 $5,308,376 $6,635,470 $7,962,564 $9,289,658 $10,616,752 $11,943,846 $13,270,940 $14,598,034 $15,925,128 $17,252,222 $18,579,316 $19,906,410 $21,233,504 $22,560,598 $1,327,096

Amounts on deposit in the Cash Funded Reserve Account on July 1, 2027 (the Initial Transfer Date) and July 1, 2028 (the Last Transfer Date) shall be transferred to the Taxable Bonds Account of the Bond Reserve Fund on such dates and deposited into a separate subaccount to be established and maintained by the Trustee therein to be designated as the Cash Funded Subaccount. Prior to the Last Transfer Date amounts on deposit in the Cash Funded Reserve Account may be used to pay the principal of and interest on and the Debt Service Payments with respect 9

to the Series 2009B Bonds when due but only to the extent that there are not sufficient amounts on deposit in the Taxable Bonds Account of the Bond Fund and the Taxable Bonds Account of the Bond Reserve Fund for such purpose. If the amount on deposit in the Cash Funded Reserve Account is less than the applicable Cash Funded Reserve Requirement, the Trustee shall notify the Treasurer of such deficiency. The Treasurer shall then transfer moneys from the Revenue Bonds Unpledged Funds Account as soon as moneys are available therein (whether in such Fiscal Year or in subsequent Fiscal Years) in amounts sufficient to bring the amount on deposit in the Cash Funded Reserve Account to equal the applicable Cash Funded Reserve Requirement. All earnings on funds in the Cash Funded Reserve Account shall be deposited into the Cash Funded Reserve Account unless the Treasurer directs the Trustee to deposit such earnings in another fund; provided however, that if the amount on deposit in the Cash Funded Reserve Account is less than the applicable Cash Funded Reserve Requirement, such earnings shall be retained in the Cash Funded Reserve Account. Gaming Revenues The State collects gaming excise taxes and other revenues from the operation of casinos in the State (other than casinos operated by Indian tribes, see INVESTMENT CONSIDERATIONS-Competition for Gaming Revenues herein) and collects a pari-mutuel wagering tax and regulatory and license fees from the operation of horse and dog tracks in the State. Under Iowa Code Section 8.57, subsection 6, paragraph (e)(1)(a)(ii) as enacted by S.F. 376, for the fiscal year beginning July 1, 2010 and for each fiscal year thereafter until the principal and interest on all bonds issued pursuant S.F. 376, Section 1 are paid, the first $55 million of revenues otherwise required to be deposited in the General Fund of the State pursuant to Iowa Code Sections 99D.17 (pari-mutuel wagering) and 99F.11 (casino wagering) (together, Gaming Revenues) are to be deposited in the Revenue Bonds Debt Service Fund. There are currently fourteen riverboat casinos, two dog track casinos and one horse track casino licensed to operate in the State. For the past five fiscal years (including the current fiscal year) of the State, Gaming Revenues have exceeded $220 million each year. The State also uses Gaming Revenues to fund debt service for other bonds and to provide funding for other initiatives, including the Vision Iowa Bonds, the School Infrastructure Bonds, and the Rebuild Iowa Infrastructure Fund as well as to make deposits to the General Fund. See RACING AND GAMING IN IOWA-Revenue Sources for a description of Gaming Revenues and RACING AND GAMING IN IOWA-Historic Revenue for Historical Gaming Revenue collection figures. State law requires that counties with casino operations must hold a voter referendum every eight years to reauthorize the gaming. See RACING AND GAMING IN IOWA-Referendum Requirements herein. Beer and Liquor Revenues The State has the exclusive right of importation into Iowa of all forms of alcoholic liquor, unless otherwise specified by State law. The Iowa Alcoholic Beverages Division (the 10

Division) is responsible for the regulation and control of alcohol in the State. The Iowa Alcoholic Beverages Commission acts as a policy-making body for the Division and reviews the purchases of alcoholic liquor for resale by the Division and the establishment of wholesale prices of alcoholic liquor. Pursuant to Iowa Code Section 8.57(6)(e)(2) as enacted by S.F. 376, if Gaming Revenues under Iowa Code Sections 99D.17 and 99F.11 are insufficient in a fiscal year to meet the total amount of such revenues directed to be deposited in the Revenue Bonds Debt Service Fund ($55,000,000) (the Gaming Revenues Appropriation) during the fiscal year, the difference (the Gaming Revenues Deficit) shall be paid from funds required to be deposited in the Beer and Liquor Control Fund pursuant to Iowa Code Section 123.53(1) which are not necessary for the payment of the costs of purchasing liquor for resale by the Division, the remittances to local authorities or other resources as required by Iowa Code Chapter 123 (2009), and for other obligations and expenses of the Division which are paid from the Beer and Liquor Control Fund (the Beer and Liquor Revenues) prior to deposit of the Beer and Liquor Revenues in the General Fund. If Beer and Liquor Revenues are insufficient during the States fiscal year (the Fiscal Year) to pay the difference, the remaining difference is required to be paid from Beer and Liquor Revenues in subsequent Fiscal Years as such revenues become available. See IOWA ALCOHOLIC BEVERAGES DIVISION- History and Operations for information with respect to the historic Beer and Liquor Revenues generated by the Division. Beer and Liquor Revenues include the excess of the amount deposited into the States Beer and Liquor Control Fund established under Iowa Code Section 123.53, including moneys appropriated by the General Assembly for deposit in the fund and moneys received from the sale of alcoholic liquors by the Division, from the issuance of permits and licenses, and moneys and receipts received by the Division from any other source as allowed under Iowa Code Section 123.53, over the amount of transfers listed under Iowa Code Section 123.53(2), including revenues necessary for the purchase of liquor for resale by the Division, remittances to local authorities or other sources as required by the Iowa Code, and other obligations and expenses of the Division. The Act also provides that the Treasurer shall prepare a quarterly report which includes, based upon information provided by the Administrator of the Racing and Gaming Commission (the Gaming Administrator) and the Administrator of the Alcoholic Beverages Division of the Department of Commerce (the Liquor Administrator), an estimate of the Gaming Revenues and Beer and Liquor Revenues that will become available during the remainder of the appropriate Fiscal Year (the Quarterly Report). The State Department of Management, State Department of Inspections and Appeals and State Department of Commerce are to take appropriate actions to provide that the amount of Gaming Revenues and Beer and Liquor Revenues that will be available during the remainder of the appropriate Fiscal Year are sufficient to cover any anticipated deficiencies. The Treasurer, the State Department of Management (the Department of Management), and the Division have entered into an Interdepartmental Agreement (the Interdepartmental Agreement) which provides that if the Treasurer estimates, in the Quarterly Report, that there will be a Gaming Revenues Deficit, the Division agrees to allocate future Beer and Liquor Revenues to a subaccount in the Beer and Liquor Control Fund created by the Administrator to 11

be transferred to the Revenue Bonds Debt Service Fund as provided under the Interdepartmental Agreement. See THE INTERDEPARTMENTAL AGREEMENT. Flow of Funds The flow chart below shows the order of the flow of funds from the Gaming Revenues and the Beer and Liquor Revenues (in the event of a Gaming Revenues Deficit) for the fiscal year beginning July 1, 2010 and each fiscal year thereafter until the principal and interest on all bonds issued by the Treasurer pursuant to the Act are paid.

12

Wagering Tax Riverboats

Wagering Tax Racetracks

Pari-Mutuel Wagering Tax Racetracks

Daily License Fees Racetracks

Regulatory Fees Racetracks

Total State Gaming Revenues(1)

Beer & Liquor Revenues(2)

First $55 Million Revenue Bonds Debt Service Fund Next $5 Million
General Fund

In the event the amount of State Gaming Revenues is less than $55 million, the difference is to be paid from Beer and Liquor Revenues.

Next $15 Million

Vision Iowa Fund

Next $5 Million School Infrastructure Fund Next $55 Million General Fund
(1)

For fiscal year 2008, total State Gaming Revenues were $280.7 million. See RACING AND GAMING IN IOWA - Historic Revenues herein.
(2)

Balance

For fiscal year 2008, total State Beer and Liquor Revenues were $85.5 million. See IOWA ALCOHOLIC BEVERAGES DIVISION - Current Operations, Gross Revenues and Profit herein.

Rebuild Iowa Infrastructure Fund

13

Standing Appropriations The direction to deposit Gaming Revenues into the Revenue Bonds Debt Service Fund and, if Gaming Revenues are insufficient in a fiscal year to meet the total amount of such revenues directed to be deposited in the Revenue Bonds Debt Service Fund ($55,000,000), to pay the difference from Beer and Liquor Revenues, are Standing Appropriations. A Standing Appropriation is made automatically under State law without further action by the General Assembly. It may only be changed by a subsequent act adopted by a majority of both houses of the General Assembly and approved by the Governor of the State. Application of Subsidy Payments The State covenants in the Indenture to cause to be deposited with the Trustee all collections of Subsidy Payments for deposit in the Bond Fund. See SOURCES OF PAYMENT AND SECURITY-Bond Fund herein for a discussion of the expenditures and transfers of fund on deposit in the Bond Fund. See SOURCES OF PAYMENT AND SECURITY-Capitalized Interest Account herein for a discussion of the use of funds in the Capitalized Interest Account for the payment of a portion of the interest due on the Bonds on December 1, 2009 and June 1, 2010 and SOURCES OF PAYMENT AND SECURITY-Scheduled Draws on the Bonds Reserve Fund; Replenishment herein for a discussion of the use of amounts on deposit in the Taxable Bonds Account of the Bond Reserve Fund for payment of a portion of the interest due on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 and the use of Subsidy Payments to replenishment amounts drawn from the Taxable Bonds Account of the Bond Reserve Fund for such purpose. The State further covenants that the State will take all actions required by law or applicable regulations as necessary to provide for the collection to the fullest extent possible of the Subsidy Payments and will take no action or fail to take any action which in any way would materially adversely affect the ability of the State to collect the Subsidy Payments to the fullest extent possible. Additional Bonds So long as (a) there is no default under the Master Indenture, and (b) the issuance of a particular series of bonds will not constitute a default under the Master Indenture, the State may issue one or more series of additional bonds, to be authenticated and delivered for the purposes specified in the Supplemental Indenture pursuant to which each series of additional bonds is issued. Each series of bonds issued pursuant to the Master Indenture shall be equally and ratably secured under the Master Indenture with all other series of bonds theretofore or thereafter issued pursuant to the Master Indenture without preference, priority or distinction of any bond or bonds over any other bond or bonds. There are no provisions under the Master Indenture or otherwise which would prohibit the State from altering the current system of allocating Gaming Revenues and Beer and Liquor Revenues to the Revenue Bonds Debt Service Fund or from increasing the amount of bonds which could be issued under the Act and payable from the Revenue Bonds Debt Service Fund on a parity with the Bonds.

14

RACING AND GAMING IN IOWA Background Iowa law currently permits gambling in the form of pari-mutuel betting and casino wagering. There are no provisions in the Iowa Constitution which prohibit or regulate gaming. Since May of 2007, casinos are no longer required to be located on a gambling boat but can be land based. The references to riverboat casinos throughout this Official Statement include land based casinos. Casino wagering is permitted only at riverboat casinos and at the two dog tracks and one horse track in the State. Riverboat casinos may offer slot machines, table games of chance and video games. Racetracks may offer table games of chance, pari-mutuel betting and slot machines. Pari-mutuel betting and casino wagering are regulated by the Iowa Racing and Gaming Commission (the Commission). The Iowa Racing and Gaming Commission was originally created in May of 1983 by the Pari-Mutuel Wagering Act. The Act provided for a Commission consisting of five members appointed by the Governor, subject to confirmation by the Senate, and who serve not to exceed a three-year term at the pleasure of the Governor. No more than three members of the Commission may be affiliated with the same political party. There are currently fourteen riverboat casinos, two dog track casinos and one horse track casino licensed to operate in the State. The Commission may grant additional gaming licenses in the future and has recently commissioned two independent studies which indicate that the Iowa market could support additional gaming facilities in certain locations. Under the original law permitting wagering, only pari-mutuel wagering on live horse and dog races was permitted. Effective July 1, 1989, legislation was enacted, allowing pari-mutuel wagering on simulcast races received by a licensed pari-mutuel facility conducting a minimum number of live performances. Simulcasting is the telecasting of live audio and visual signals of pari-mutuel races received from an authorized racing facility for the purpose of pari-mutuel wagering. Effective July 1, 1989, legislation was enacted allowing the Commission to license qualified sponsoring organizations to conduct gambling games on excursion gambling boats in a county where the electorate approves a proposition by referendum. Effective in March 1994, legislation was enacted which, among other things, allowed for gambling games at existing racetrack enclosures when authorized by a local referendum. In addition, counties with casino operations must hold a voter referendum every eight years, beginning in June 2002 to reauthorize the gaming. The Commission is charged with the administration of the Iowa Pari-Mutuel Wagering Act and Excursion Boat Gambling Act which mandate that the Commission have full jurisdiction over and supervise all race meetings and gambling excursions governed by Iowa Code Chapters 99D and 99F. The Commission appoints an Administrator (the Administrator) for a four-year term, responsible for the daily operations of the Commission. It is the responsibility of the Commission to administer the pari-mutuel wagering and riverboat gambling laws and agency rules, to protect the public and assure them of the integrity of the racetracks' and riverboats' gambling operations and their participants. The Iowa Division 15

of Criminal Investigation (DCI) is responsible for criminal enforcement at licensed gambling facilities in Iowa. The DCI has an on-site presence at the racetracks and excursion gambling boats. Special agents conduct background investigations for the Commission and notify the Commission of any rule violations they observe. Referendum Requirements Currently, the State collects Gaming Revenues from fourteen riverboat casinos, two dog track casinos and one horse track casino. These casinos are located in thirteen different counties. Each county with a casino was originally required to conduct a referendum to authorize the operation of a casino in the county. In addition, counties which had previously authorized casino operations were required to have an additional referendum in 1994 to authorize unlimited wagers and the removal of loss limits and counties with dog or horse tracks were authorized in 1994 to conduct a referendum to approve casino operations at those tracks. Under current State law, the counties with casino operations must hold a voter referendum every eight years, beginning in November 2002, to reauthorize gaming. A separate referendum question is required for each type of facility (riverboat or racetrack) in operation within the county. A simple majority is required for approval of continued operation. In the event a referendum to reauthorize gaming at a dog or horse track fails to win voter approval, the gaming portion of the facility will be required to cease operations as soon as practical. In the event a referendum to reauthorize gaming at a riverboat fails to win voter approval, the gaming operations may continue for the remaining term of the original license (or the original license of the current owner if the property has been transferred to a different owner), not exceeding ten years from the date of the license. All casino operations that were in existence and therefore subject to the referendum requirement in November 2002 were reapproved. All counties with casino operations will be required to hold their next referendum to reauthorize continued gaming in November 2010. The following table shows (i) the name and location of the riverboat casinos, dog track casinos and horse track casino currently licensed to operate in the State, (ii) the original date each casino received its racing and/or gaming license, (iii) the original percentage vote in favor of the original proposal to permit casino gambling, (iv) where applicable, the percentage vote in favor of reauthorization in 2002, and (v) the date on which each casino would be required to cease operation in the event that it failed to receive a majority vote in favor of reauthorization in 2010:

16

Elections Involving Casinos in Iowa

Facility Name/ Location Original Date of Racing License (R) / Gaming License (G) Percentage Vote in Favor Percentage Vote in Favor of Reauthorization in 2002 First Date Subject to Close

Racetrack Casinos:
Dubuque Greyhound Park/Mystique Casino

Dubuque, Dubuque County Prairie Meadows Racetrack and Casino Altoona, Polk County
Horseshoe Casino/Bluffs Run Greyhound Park

July 18, 1984 (R) July 20, 1995 (G)

74.4%

80%

December 31, 2010

July 18, 1984 (R) February 28, 1995 (G)

61.8%

66%

December 31, 2010

Council Bluffs, Pottawattamie County

February 27, 1986 (R) February 28, 1995 (G)

59.7%

79%

December 31, 2010

Riverboat Casinos:
Terribles Lakeside Casino Resort Osceola, Clarke County Lady Luck Casino Marquette, Clayton County Wild Rose Casino Clinton, Clinton County Diamond Jo Casino Dubuque, Dubuque County Catfish Bend Casino Fort Madison, Lee County (summer) Burlington, Des Moines County (winter) Harrahs Council Bluffs Casino Hotel Council Bluffs, Pottawattamie County Ameristar II Casino Council Bluffs, Pottawattamie County Isle of Capri Casino Bettendorf, Scott County Rhythm City Casino Davenport, Scott County
February 2, 2005 (G)

65.9%

80%

February 2, 2014

March 2, 2000 (G)

59.7%

81%

March 31, 2011

June 9, 2006 (G)

61.8%

71%

June 9, 2015

July 15, 1999 (G)

66.6%

79%

March 31, 2011

January 20, 1994 (G)

52.2%

73% (Lee County) 63% (Des Moines County)

March 31, 2011

55.6%

January 20, 1995 (G)

63.1%

79%

March 31, 2011

January 20, 1995 (G)

63.1%

79%

March 31, 2011

March 2, 2000 (G)

59.8%

70%

March 31, 2011

October 10, 2000 (G)

59.8%

70%

March 31, 2011

17

Facility Name/ Location

Original Date of Racing License (R)/ Gaming License (G) June 4, 1994 (G)

Percentage Vote in Favor

Percentage Vote in Favor Of Reauthorization in 2002 75%

First Date Subject to Close March 31, 2011

Argosy Casino Sioux City, Woodbury County Riverside Casino & Golf Resort Riverside, Washington County The Isle Casino & Hotel Waterloo Waterloo, Blackhawk County Diamond Jo Worth Casino Northwood, Worth County Wild Rose Casino Emmetsburg, Palo Alto County

55.3%

May 11, 2005 (G)

52.2%

N/A

May 11, 2014

May 11, 2005 (G)

66.3%

N/A

May 11, 2014

May 11, 2005 (G)

75.0%

N/A

May 11, 2014

May 11, 2005 (G)

71.1%

N/A

May 11, 2014

Although several counties in the State have held referenda with respect to authorizing casino operations where the proposal failed to receive approval, all counties which have previously approved casino operations have reauthorized the casino operations at the subsequent reauthorization referenda. As set forth in the table above, the percentage vote in favor of reauthorization has always been higher than the percentage vote in favor of the original authorization. Referenda will be held with respect to each gaming facility in 2010, 2018, 2026 and 2034 and each eight years thereafter. In the event that voters should fail to approve the continued operation of one or more gaming facilities at any of the referenda to be held while the Bonds are Outstanding, it would have an immediate adverse impact on the collection of Gaming Revenues. See RACING AND GAMING IN IOWA-Historic Revenues for information on the historic Gaming Revenues produced by the operation of each of the casino facilities. Revenue Sources Gaming Revenues received by the State as a result of the operation of the casinos and racetracks under the jurisdiction of the Racing and Gaming Commission are as follows: Wagering Tax. Gaming Revenues include the States share of the wagering tax imposed on the adjusted gross receipts (gross receipts less winnings paid to wagerers) received annually from gambling games at each riverboat casino and racetrack casino. For riverboat casinos, the wagering tax is imposed on the adjusted gross receipts from all slot machines, table games and other gambling games. The wagering tax rate for riverboat casinos is 5% on the first $1 million of adjusted gross receipts, 10% on the next $2 million, and 22% on adjusted gross receipts over $3 million. For racetrack casinos, the wagering tax is imposed on the adjusted gross receipts from slot machines, table games and other gambling games. The wagering tax rate for racetrack 18

casinos is 5% on the first $1 million of adjusted gross receipts and 10% on the next $2 million. The tax rate imposed on adjusted gross receipts over $3 million shall be 22% if the racetrack enclosure is located in the same county as another excursion boat and the racetracks adjusted gross revenue from the prior fiscal year is less than $100 million. If the racetrack is located in the same county as another excursion boat and had adjusted gross revenue over $100 million in the prior fiscal year their tax rate for receipts greater than $3 million shall be 24%. If the racetrack enclosure is the only casino in the county their tax rate for all revenue greater than $3 million shall be 24%. The wagering tax is paid by the licensee of each riverboat and racetrack casino to the State within 10 days after the close of the day when the wagers are made. The tax is then distributed as follows: 0.5% of the adjusted gross receipts to the city in which the facility is located; 0.5% of the adjusted gross receipts to the county in which the facility is located; 0.5% of the adjusted gross receipts to the States gamblers assistance fund; 0.8% of adjusted gross receipts to the States county endowment fund; 0.2% of adjusted gross receipts to the States miscellaneous fund and the remaining amount to the State. Pari-Mutuel Wagering Tax. Gaming Revenues also include the States share of the parimutuel wagering tax imposed on the gross sum wagered at each horse and dog racetrack facility in the State. In the case of dog tracks, the rate of tax for live racing is 4% if the gross sum wagered in the racing season is less than $30 million, 5% if the gross sum wagered is between $30 million and $55 million, and 6% if the gross sum wagered is in excess of $55 million. None of the States dog tracks have reported pari-mutuel wagering in excess of $30 million since 1995. For sums wagered, at the States dog tracks, on simulcast races (that is, races held at other facilities and televised live on-site), the pari-mutuel wagering tax rate is 2%. In the case of horse tracks, the pari-mutuel wagering tax rate for live racing is 6% (and, for simulcast racing, 2%); however, an offsetting credit of up to 6% is available if the gross sum wagered for the annual racing season is less than $90 million. The gross sum wagered at the States only horse track has been less than $90 million for each year since 1990. Thus, the State has not collected pari-mutuel wagering tax from its only horse track since 1990. The pari-mutuel wagering tax is paid by the licensee of each dog and horse racetrack facility to the State within 10 days after the close of each annual racing season. The tax is distributed as follows: 0.5% of the gross sum wagered to the city in which the facility is located; 0.5% of the adjusted gross receipts to the county in which the facility is located; and the remaining amount to the State. Racetrack Daily License Fees. Gaming Revenues also include a daily license fee payable by the States racetrack facilities. The daily license fee is set at $200.00 for each day that horse or dog racing is conducted or simulcast at the racetrack facility. Regulatory Fee. Gaming revenues also include a regulatory fee collected from each racetrack. The fee is determined each fiscal year on the amount appropriated to the Commission

19

plus the cost of salaries for no more than three special agents from the DCI for each racetrack that has been issued a table games license plus direct and indirect support costs for the agents. Historic Revenues The following table shows the components of and total Gaming Revenues received by the State for each of the last six fiscal years. Components of State Gaming Revenues
Fiscal Years 2003 through 2008 2003 Wagering Tax Riverboats Wagering Tax Racetracks Pari-mutuel Wagering Tax - Racetracks Daily License Fees Racetracks Regulatory Fees Racetracks Total State Gaming Revenues 2004 2005 2006 2007 2008

$120,872,266 57,835,883 461,361 197,600 3,286,264 $182,653,374

$130,300,433 85,510,226 397,865 197,400 3,306,436 $219,712,360

$144,689,613 72,284,933 358,318 198,200 2,841,920 $220,372,984

$146,439,674 81,416,974 395,015 196,200 3,097,277 $231,545,140

$166,634,970 98,399,229 375,467 196,800 3,071,232 $268,677,698

$179,978,826 96,756,921 398,431 198,400 3,359,244 $280,691,822

The States Revenue Estimating Conference (the REC) estimates that total State Gaming Revenues in fiscal year 2009 will be $281.4 million and total State Gaming Revenues in fiscal year 2010 will be $282.0 million. The REC is comprised of the Governor or their designee, the Director of the Legislative Fiscal Bureau, and a third person agreed upon by the other two members. The REC meets quarterly, generally in July, October, December, and April. The Governor and the Legislature are required to use the REC estimates in preparing the state budget.

20

The following table shows the Gaming Revenues received from each of the licensed facilities in the State for each of the past six fiscal years. Facility Gaming Revenues Fiscal Years 2003 through 2008
Facility Racetrack Casinos: Dubuque Greyhound Park / Mystique Casino Prairie Meadows Racetrack and Casino Horseshoe Casino/ Bluffs Run Greyhound Park Riverboat Casinos: Terribles Lakeside Casino Resort Lady Luck Marquette Casino 6,969,920 7,649,659 8,208,452 8,014,789 7,360,474 6,283,951 9,992,252 11,042,864 10,443,077 10,844,601 11,512,588 10,399,825 $8,072,529 $10,168,136 $9,223,571 $13,320.458 $14,744,779 $14,544,764

2003

2004

2005

2006

2007

2008

29,172,820

44,094,276

39,176,983

40,299,466

42,406,811

42,475,564

24,535,759

35,149,515

27,282,817

31,485,542

44,891,138

43,692,668

Wild Rose Casino Clinton Diamond Jo Casino Catfish Bend Casino Harrahs Council Bluffs Casino Hotel Ameristar II Casino Isle of Capri Casino Bettendorf Rhythm City Casino Argosy Casino Riverside Casino & Golf Resort The Isle casino & hotel waterloo Diamond Casino Jo Worth

4,996,535 8,945,013 4,907,157 20,353,147 27,197,809 18,273,632 11,958,163 7,278,638 N/A

4,845,178 9,557,941 5,465,001 20,448,230 30,148,878 19,362,790 13,876,928 7,902,964 N/A

4,932,355 10,108,972 5,849,869 23,374,742 35,612,457 20,370,131 15,232,054 10,557,504 N/A

4,851,347 9,269,814 5,417,573 23,035,613 36,764,319 19,327,445 15,049,365 10,729,721 N/A

5,259,177 7,912,420 5,495,452 19,729,515 35,548,964 17,855,095 12,966,708 11,142,281 13,885,954

5,006,525 7,463,162 7,251,701 18,500,538 34,475,309 18,419,924 10,639,394 10,809,893 16,387,687

N/A

N/A

N/A

N/A

8,883

14,522,629

N/A

N/A

N/A

2,963,564

13,095,254

14,867,941

Wild Rose Casino Emmetsburg Total Gaming Revenues

N/A

N/A

N/A

171,523

4,862,205

4,950,347

$182,653,374

$219,712,360

$220,372,984

$231,545,140

$268,677,698

$280,691,822

21

The following table shows the Gaming Revenues received from licensed facilities in each of the counties with licensed facilities for each of the past six fiscal years.

Gaming Revenues by County Fiscal Years 2003 through 2008

County Blackhawk Clarke Clayton Clinton Dubuque Lee/Des Moines Palo Alto Polk Pottawattamie Scott Washington Woodbury Worth Total Gaming Revenues 2003 N/A $9,992,252 6,969,920 4,996,535 17,017,542 4,907,157 N/A 29,172,820 72,086,715 30,231,795 N/A 7,278,638 N/A $182,653,374 2004 N/A $11,042,864 7,649,659 4,845,178 19,726,077 5,465,001 N/A 44,094,276 85,746,623 33,239,718 N/A 7,902,964 N/A $219,712,360 2005 N/A $10,443,077 8,208,452 4,932,355 19,332,543 5,849,869 N/A 39,176,983 86,270,016 35,602,185 N/A 10,557,504 N/A $220,372,984 2006 N/A $10,844,601 8,014,789 4,851,347 22,590,272 5,417,573 171,523 40,299,466 91,285,474 34,376,810 N/A 10,729,721 2,963,564 $231,545,140 2007 $8,883 11,512,588 7,360,474 5,259,177 22,657,199 5,495,452 4,862,205 42,406,811 97,685290 30,821,803 13,885,954 11,142,281 13,095,254 $268,677,698 2008 $14,522,629 10,399,825 6,283,951 5,006,525 22,007,926 7,251,701 4,950,347 42,475,564 96,668,515 29,059,318 16,387,687 10,809,893 14,867,941 $280,691,822

The following table shows the Gaming Revenues received by the State during each month for each of the past three fiscal years and for the first eleven months of Fiscal Year 2009.

Gaming Revenues by Month

Fiscal Year 2006 Monthly $15,523,088 18,847,251 18,590,464 19,083,786 17,940,196 18,553,785 19,634,178 19,005,494 21,424,318 21,057,450 21,550,086 20,335,044 Fiscal Year 2007 Fiscal Year 2008 Monthly $18,422,324 24,762,230 23,894,833 23,727,570 22,763,847 21,559,634 22,133,883 23,386,368 26,560,952 24,460,881 26,015,624 23,003,676 Fiscal Year 2009* Cumulative Monthly Cumulative $15,523,088 $17,308,445 $17,308,445 34,370,339 21,845,909 39,154,354 52,960,803 23,087,083 62,241,437 72,044,589 22,215,260 84,456,697 89,984,785 22,184,066 106,640,763 108,538,570 23,709,043 130,349,806 128,172,748 21,678,451 152,028,257 147,178,242 21,191,701 173,219,958 168,602,560 25,465,415 198,695,373 189,660,010 23,057,742 221,753,115 211,210,096 23,667,207 245,420,322 231,545,140 23,257,376 268,677,698 Cumulative Cumulative Monthly $18,422,324 $14,751,855 $14,751,855 43,184,554 26,225,625 40,977,480 67,079,387 23,403,461 64,380,941 90,806,957 24,301,989 88,682,930 113,570,804 22,740,104 111,423,034 135,130,438 20,653,431 132,076,465 157,264,321 22,836,498 154,912,963 180,650,689 24,103,667 179,016,630 207,211,641 25,700,390 204,717,020 231,672,522 24,045,535 228,762,555 257,688,146 24,962,892 253,725,447 280,691,822

July August September October November December January February March April May June

*Fiscal Year 2009 data only available through May.

As a result of Iowa legislation adopted in 2004, riverboat casinos and racetracks that paid an assessment in 2005 and 2006 will be entitled to a tax credit in a like amount over a five-year period, ranging from fiscal years 2009 through 2015 depending on the type of facility. The 22

legislation which approved the assessments and the related tax credit resulted from litigation involving tax rates and changes in the games permitted at casinos. The tax credits are to be applied annually in the applicable years to the first tax dollars owed by the riverboat casinos and racetracks and will delay receipt of Gaming Revenues being deposited into the Revenue Bonds Debt Service Fund until the credit has been exhausted. In the table above, the July 2009 amount reflects a tax credit in the amount of $4.6 million pursuant to the same legislation. Below is a chart outlining the total amount of the tax credits during fiscal years ending June 30th of 2011 through 2015 (the years of the tax credit affecting the Gaming Revenues) that the riverboat casinos and racetracks are entitled to: Fiscal Year 2011 2012 2013 2014 2015 Tax Credits $10,600,464 $10,600,464 $10,600,464 $ 6,000,464 $ 6,000,464

IOWA ALCOHOLIC BEVERAGES DIVISION History and Operations Iowas involvement in liquor sales began in 1934 as a complete monopolistic system of the wholesale and retail sale of wine and spirits. The 1934 Iowa General Assembly created the Iowa Liquor Control Commission, and it opened five state-operated liquor stores in June of that year. The system of state-controlled liquor stores stayed in place until 1986, when the Iowa Alcoholic Beverages Division (the Division) was created. Today, the State wholesales and distributes spirits only to privately-owned retail stores through the Division. While all states collect tax from the sale of spirits, the main difference is the method used by each state to collect revenue. Some states apply a flat tax per gallon on sales made by private sector wholesalers; some states work directly wholesaling liquor to retailers, also known as control states. Iowa follows the second route, and direct involvement in the sale and distribution of spirits allows Iowa to retain profit that would otherwise go to private sector wholesalers. Currently, 18 states and one county in Maryland are directly involved in the sale of spirits and are referred to as Control States. The Control States were formed at the end of Prohibition and chose direct state involvement as the method for distributing alcoholic beverages to control the trafficking within their respective borders and to maximize the profit from the sale of alcohol. Although changes and improvements have been made to operations in the various Control States, none of the original 19 jurisdictions have abandoned the Control State System. The Control State operations, in effect, act as non-profit entities, transferring all profit made from liquor sales over to state treasuries, which is the role of the Division.

23

The Division does not promote the sale or use of spirits to Iowa consumers. The Division provides a service by delivering liquor to retailers and, at the same time, collecting the tax on behalf of the State. Iowa has a fifty percent (50%) markup on wholesale spirit sales which currently generates over $65 million in net income as an annual source of revenue. This revenue is used for substance abuse treatment programs; distributed to cities and counties for local use; and deposited in the state General Fund to fund state projects and programs. Current Operations, Gross Revenues and Profit Today, over 590 privately-owned outlets in the State sell liquor to consumers as well as to bars, restaurants and other on-premises locations. Stores are allowed to sell liquor seven days a week, including holidays. Most accept checks and major credit cards for consumer purchases. The Division wholesales spirits to these over 590 privately-owned liquor outlets at a fifty percent (50%) markup over the Divisions cost. The Division warehouses and delivers products to retailers on a weekly basis. The Division will deliver an order as small as 5 cases, while some large volume retailers receive deliveries twice weekly. By law, the Division offers the same price on spirits to all retailers regardless of the quantity purchased. The Division also offers the same terms on delivery to all retailers regardless of their location in the State. Such practices have enabled over 310 small independently-owned stores to co-exist and compete with large volume chain stores. Beer and Liquor Revenues include the excess of the amount deposited into the States Beer and Liquor Control Fund established under Iowa Code Section 123.53, including moneys appropriated by the General Assembly for deposit in the fund and moneys received from the sale of alcoholic liquors by the Division, from the issuance of permits and licenses, and moneys and receipts received by the Division from any other source as allowed under Iowa Code Section 123.53, over the amount of transfers listed under Iowa Code Section 123.53(2), including revenues necessary for the purchase of liquor for resale by the Division, remittances to local authorities or other sources as required by the Iowa Code, and other obligations and expenses of the Division.

BEER AND LIQUOR REVENUES FROM THE BEER AND LIQUOR CONTROL FUND (in millions of dollars for Fiscal Years 2003 through 2008) 2003 Deposits: Sale of Liquor Sale of Licenses Beer Tax Collected Wine Tax Collected Miscellaneous Revenue Total Deposits $121.2 9.0 13.9 4.6 2.1 $150.8 2004 $133.7 8.8 14.0 4.9 2.2 $163.6 2005 $146.7 9.3 14.0 5.3 2.3 $177.6 2006 $160.9 9.9 14.1 5.7 2.5 $193.1 2007 $177.5 10.0 14.2 6.0 2.7 $210.4 2008 $188.8 10.7 14.5 6.2 3.0 $223.2

24

Revenues necessary for the purchase of liquor for resale, Remittances to local authorities and other sources, and Expenses and Obligations of the Division BEER AND LIQUOR REVENUES

$87.1 $63.7

$90.7 $72.9

$101.7 $75.9

$113.2 $79.9

$129.6 $80.8

137.7 $85.5

THE INTERDEPARTMENTAL AGREEMENT The Treasurer, the Department of Management, and the Division have entered into an Interdepartmental Agreement in connection with the issuance of the Bonds. Under the Interdepartmental Agreement, the Treasurer has agreed to prepare Quarterly Reports setting forth: (1) the amounts on deposit in (a) the Bond Fund, (b) the Revenue Bonds Pledged Funds Account, and (c) the Revenue Bonds Unpledged Funds Account; (2) information estimating the amount of Gaming Revenues that will be available for the remainder of the Fiscal Year to fund the unfunded portion of the Gaming Revenues Appropriation for such Fiscal Year and the dates on which it is estimated such Gaming Revenues will be available; (3) the Treasurers estimate of the amount, if any, of the Gaming Revenues Deficit for such Fiscal Year; (4) the information from the report of the Liquor Administrator estimating the amount of Beer and Liquor Revenues that will be available for the remainder of the Fiscal Year to fund the unfunded portion of any Gaming Revenues Deficit for such Fiscal Year and the dates on which it estimates that such Beer and Liquor Revenues will be available; (5) if it is estimated that there will be a Gaming Revenues Deficit for such Fiscal Year, the amount of Beer and Liquor Revenues to be applied to fund such deficit; and (6) for the Quarterly Report due on or before March 10 of each Fiscal Year (the March Quarterly Report), the amount of Gaming Revenues and Beer and Liquor Revenues estimated to be received and deposited into the Bond Fund on or before two Business Days prior to May 15 of such Fiscal Year (the May Transfer Day). The Division has agreed to establish within the Beer and Liquor Control Fund a subaccount entitled the Revenue Bonds Debt Service Fund Allocation Account (the Allocation Account). Upon receipt of a Quarterly Report from the Treasurer which estimates that there will be a Gaming Revenues Deficit, the Division agrees to allocate future Beer and Liquor Revenues as they are received to the Allocation Account in the amounts required by the Quarterly Report. The Interdepartmental Agreement further provides that, if in any Fiscal Year Gaming Revenues and Beer and Liquor Revenues have not fully funded the Gaming Revenues Appropriation for the Fiscal Year, then all Beer and Liquor Revenues received in the immediately succeeding Fiscal Year shall be deposited into the Allocation Account until any Gaming Revenues Deficits for the prior Fiscal Year have been fully funded. Amounts in the Allocation Account are to be transferred to the Revenue Bonds Debt Service Fund on or before the first day of each month.

25

IOWA JOBS PROGRAM Background In April 2009, the Iowa General Assembly adopted Senate File 376 (the Act) authorizing the funding of various infrastructure improvements and grants and loans programs, including a portion of the Iowa Jobs Program, establishing the Iowa Jobs Board, authorizing the Treasurer to issue and sell the Bonds, providing for the security for the Bonds, and providing for or revising various appropriations. The Act was adopted in response to the current economic downturn and the flooding, tornadoes and other natural disasters which struck the State during the summer of 2008. The Act is one of five bills adopted by the General Assembly and signed by Iowa Governor Chet Culver which together authorize an $830 million multi-year initiative known as the Iowa Jobs Program intended to create jobs, rebuild communities impacted by the 2008 severe weather, invest in the States infrastructure, and promote long-term economic growth. Iowa Jobs Board The Act establishes a new Iowa Jobs Board. The Board will oversee the Iowa Jobs Program and manage the disbursement of funds from the Iowa Jobs Fund. The Iowa Finance Authority (IFA) will administer the Program and provide staffing, office space, and support for the Board. For these purposes, the IFA is to receive a Standing Appropriation of $200,000 from the Rebuild Iowa Infrastructure Fund for the duration of the Iowa Jobs Program. IFA is authorized to establish emergency and regular administrative rules to administer the Iowa Jobs Program. Under the Act, the membership of the Iowa Jobs Board is required to include the following: (a) Six members of the general public appointed by the Governor. (b) The Director of the Department of Economic Development or the Director's designee. (c) The Executive Director of the Iowa Finance Authority or the Director's designee. (d) The Director of the Department of Workforce Development or the Director's designee. (e) The Executive Director of the Rebuild Iowa office or the Director's designee until June 30, 2011, and then the Administrator of the Homeland Security and Emergency Management Division of the Department of Public Defense or the Administrator's designee. (f) The Treasurer or the Treasurer's designee. 26

The Act creates the Iowa Jobs Program for the purpose of assisting local governments and communities with local infrastructure construction projects relating to disaster rebuilding, reconstruction and replacement of local public buildings, flood control, and flood protection. The Iowa Jobs Board will allocate funds on a competitive basis. Initially, $118.5 million of the Bond proceeds will be available to the Board for distribution. The Board is also required to review the plans for the $46.5 million of targeted projects referred to below. A city, county, or nonprofit organization that sponsors or supports the public needs of the local community may apply to the Board for grants under the Program. The Act specifies the criteria that the Board must consider for prioritizing eligible projects. The Board may award grants of up to 75% of the total cost for replacing or rebuilding existing disaster-related damaged buildings and up to 50% for the total cost for all other projects. Grant applicants may not receive more than $50 million in assistance from the Iowa Jobs Fund. The Act specifies that the Iowa Jobs Board will develop a level of transparency regarding project allocations and ensure that funds obligated under the Program are coordinated with other potential funding sources to leverage all funds. It also specifies that the Board will ensure that projects receiving funds are located in geographically diverse areas of the State. Projects Funded From Bond Proceeds The Act appropriates the proceeds of the Bonds (i) for specific projects designated by the General Assembly ($185 million); (ii) to certain State agencies for specific programs ($195 million); (iii) to the Iowa Jobs Board for competitive grants for local infrastructure projects related to disaster and flood rebuilding and prevention projects awarded by the Board ($118.5 million); and (iv) for targeted flood recovery rebuilding projects in Linn County, Cedar Rapids and other specified cities ($46.5 million). Specific Projects. $185 million will be used for designated projects at and grants from State agencies, including the following: Department of Administrative Services Major Maintenance Department of the Blind Dorm Remodel Adult Orientation Center in Des Moines Department of Corrections First Community Based Corrections Waterloo Residential Expansion Third Community Based Corrections Sioux City Residential Expansion Fifth Community Based Corrections Des Moines Residential Expansion Seventh Community Based Corrections Davenport Residential Expansion Eighth Community Based Corrections Ottumwa Residential Expansion Iowa Correctional Institution for Women Expansion 27

$14,624,923

$869,748

$6,000,000 $5,300,000 $13,100,000 $2,100,000 $4,100,000 $47,500,000

Mt. Pleasant/Rockwell City Improvements Department of Economic Development Community Attraction and Tourism River Enhancement Community Attraction and Tourism Accelerated Career Education Program Capital projects at Community Colleges Department of Education Community College Major Maintenance Infrastructure Department of Natural Resources Volga River Recreation Area Infrastructure Improvements Carter Lake Improvements Lake Restoration and Dredging Board of Regents Iowa Public Radio Infrastructure Iowa State University-Veterinary Lab Phase II Department of Transportation Public Transit Infrastructure Commercial Airport Infrastructure Department of Veterans Affairs Iowa Veterans Home Master Plan Total Amount State Agencies. include the following:

$12,500,000

$12,000,000 $10,000,000 $5,500,000

$2,000,000

$750,000 $500,000 $10,000,000

$1,900,000 $10,000,000

$2,200,000 $1,500,000

$22,555,329 $185,000,000

The amounts appropriated to State agencies for specific programs

Department of Agriculture and Land Stewardship Soil Conservation Iowa Finance Authority Public Shelter Grant Program Disaster Damage Housing Assistance Grant Program Affordable Housing Assistance Grant Program Sewer Infrastructure Grant Program Iowa Telecommunications and Technology Commission Broadband Deployment and Sustainability Grants Department of Natural Resources Watershed Rebuilding-Water Quality Grants

$11,500,000

$10,000,000 $5,000,000 $20,000,000 $55,000,000

$25,000,000

$13,500,000

28

Board of Regents Iowa Energy Center-Alternative Energy Revolving Loan Program Department of Transportation Bridge Replacement Total Amount

$5,000,000

$50,000,000 $195,000,000

Targeted Projects. The amounts appropriated for targeted flood recovery rebuilding projects (which do not need to go through the Iowa Jobs Board competitive grant process) include the following: Human Services Resource Replacement Center Linn County Options of Linn County (Mental Health Workshop Building Linn County Steam Energy Solution Cedar Rapids National Czech and Slovak Museum Cedar Rapids Paramount Theatre - Cedar Rapids Cedar Rapids Public Library Cedar Rapids Cedar Rapids Public Works Building Palo Fire Station Elkader Fire Station Charles City Fire Station Total Amount $10,000,000 $5,000,000 $5,000,000 $10,000,000 $5,000,000 $5,000,000 $5,000,000 $500,000 $500,000 $500,000 $46,500,000

Grants for the targeted rebuilding are contingent on submission of a specified plan for each project to the Iowa Jobs Board by September 1, 2009. Funds for projects that do not submit a plan by the deadline will revert to the Iowa Jobs Fund for use by the Iowa Jobs Board in the competitive grant process. Other Projects The Iowa Jobs Program also includes a number of other projects being funded from sources other than the proceeds of the Bonds. These include: $100 Million to rebuild 9 buildings destroyed by flooding at the University of Iowa, which will allow the use of nearly $500 Million in federal funds $15 Million to build a veterinary hospital lab at Iowa State University $100 million for future investments in state public facilities, including state parks.

29

SOURCES AND USES OF FUNDS The following is a summary of the estimated sources and uses of the proceeds of the Bonds (exclusive of accrued interest on the Bonds). Series 2009A Bonds Sources: Bond Proceeds Net Original Issue Premium Total Uses: Revenue Bonds Capitals Fund Bond Reserve Fund Costs of Issuance Underwriters Discount Capitalized Interest Account Total Series 2009B Bonds Sources: Bond Proceeds Net Original Issue Discount Total Uses: Revenue Bonds Capitals Fund Bond Reserve Fund Costs of Issuance Underwriters Discount Capitalized Interest Account1 Total
1

$380,120,000 28,317,959 $408,437,959

$358,030,000 32,111,319 481,017 2,057,336 15,758,287 $408,437,959

$220,950,000 (1,290,348) $219,659,652

$186,970,000 22,095,000 254,290 2,019,523 8,320,839 $219,659,652

Capitalized interest net of Subsidy Payments

30

THE BONDS Description The Bonds are issuable only as fully registered bonds, in denominations of $5,000 or any integral multiple thereof, and will initially be issued in the form of a single Bond for each maturity registered in the name of The Depository Trust Company, New York, New York (DTC), or its nominee, which will act as securities depository for the Bonds. Ownership interests in the Bonds registered in the name of DTC, or its nominee, will be in the denominations of $5,000 or any integral multiple thereof and will be in book-entry form as described in the subsection captioned Book-Entry Only System. The Bonds will be dated their date of delivery, and will bear interest from their date, payable semiannually on June 1 and December 1 of each year commencing December 1, 2009. The Bonds bear interest at the rates and mature on the dates and in the amounts set forth on the inside cover page of this Official Statement. Interest on the Bonds is payable to DTC, or its nominee, as registered owner of the Bonds, which interest is to be redistributed to the Beneficial Owners by DTC and its Participants. See THE BONDS - Book-Entry Only System. For every exchange or transfer of a Bond, the Trustee may impose a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. Optional Redemption The Series 2009A Bonds are subject to redemption prior to maturity on or after June 1, 2019 in whole or in part on any Business Day as to any maturity or maturities selected by the State at a redemption price of 100% of the principal amount of the Bonds to be redeemed, plus accrued interest on such Bonds to the redemption date. The Series 2009B Bonds are subject to redemption prior to maturity on or after June 1, 2019 in whole or in part on any Business Day as to any maturity or maturities selected by the State at a redemption price of 100% of the principal amount of the Bonds to be redeemed, plus accrued interest on such Bonds to the redemption date. Mandatory Redemption The Series 2009B Bonds shall be subject to mandatory redemption from sinking fund payments, at a redemption price equal to the principal amount thereof, plus interest accrued to the date of redemption, without premium, on the dates and in the amounts as follows:

31

Redemption Date (June 1) 2029 2030 2031 2032 2033 2034** **Stated Maturity

Principal Amount $26,850,000 33,920,000 36,210,000 38,655,000 41,265,000 44,050,000

Extraordinary Optional Redemption of Series 2009B Bonds The Series 2009B Bonds are subject to redemption prior to maturity at the option of the State, in whole or in part upon the occurrence of an Extraordinary Event (as defined below), at a redemption price (the Extraordinary Redemption Price) equal to the greater of: (i) 100% of the principal amount of the Series 2009B Bonds to be redeemed; or

(ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of such Series 2009B Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which such Series 2009B Bonds are to be redeemed, discounted to the date on which such Series 2009B Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate (as defined under the Indenture) plus 100 basis points; plus, in each case, accrued interest on such Series 2009B Bonds to be redeemed to the redemption date. An Extraordinary Event will have occurred if Section 54AA or 6431 of the Internal Revenue Code of 1986, as amended (the Code) (as such Sections were added by Section 1531 of the Recovery Act, pertaining to Build America Bonds) in a manner pursuant to which the States Subsidy Payments from the United States Treasury are reduced or eliminated. Selection of Bonds for Redemption The Series 2009A Bonds shall be redeemed only in denominations of $5,000 or any integral multiple thereof. If less than all of the Series 2009A Bonds are to be redeemed, the State shall select the maturity or maturities of the Series 2009A Bonds to be redeemed and, if less than all of a specified maturity of the Series 2009A Bonds are to be redeemed, the Trustee shall select Series 2009A Bonds of such maturity by lot or in such other manner as the Trustee in its discretion deems fair. The Series 2009B Bonds shall be redeemed only in denominations of $5,000 or any integral multiple thereof. If less than all of the Series 2009B Bonds shall be redeemed, the Series 2009B Bonds shall be redeemed in amounts that, as nearly as practicable, are in proportion to the 32

principal amounts of Series 2009B Bonds owned by each Registered Owner, pursuant to the following formula: (principal amount of Series 2009B Bonds to be redeemed) x (principal amount of Series 2009B Bonds owned by Registered Owner)/(principal amount of Series 2009B Bonds outstanding). So long as DTC is the Registered Owner of the Series 2009B Bonds, subject to DTCs policies and procedures, if less than all of the Series 2009B Bonds shall be redeemed, the Series 2009B Bonds shall be redeemed in amounts that, as nearly as practicable, are in proportion to the principal amounts of Series 2009B Bonds owned by each Beneficial Owner, pursuant to the following formula: (principal amount of Series 2009B Bonds to be redeemed) x (principal amount of Series 2009B Bonds owned by Beneficial Owner)/(principal amount of Series 2009B Bonds Outstanding). The State can provide no assurance that DTC, the DTC Participants or any other intermediaries will allocate redemptions among Beneficial Owners on such a proportional basis. Notice of Redemption In order to exercise any option to redeem any Outstanding in whole or in part, the Treasurer shall cause the Trustee to give notice of such redemption to Holders of such Bonds to be redeemed by notification to the Trustee of its intention to redeem all or part of any Bonds Outstanding at least 45 days prior to the date fixed for redemption (or such shorter period as shall be agreed to by the Trustee). A notice of redemption to the holders of the Bonds to be redeemed in whole or in part shall be mailed by first class mail by the Trustee at least 30 days prior to the date fixed for redemption to the Bondholders of such Bonds at their last addresses as they shall appear upon the register maintained by the Registrar. Book-Entry Only System Beneficial ownership interests in the Bonds will initially be available in book-entry form only in denominations of $5,000 or any integral multiple thereof. Purchasers of beneficial ownership interests in the Bonds will not receive bond certificates representing their interests in the Bonds and will not be Registered Owners of the Bonds under the Indenture. DTC will act as securities depository for the Bonds. One fully registered Bond for each maturity of the Bonds will be registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may be requested by an authorized representative of DTC. The information that follows in this section Book-Entry Only System is based solely on information provided by DTC. No representation is made by the State or the Underwriters as to the completeness or the accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. DTC, the worlds 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. 33

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 DTCs 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 includes both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a whollyowned subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect Participants). DTC has Standard & Poors highest rating: AAA. 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 and www.dtc.org. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTCs records. The ownership interest of each actual purchaser of each Security (Beneficial Owner) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 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 DTCs 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; DTCs 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. Beneficial owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Bonds may wish to ascertain that 34

the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTCs practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTCs MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the State 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). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTCs practice is to credit Direct Participants accounts upon DTCs receipt of funds and corresponding detail information from the State or the Trustee, on payable date in accordance with their respective holdings shown on DTCs records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with Bonds 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, the Trustee, or the State, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the State or the 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 State or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. The State may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTCs book-entry system has been obtained from sources that the State believes to be reliable, but the State takes no responsibility for the accuracy thereof.

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INVESTMENT CONSIDERATIONS Limited Special Obligations The Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Bonds do not directly, indirectly, or contingently obligate the State or a political subdivision of the State to apply moneys from or to levy or pledge any form of taxation whatsoever to, or to continue the appropriation of funds for the payment of the Bonds. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the Pledged Funds. Possible Changes in Law The Code of Iowa and the Act currently provide that Gaming Revenues and Beer and Liquor Revenues are to be deposited in the Revenue Bonds Debt Service Fund to the extent described herein. It is within the power of the General Assembly and Governor to, at any time, amend the laws of the State of Iowa, including the Act, in a manner which could adversely affect the Bonds, including altering or abolishing the present system of gaming operations or collecting Gaming Revenues and/or the liquor control system and the collection of Beer and Liquor Revenues or appropriating the Gaming Revenues or Beer and Liquor Revenues for another purpose rather than continuing to direct their deposit to the Revenue Bonds Debt Service Fund. There are no provisions under the Master Indenture or otherwise which would prohibit the State from altering the current system of allocating Gaming Revenues and Beer and Liquor Revenues to the Revenue Bonds Debt Service Fund or from increasing the amount of bonds which could be issued under the Act and payable from the Revenue Bonds Debt Service Fund on a parity with the Bonds. Any of these events might negatively impact the moneys available to pay the principal of and premium, if any, and interest on the Bonds. However, funds in the Pledged Funds prior to any change in the law would continue to be pledged to the payment of the Bonds. Referendum Requirements Under State law, the counties with casino operations must hold a voter referendum every eight years, a requirement which was first applicable in November 2002 to reauthorize the gaming. Thus, the next time when counties must hold a referendum to reauthorize gaming is November 2010. In the event a referendum to reauthorize gaming at a dog or horse track fails to win voter approval, the gaming portion of the facility will be required to cease operations as soon as practical. In the event a referendum to reauthorize gaming at a riverboat fails to win voter approval, the gaming operations may continue for the remaining term of the original license, not exceeding ten years from the original date of the license. Similar referenda will be held with respect to each gaming facility in 2018, 2026 and 2034. In the event that voters should fail to approve the continued operation of one or more 36

gaming facilities at any of the referenda to be held while the Bonds are Outstanding, it would have an immediate adverse impact on the collection of Gaming Revenues. See RACING AND GAMING IN IOWA-Referendum Requirements for additional information on the referendum requirements. Revenue Variations Amounts deposited in the Pledged Funds, including earnings on the Revenue Bonds Debt Service Fund, described in SOURCES OF PAYMENT AND SECURITY FOR THE BONDS, constitute the only source for the payment of the principal of and premium, if any, and interest on the Bonds. The Gaming Revenues are generated primarily from the levy of taxes on wagering and gaming activities at the various racetracks and gaming casinos operating in the State (other than those operated by Indian tribes) and subject to regulation by the State Racing and Gaming Commission. Historically, Gaming Revenues have exceeded the maximum of $55,000,000 authorized by the Act to be deposited in the Revenue Bonds Debt Service Fund. However, the amount of the collections in the future is dependent upon continuing racing and gaming activities at the racetracks and gaming casinos subject to regulation by the State Racing and Gaming Commission. Collections can be affected by the popularity of gaming activities generally and the popularity of the specific games offered at the casinos, declining population, the age of the population, and other factors generally impacting the economy of the State. There can be no assurance that future collections will be sufficient to pay the principal of and premium, if any, and interest on the Bonds. In addition, Beer and Liquor Revenues are a result of the operation by the State of its liquor control system. Pursuant to the Act, if Gaming Revenues which would otherwise be deposited in the General Fund of the State are insufficient in a fiscal year to meet the total amount of such revenues directed to be deposited in the Revenue Bonds Debt Service Fund ($55,000,000) during the fiscal year, the difference shall be paid from Beer and Liquor Revenues. If Beer and Liquor Revenues are insufficient during the fiscal year to pay the difference, the remaining difference is required to be paid from Beer and Liquor Revenues in subsequent fiscal years as such revenues become available. Beer and Liquor Revenues are dependent on the continuing operation and success of the liquor control system in generating revenues in excess of its operating expenses. The continued success of the liquor control system in generating Beer and Liquor Revenues will be affected by changing consumer consumption patterns, the popularity of alcoholic beverages offered through the liquor control system and generally, declining population, the age of the population, competitive alcoholic and non-alcoholic beverages, and other factors generally impacting the economy of the State. There can be no assurance that future Beer and Liquor Revenues will be sufficient to make up a Gaming Revenues Deficit. In addition, proposals have periodically been made by various groups and individuals to end the States liquor control system and permit the wholesale distribution of alcoholic beverages by the private sector. It is impossible to predict the likelihood of passage of any future similar proposals, the form of any proposal which might be adopted, or the impact on Beer and Liquor Revenues if such a proposal were adopted. 37

Competition for Gaming Revenues In addition to the casinos licensed to operate in the State by the Commission, there are three casinos in the State that are operated by Indian tribes pursuant to compacts between the State and the tribes. The compacts have been entered into as required by the provisions of the federal Indian Gaming Regulatory Act (IGRA). The Omaha Tribe of Nebraska entered into its first compact with the State on December 30, 1991, and began operation of CasinOmaha near Onawa, Iowa soon thereafter. The Winnebago Tribe of Nebraska entered into its first compact with the State on February 25, 1992, and began operation of the WinneVegas Casino near Sloan, Iowa soon thereafter. CasinOmaha and WinneVegas Casino are located in rural locations between the cities of Council Bluffs, Iowa and Sioux City, Iowa on the western border of Iowa. The Sac and Fox Tribe of the Mississippi in Iowa entered into its first compact with the State on March 3, 1992, and began operation of Meskwaki Bingo and Casino near Tama, Iowa soon thereafter. Tama is located in east-central Iowa approximately sixty miles northeast of Des Moines. Any financial information that the State may have pertaining to the tribal casinos is confidential pursuant to state law and the terms of the compacts, therefore any such financial information cannot be publicly disclosed by the State. Tribal casinos are not subject to state taxation, nor do they make any substantial form of payment to the State. The Tribal casinos lack of substantial financial obligations to the State may provide them with a competitive advantage over those casinos that are subject to state taxation or other obligations to the State. Subject to the requirements of the IGRA, it is possible that other Tribal casinos could open in the State and provide additional competition. The State also operates a state lottery offering a variety of games including a multistate game. Gaming is also permitted at licensed casinos in the bordering states of Illinois, South Dakota and Missouri. In addition, Indian casinos operate in the bordering states of Minnesota, Wisconsin and South Dakota. Pari-mutuel wagering is permitted in the bordering states of Nebraska, Minnesota, Illinois and Wisconsin. Other state lotteries are operated in Nebraska, Minnesota, Illinois, Missouri, South Dakota and Wisconsin. Subsidy Payments Although the State anticipates that the Debt Service Payments on the Bonds will be less than $55 million and it will not need the Subsidy Payments in order to make Debt Service Payments, the State will covenant in the Indenture that it will direct that the Subsidy Payments be paid to the Trustee and has directed the Trustee to deposit the Subsidy Payments in the Bond Fund. The State has directed that the Subsidy Payments received relating to the interest payable on the Series 2009B Bonds on December 1, 2009 and June 1, 2010 be deposited in the Taxable Bonds Account of the Bond Reserve Fund in order to replenish the Bond Reserve Fund for the scheduled draws on the Transfer Days immediately preceding December 1, 2009 and June 1, 2010. See SOURCES OF PAYMENT AND SECURITY-Scheduled Draws on the Bonds Reserve Fund; Replenishment herein. Receipt of the Subsidy Payments by the State is subject to certain requirements which must be met by the State, including those pertaining to the use of the proceeds of the Series 2009B Bonds and the filing of a form with the Internal Revenue Service 38

prior to each Interest Payment Date. In addition, receipt of the Subsidy Payments is subject to continuation of the Build America Bond program by the federal government, timely payment of the Subsidy Payments, and potential offsets by the federal government against the Subsidy Payments for unrelated amounts owed by the State to the federal government. Additional Bonds So long as (a) there is no default under the Master Indenture, and (b) the issuance of a particular series of bonds will not constitute a default under the Master Indenture, the State may issue one or more series of additional bonds, to be authenticated and delivered for the purposes specified in the Supplemental Indenture pursuant to which each series of additional bonds is issued. Each series of bonds issued pursuant to the Master Indenture shall be equally and ratably secured under the Master Indenture with all other series of bonds theretofore or thereafter issued pursuant to the Master Indenture without preference, priority or distinction of any bond or bonds over any other bond or bonds. Secondary Market for Bonds The Bonds will not be listed on any securities exchange or inter-dealer quotation system. The Underwriters have advised the State that they presently intend to make a market in the Bonds. However, the Underwriters are not required to engage in such market making, and such market making, if commenced, may be discontinued at any time without notice. In addition, any change in the rating of the Bonds (see RATINGS) could adversely affect the existence of a secondary market for the Bonds or the price of the Bonds in any such market.

LITIGATION There is no litigation of any nature now pending or threatened restraining or enjoining the issuance, sale, execution or delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the State taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or security provided for the payment of the Bonds, or the existence or powers of the State.

LEGAL MATTERS All legal matters incident to the authorization, issuance and delivery of the Bonds are subject to the approval of Dorsey & Whitney LLP, Bond Counsel. Certain legal matters will be passed upon for the Underwriters by Davis, Brown, Koehn, Shors, & Roberts, P.C., Des Moines, Iowa.

TAX EXEMPTION In the opinion of Dorsey & Whitney LLP, Bond Counsel, under the Code as presently construed and administered, and assuming continuing compliance with certain covenants made 39

by the State, interest on the Series 2009A Bonds (including any original issue discount) (i) is excluded from gross income of the owners thereof for federal income tax purposes and (ii) is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and is not included in adjusted current earnings for purposes of the federal alternative minimum tax imposed on corporations. The opinion on federal tax matters will be based on, and will assume the accuracy of, certain representations and certifications and compliance with certain covenants of the State contained in the transcript of proceedings, which are intended to evidence and assure that the Series 2009A Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of the certifications and representations made by the State. The Internal Revenue Code of 1986, as amended (the Code) contains a number of requirements and restrictions which apply to the Series 2009A Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The State has covenanted in the Indenture that it will, to the extent permitted by law, comply with the provisions of the Code that constitute conditions to or requirements for the exclusion from gross income of the interest paid on the Series 2009A Bonds by the owners thereof for federal income tax purposes pursuant to the provisions of Section 103 of the Code. Failure to comply with certain of those covenants could cause interest on the Series 2009A Bonds to become includable in gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance of the Series 2009A Bonds. The Indenture may be amended without the consent of any owner of the Series 2009A Bonds for the purpose of taking action necessary to maintain tax exemption with respect to the Series 2009A Bonds under applicable federal law or regulations. The Series 2009A Bonds will not be qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code. The Series 2009B Bonds are taxable obligations. Interest on the Series 2009B Bonds is includable in gross income for federal income tax purposes pursuant to the Code. No other opinion has been obtained or is given regarding the federal tax consequences of the purchase, ownership, retirement or disposition of the Series 2009B Bonds. Prospective purchasers or owners of the Series 2009B Bonds should consult with their tax advisers concerning such tax issues, including, without limitation, the treatment of interest in jurisdictions other than the State of Iowa, the calculation and timing of inclusion of interest in income, the tax consequences of dispositions of the Series 2009B Bonds at a gain or loss and the determination of the amount thereof, rules applicable if the Series 2009B Bonds are acquired at a premium or discount from their face amount (including without limitation the possible treatment of accrued market discount as ordinary income, deferral of certain interest deductions attributable to indebtedness incurred or continued to purchase or hold Series 2009B Bonds and the amortization of market premium). Interest payments and proceeds of the sale, exchange, redemption or retirement of Series 2009B Bonds are expected to be reported to the Internal Revenue Service to the extent required by law.

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A backup withholding tax may apply to payments to holders of the Series 2009B Bonds under circumstances described in Section 3406 of the Code, including without limitation failure of a holder of Series 2009B Bonds to provide the holders tax identification number or certain other information. Payments to holders of Series 2009B Bonds who are not U.S. residents or which are foreign entities may also be subject to tax withholding in certain circumstances. The holders of the Series 2009B Bonds are not entitled to a tax credit as a result of ownership of the Series 2009B Bonds. Bond Counsel is also of the opinion, under existing laws of the State of Iowa and the current rules of the Iowa Department of Revenue and Finance, that the interest on the Series 2009 Bonds will not be subject to the taxes imposed by Division H, Personal Net Income Tax and Division III, Business Tax on Corporation of Chapter 442 of Code of Iowa, 2009, as amended (the Iowa Code), but the interest thereon will be subject to the franchise tax imposed by Division V, Taxation of Financial Institutions of Chapter 422 of the Iowa Code. Interest on the Series 2009 Bonds will be required to be included in adjusted current earnings to be used in computing state alternative minimum taxable income of corporations and financial institutions for purposes of Section 422.33 and 422.60 of the Iowa Code. ORIGINAL ISSUE DISCOUNT The Series 2009A Bonds maturing in 2029 (collectively, the Discount Bonds) are being sold at a discount from the principal amount payable on such Discount Bonds at maturity. The difference between the price at which a substantial amount of the Discount Bonds of a given maturity is first sold to the public (the Issue Price) and the principal amount payable at maturity constitutes original issue discount under the Code. The amount of original issue discount that accrues to a holder of a Discount Bond under section 1288 of the Code is excluded from federal gross income to the same extent that stated interest on such Discount Bond would be so excluded. The amount of the original issue discount that accrues with respect to a Discount Bond under section 1288 is added to the owners federal tax basis in determining gain or loss upon disposition of such Discount Bond (whether by sale, exchange, redemption or payment at maturity). Interest in the form of original issue discount accrues under section 1288 pursuant to a constant yield method that reflects semiannual compounding on dates that are determined by reference to the maturity date of the Discount Bond. The amount of original issue discount that accrues for any particular semiannual accrual period generally is equal to the excess of (1) the product of (a) one-half of the yield on such Discount Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such Discount Bonds, over (2) the amount of stated interest actually payable. For purposes of the preceding sentence, the adjusted issue price is determined by adding to the Issue Price for such Discount Bonds the original issue discount that is treated as having accrued during all prior semiannual accrual periods. If a Discount Bond is sold or otherwise disposed of between semiannual compounding dates, then the original issue discount that would have accrued for that semiannual accrual period for federal income tax purposes is allocated ratably to the days in such accrual period.

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An owner of a Discount Bond who disposes of such Discount Bond prior to maturity should consult owners tax advisor as to the amount of original issue discount accrued over the period held and the amount of taxable gain or loss upon the sale or other disposition of such Discount Bond prior to maturity. Owners who purchase Discount Bonds in the initial public offering but at a price different than the Issue Price should consult their own tax advisors with respect to the tax consequences of the ownership Discount Bonds. The Code contains provisions relating to the accrual of original issue discount in the case of subsequent purchasers of bonds such as the Discount Bonds. Owners who do not purchase Discount Bonds in the initial offering should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds. Original issue discount that accrues in each year to an owner of a Discount Bond may result in collateral federal income tax consequences to certain taxpayers. No opinion is expressed as to state and local income tax treatment of original issue discount. All owners of Discount Bonds should consult their own tax advisors with respect to the federal, state, local and foreign tax consequences associated with the purchase, ownership, redemption, sale or other disposition of Discount Bonds.

ORIGINAL ISSUE PREMIUM The Series 2009A Bonds maturing in 2011 through 2023 and 2025 through 2028 as well as the Series 2009A Bonds maturing on June 1, 2024 in the principal amount of $16,910,000 are being issued at a premium to the principal amount payable at maturity. Except in the case of dealers, which are subject to special rules, Bondholders who acquire Series 2009A Bonds at a premium must, from time to time, reduce their federal tax bases for the Series 2009A Bonds for purposes of determining gain or loss on the sale or payment of such Series 2009A Bonds. Premium generally is amortized for federal income tax purposes on the basis of a bondholders constant yield to maturity or to certain call dates with semiannual compounding. Bondholders who acquire Series 2009A Bonds at a premium might recognize taxable gain upon sale of the Series 2009A Bonds, even if such Series 2009A Bonds are sold for an amount equal to or less than their original cost. Amortized premium is not deductible for federal income tax purposes. Bondholders who acquire Series 2009A Bonds at a premium should consult their tax advisors concerning the calculation of bond premium and the timing and rate of premium amortization, as well as the state and local tax consequences of owning and selling Series 2009A Bonds acquired at a premium.

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UNDERWRITING The Bonds are being purchased by Barclays Capital Inc., as representative of the underwriters set forth on the cover page of this Official Statement (the Underwriters). Pursuant to the Bond Purchase Agreement, the Underwriters have agreed to purchase the Series 2009A Bonds at a purchase price of $406,380,622.83 (reflecting the par amount of the Series 2009A Bonds, an aggregate net original issue premium of $28,317,959.25, and the Underwriters discount of $2,057,336.42), and to purchase the Series 2009B Bonds at a purchase price of $217,640,129.27 (reflecting the par amount of the Series 2009B Bonds, an aggregate net original issue discount of $1,290,348.00, and the Underwriters discount of $2,019,522.73). The Bond Purchase Agreement provides that the Underwriters will purchase all the Bonds, if any are purchased, subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices may be changed from time to time by the Underwriters. The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and certain dealer banks and banks acting as agents at prices lower than the public offering prices stated on the cover page hereof. Morgan Stanley and Citigroup Inc., the respective parent companies of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc., each an underwriter of the bonds, have entered into a retail brokerage joint venture. As part of the joint venture, each of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of this arrangement, each of Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. will compensate Morgan Stanley Smith Barney LLC for its selling efforts in connection with their respective allocations of Bonds. J.P. Morgan Securities Inc., one of the underwriters of the Bonds, has entered into an agreement (the Distribution Agreement) with UBS Financial Services Inc. for the retail distribution of certain municipal securities offerings including the Bonds, at the original issue prices. Pursuant to the Distribution Agreement (if applicable for this transaction), J.P. Morgan Securities Inc. will share a portion of its underwriting compensation with respect to the Bonds with UBS Financial Services Inc.

RELATIONSHIPS AMONG THE PARTIES In other transactions or pursuant to other programs of the State not related to the Bonds, each of the law firms identified under the heading LEGAL MATTERS may have represented, or may be representing, the State, the Underwriter or the Trustee or their affiliates in capacities different from those in connection with the issuance of the Bonds. Furthermore, the State, the Underwriter and the Trustee and their affiliates are not limited in engaging in current or future business transactions together or in any combination with each other as a result of this transaction. Potential purchasers of the Bonds should not assume that the State, the Underwriter and the Trustee, or their respective counsel, have not previously engaged in, are not presently engaged in, or will not after the issuance of the Bonds engage in, other transactions with each 43

other or with any affiliates of any of them, and no assurance can be given that there are or will be no past, present or future relationships or transactions between or among any of these parties or the law firms referenced herein.

FINANCIAL ADVISOR Public Financial Management, Inc. ("PFM"), has been retained to act as financial advisor for the State in connection with certain aspects of the issuance of the Bonds. Although PFM assisted in the preparation of this Official Statement, PFM is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement.

COMPLIANCE WITH SEC RULE 15c2-12 The State has provided the Underwriters with a copy of its Preliminary Official Statement dated June 30, 2009. As of its date, the Preliminary Official Statement was deemed final by the State for purpose of SEC Rule l5c2-12(b)(1), absent only the types of information specified in SEC Rule 15c2-12(b)(l). The State has contracted with the Underwriters in the Bond Purchase Agreement, in compliance with SEC Rule 15c2-12(b)(3), to deliver to the Underwriters, within seven days of the date of the Bond Purchase Agreement, copies of the final Official Statement in sufficient quantity to comply with SEC Rule l5c2-12(b)(4) and the rules of the Municipal Securities Rulemaking Board.

CONTINUING DISCLOSURE In order to permit the Underwriters to comply with paragraph (b)(5) of Rule 15c2-12 promulgated by the Securities and Exchange Commission (as in effect and interpreted from time to time, the Rule), the State will enter into a Continuing Disclosure Agreement with the Trustee to provide annual reports of specified information and notice of the occurrence of certain material events as described below. The annual reports and notices of material events will be provided to the MSRB in an electronic format as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB until all Bonds have been paid or defeased under the Indenture. The Continuing Disclosure Agreement may be amended pursuant to the terms thereof and provides certain remedies for enforcement by the Trustee and Bondholders according to the terms thereof. A default under the Continuing Disclosure Agreement will not constitute a default under the Indenture.

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Information to be Disclosed The following information is expected to be provided, no later than 210 days after the end of each fiscal year, commencing June 30, 2009: (i) the Comprehensive Annual Financial Report of the State; and (ii) to the extent not included in the financial statements referred to in paragraph (i) above, the information, as of the end of the most recent fiscal year, in the tables included in this Official Statement under RACING AND GAMING IN IOWA-Historic Revenues and in the tables included in this Official Statement under IOWA ALCOHOLIC BEVERAGES DIVISION. The information to be disclosed may be incorporated by reference from other documents, including official statements. In addition, the Trustee, pursuant to the Continuing Disclosure Agreement, will provide notice of the occurrence of any of the following events or conditions, if material: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; (vii) Modifications to rights of Bondholders; (viii) The giving of notice to redeem any Bonds other than for a sinking fund redemption; (ix) Defeasances relating to the Bonds; (x) Release, substitution, or sale of property securing repayment of the Bonds; and (xi) Rating changes. The State is in substantial compliance with its previous continuing disclosure undertakings.

RATINGS Moodys Investors Service, Inc. and Standard & Poors Ratings Services have given the Bonds ratings of Aa3 and AA, respectively. No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. Any explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. The State furnished to such rating agencies certain information and materials concerning the State, the Iowa Jobs Program, the Gaming Revenues and Beer and Liquor Revenues and the Bonds. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions by the rating agencies. There is no assurance that the ratings mentioned above will continue for any given period of time or that they might not be 45

lowered or withdrawn entirely by the rating agencies, if in their judgment circumstances so warrant. Any such downward change in or withdrawal of any one or more of the ratings, would have an adverse effect on the market price of the Bonds.

MISCELLANEOUS Any statements made in this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are set forth as such and not as representations of fact, and no representations are made that any of the estimates will be realized. The references herein and in APPENDIX B hereto to the Indenture and other documents referred to herein are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and reference is made to such documents for full and complete statements of such provisions. The execution and delivery of this Official Statement has been duly authorized by the State. STATE OF IOWA By:___________________ State Treasurer

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APPENDIX A

INFORMATION CONCERNING THE STATE

THE STATE OF IOWA

The information contained in this Appendix provides general information about the functions and financial information of the State of Iowa and its economy and demographics. The Bonds (as defined in the Official Statement to which this appendix is attached) are limited special obligations of the State of Iowa and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State of Iowa, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State of Iowa. The issuance and sale of the Bonds do not directly, indirectly, or contingently obligate the State of Iowa or a political subdivision of the State of Iowa to apply moneys from or to levy or pledge any form of taxation whatever to, or to continue the appropriation of funds for the payment of the Bonds. The principal of and premium, if any, and interest on the Bonds are payable solely from, and secured by a pledge of, the funds which are described in the official statement to which this Appendix is attached. ELECTED OFFICIALS Chester J. Culver Patty J. Judge Michael A. Mauro David A. Vaudt Michael L. Fitzgerald William H. Northey Thomas J. Miller Governor Lieutenant Governor Secretary of State Auditor of State Treasurer of State Secretary of Agriculture Attorney General

LEGISLATIVE OFFICIALS John P. Kibbie Pat J. Murphy President of the Senate Speaker of the House of Representatives JUDICIAL OFFICIALS Marsha K. Ternus Rosemary Shaw Sackett Chief Justice of the Supreme Court Chief Judge of the Court of Appeals

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STATE GOVERNMENT ORGANIZATION General Organization The State Constitution places the legislative authority of State government in a Legislature consisting of a Senate and a House of Representatives, and limits the membership to no more than 50 Senators and 100 Representatives, which is the present size. Senators serve a term of four years, and Representatives serve a term of two years. The chief executive power is allocated to the Governor, who has responsibility for taking final action on all laws enacted by the Legislature and managing the executive branch. The State Constitution and laws of the State provide for six additional State-wide elected officials: Lieutenant Governor, Secretary of State, Treasurer of State, Attorney General, Auditor of State, and Secretary of Agriculture, each of whom serves a term of four years commencing the same year as the Governors term begins. The States Legislature operates on a biennium calendar, with the first session beginning in odd-numbered years. The Legislature, by statute, begins each session on the second Monday in January every year. Although there is no statutory or constitutional limit on session length, Legislators are only entitled to expense money for up to 110 days in the first session and up to 100 days in the second. The Legislature has, however, remained in session longer if its business has not been consummated within these expense limits. The State Constitution provides that no money may be spent from the States Treasury, unless the Legislature enacts a law to do so and the Governor concurs. State Treasurer The Treasurer is a Constitutional officer, responsible for keeping an accurate account, on a cash basis, of the funds of the State of Iowa and other duties as prescribed by the Code of Iowa. The Treasurer accepts and verifies all collections received by the state treasury and disburses and verifies all payments made form the state treasury, including the redemption of all proper warrants issued by the Department of Administrative Services. The Treasurer invests all funds not needed for current operating expenses. For the 12 months ending June 30, 2008, the average daily balance of the funds participating in the Treasurers state investment pool was $2.76 billion. Additional duties of the State Treasurer include the coordination of state financing activities, investment of bond proceeds, and serving as the custodian for the Iowa Public Employees Retirement System, the Public Safety Peace Officers Retirement System, Accident, and Disability System, and the Judicial Retirement System. Other major programs administered by the Treasurer are the Iowa Educational Savings Plan Trust and the Unclaimed Property Great Iowa Treasure Hunt.

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Department of Management The Director of the Department of Management is appointed by and serves at the pleasure of the Governor. The functions and responsibilities of the Department include: preparing an annual State budget; providing annual estimates of State revenues and annual reports on standing appropriations; reporting to the Legislative Services Agency projected allocations of each annual appropriation at the beginning of each fiscal year, monthly expenditure reports during the fiscal year and final reports on each appropriation, including reversions and transfers, after the end of each fiscal year; reporting to the Legislative Services Agency certain information used in preparing the annual State budget; certifying the amount of money to be levied for general State taxes for each fiscal year; recommending intra- and inter-departmental transfers of unspent appropriations; and recommending modification of quarterly allotments of appropriations if projected expenditures for a fiscal year exceed projected revenues. Department of Administrative Services The Department of Administrative Services (DAS) became a State agency on July 1, 2003, combining the former Departments of Personnel, Information Technology, General Services, and Revenue and Finances Accounting Bureau (now known as the State Accounting Enterprise). Governor, Tom Vilsack defined DAS goals to save money, streamline, improve services to customers and apply its resources in a more flexible way. DAS employees share a common priority: to improve services to DAS customers, the state agencies that directly serve the citizens, so that those agencies are, in turn, empowered to provide better service to the citizens of Iowa. The Director of the DAS is appointed by and serves at the pleasure of the Governor. The functions and responsibilities of the State Accounting Enterprise, a division of DAS, include reviewing claims for expenditures; issuing warrants or electronic fund transfers for payment of claims; accounting for State revenues and expenditures; and preparation of a comprehensive annual financial report. State Auditor The Auditor of State is required by Chapter 11 of the Code of Iowa to audit annually all departments of the State. The general purpose financial statements of the State of Iowa are audited by the Auditor of State in accordance with generally accepted auditing standards as promulgated by the American Institute of Certified Public Accountants and Chapter 11 of the Code of Iowa. In addition, the Auditor conducts a single audit under the requirements set forth in the Single Audit Act and OMB Circular A 128, Audits of State and Local Governments. The Auditor is also concerned with efficiency, economy of operations, and program results.

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STATE FINANCIAL OPERATIONS Budget Process The budget of the State is a complete financial plan and encompasses all revenues and expenditures, both operating and capital outlay, of the General Fund. The budget is prepared on an accounting basis consistent with the basis on which the State keeps its accounting records. Under State law, the budget presented by the Governor must be balanced and supporting data must be supplied to the legislative branch. The States budget is prepared on an annual basis. Department program reviews and evaluations are followed by a series of reviews, hearings and analysis by the Department of Management and hearings by the Governor. The Governors proposed budget is required to be completed and presented to the Legislature by the first of February prior to the new fiscal year and proposed appropriation bills necessary for its implementation are presented to each house of the Legislature. These bills are referred to the appropriation committees and subcommittees of both houses for analysis and committee hearings. When an appropriation bill is passed by both houses of the Legislature, the bill is enrolled and sent to the Governor. The Governor may sign it into law or veto it as a whole or veto parts of it on a line-item basis. Funds may be disbursed only after appropriations have been allotted by the Department of Management, subject to review of the Governor. Each department may request allotment revisions, appropriation transfers, or supplemental appropriations. The Department of Management approves revised allotments subject to the Governors review. Appropriation transfers from one line-item appropriation of the budget to another are made with the approval of the Department of Management and the Governor after a two-week notification to the appropriation committees and subcommittee chairpersons. The Legislature and the Governor act on supplemental appropriation bills in a manner similar to original appropriations. Expenditure Control To help assure that budgeted expenditures in a fiscal year will not exceed budgeted revenues for such fiscal year, State law requires the Governor to recommend and the Legislature to enact a budget where total spending does not exceed 99% of total available revenues. Estimated expenditures and revenues for the balance of such fiscal year are monitored on an on-going basis. If expenditures for a fiscal year are projected to exceed estimated revenues for that fiscal year, the State may take various measures to increase revenues or decrease expenditures. Such measures have included: (i) suspending the hiring of additional State employees or the replacing of retiring State employees; (ii) imposing certain restrictions on purchases by State agencies; (iii) increasing certain tax rates; and (iv) the preparation and submission by the Governor to the Legislature of a revised budget. State law authorizes the Governor to impose across-the-board pro rata reductions in expenditures in order to assure that revenues and other available funds are sufficient to pay expenses in a given fiscal year. The Governor exercised this authority several times in the past.

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This was done by reducing allotments to the extent necessary to achieve a balance between projected revenues and expenditures. Expenditures for new programs or for expansion of existing programs cannot be made from the General Fund until moneys have been authorized by the Governor and appropriated by the Legislature. Cash Management and Investment Policies The Treasurer is responsible for the deposit of cash receipts, payment of warrants, and investment of funds. Information from the Department of Revenue and Finance, which issues all warrants, is analyzed to determine cash flows. Highest priority is given to expediting the processing of receipts for immediate deposit in the States banks to maximize cash available for investment. The Department of Revenue receives over 73% of tax revenue electronically and deposits 86% of all tax revenue on the same day as receipt. Most funds received from the Federal Government are wired directly to the Treasurers central account. The reviewing and auditing functions are performed after the checks are deposited by the Treasurer. Because no payments are made until required warrants are actually presented to the Treasurer, it is possible to maximize investment return on available funds. An on-line computer inquiry system provides immediate status of issued warrants and enables daily reconciliation of cash and monitoring of outstanding warrants. With centralized control of disbursements, trade discounts are realized, payments are not made to parties indebted to the State, and disbursements can be delayed with short notice, if necessary. The pooled money fund, which is managed by the Treasurer, pools the cash balances of State funds, excluding pension funds and funds of State universities. State law authorizes the Treasurer to invest these funds to assure safety, liquidity and earnings. It is the responsibility of the Treasurer to make money available to pay for State warrants as they are presented. Allocations of earnings are made to each participating fund monthly, based on the percentage of its daily average cash balance to the total fund. Under the provisions of State law with respect to the investment of public funds, the Treasurer is authorized to invest any of the funds in the Treasurers custody. In the investment of such funds, the Treasurer is required to exercise care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use to attain the goals of safety, liquidity, and return. State law imposes restrictions on investment maturities and the exposure to credit risk. To further define and restrict the statutory prudent person rule, the Treasurer has adopted a written investment policy which generally limits investments. The Treasurer has also adopted guidelines which require diversification of the investment portfolio, impose minimum liquidity standards, regulate the maturities within the portfolio, seek to minimize the exposure of the portfolio to the risk of default, and seek to protect the assets of the State from fraud and embezzlement.

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Financial Controls The financial control functions are performed principally by the Department of Administrative Services. After passage of appropriation bills, allotments of the total appropriation are established. Requests to revise quarterly allotments require substantiation by the requesting department and approval of the Department of Management. No claim for expenditure may be submitted for payment unless a claim voucher is prepared by the requesting agency and forwarded to the Department of Administrative Services. With respect to any claim presented, it must be certified that the proposed expenditure is for a purpose intended by law and sufficient unexpended appropriation balances are available for expenditure. The statewide accounting system also performs various editing checks to assure appropriation authorizations are not exceeded. General Fund expenditures are made by State warrant or electronic fund transfers authorized by the Director of the Department of Administrative Services. The authorization of the Director is full authority for the Treasurer of State to pay the warrant or electronic fund transfer upon presentation. In addition to Department of Administrative Services review, all State department or agency heads are responsible for maintaining expenditures within appropriated limits. For programs supported in part with Federal or other funds, expenditures cannot exceed the sum of appropriations and additional dedicated revenue that is received. If dedicated revenue is not received as expected, expenditures must be reduced by a like amount. The State maintains an on-line accounting system which uses a number of control edits that have been established in the DAS. Accounting transactions may be entered and edited by an agency, but final approval of a transaction updating the accounting system must be made by an agency with supervisory authority over a specific type of transaction. Accounting information is available daily to agency central accounting and State budget personnel through extensive on-line tables and a data warehouse. General Fund appropriable receipts are monitored by the DAS and the Department of Management on a daily basis. Monthly reports are prepared comparing month and year-to-date revenues with the prior year results and with current year estimates. These reports and supporting analysis are available in the Department of Management office three working days after the end of the fiscal period. General Fund expenditures are also monitored on a daily basis. Monthly reports that provide total General Fund expenditures on a monthly and year-to-date basis are created from the files of the statewide accounting system and are forwarded to State agencies in the data warehouse. State law requires that, for each Fiscal Year, the financial position and results of operations of the State shall be reported in the comprehensive annual financial report (CAFR) prepared in accordance with generally accepted accounting principles (GAAP), as established by the Governmental Accounting Standards Board (GASB). The CAFR is generally issued in December of each year.

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STATE ECONOMIC AND DEMOGRAPHIC INFORMATION General Information The State of Iowa has a population of approximately 2.99 million and occupies 56,000 square miles of land located in the North Central Region of the United States. The State is bordered on the east by the Mississippi River and on the west by the Missouri River. Des Moines is the States capital and largest city. The metropolitan statistical area (MSA) that includes Des Moines had a population of 556,230 in 2008. In terms of population, Iowa has become an increasingly urbanized state. By Estimates show in 2007, 56 percent of Iowa residents lived in cities and towns. While Iowa has been traditionally characterized as a rural state, the number of inhabitants who live outside towns and cities has declined for most of the last 100 years. Iowas economy is supported by a diverse mixture of industry, agriculture, services and government employment. In 2007, Iowas gross domestic product (formerly gross state product) incorporated 6 percent from the agricultural industry, 10.7 percent for finance and insurance, 8 percent for real estate, rental and leasing, and 3 percent for professional and technical services. Agriculture continues to play an important role in the State economy. Iowa is a leader in the production of corn, soybeans, hogs and cattle. In addition, a larger part of Iowas non-farm personal income is earned in agriculture-related industries, such as agricultural services, food and kindred products, leather and leather products, and chemicals, in addition to farm machinery.

Iowas Population In 2000 the State ranked 30th in number of inhabitants among the fifty states, the same as in 1990. Table A-1 below shows U.S. and Iowa population and changes in population for certain years from 1980 through 2000 and projected population and changes in population in 2030. Table A-1 Total Resident Population of the United States and Iowa Population U.S. Iowa 1980 226,504,825 2,913,808 1990 248,709,873 2,776,755 2000 281,421,906 2,926,324 2010* 308,935,581 3,009,907 2020* 335,804,546 3,020,496 2030* 363,584,435 2,955,172 *Projected, Source U.S. Census Bureau Year Percent Change U.S. Iowa 11.4% 3.2% 9.8 (4.7) 13.2 5.4 9.8 2.9 8.7 0.4 8.3 (2.2)

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Personal Income and Employment Personal Income. The University of Iowa Institute for Economic Research's latest outlook is for personal income in Iowa to grow by 5.3% in 2008, 3.8% in 2009, and 4.6% in 2010. According to the Bureaus of Economic Analysis, in the last three quarters of 2007-08 Fiscal Year, Iowas personal income, seasonally adjusted, grew at a rate of 1.4%, 0.9% and 1.6% respectively, which was similar to the nation as a whole, with personal income growth of 1.2%, 0.8% and 1.8%, respectively. Contributing to Iowas personal income was higher growth in transportation and warehouse (4.87%), professional and technical services (8.86%), durable and nondurable goods manufacturing (5.02%), and health care and social assistance (5.36%). Farmland Values. The most recent survey of area bankers indicates that farmland values have plateaued and have started to retreat. The Federal Reserve Bank of Chicago surveys farm bankers in the area four times a year to determine their best estimates of farmland values. In their May 2009 survey, Iowa farmland values had fallen 7% from January 2009 to April 2009. This is matched by the same percentage drop in Wisconsin, with the overall average drop for the Federal Reserve Bank of Chicago District (the District) of 6 percent. The year-over-year gain of 2% in Iowa was equal to the District average of a 2% gain over last year. Employment. Iowa continues to have an average unemployment rate below the rate of the nation as a whole. Over the past ten years, Iowas unemployment rate has been between one and two percentage points below the national average. The U.S. unemployment rate for April 2009 was 8.9%, compared to 5.0% in April 2008. Iowas unemployment rate for April 2009 was 5.1%, compared to 4% in April 2008. In April 2009, there were 1,590,400 employed Iowans. This compares with the level of 1,608,500 employed Iowans in April 2008. Iowa has a greater percentage of labor force employed compared to the nation as a whole and also has a larger percentage of its population actively participating in the labor force. While Iowas personal income lags that of the nation, its high levels of employment help maintain median household income at levels at or exceeding the national average. In 2007, Iowas median household income was $47,324, in 2007 inflation-adjusted dollars. The national median household income was reported at $50,740. Exports. The rise in exporting industries has been an important factor in Iowa economic growth since the 1990's. Growth in exports of industrial machinery, instruments and measurement devices, electronics, specialized transportation equipment, chemicals and pharmaceuticals, and processed food products have helped diversify Iowa's economy. When combined with traditional farm commodities and livestock, total exports from Iowa have continued to increase. Specifically, the last ten years have seen steady and strong growth. Strong harvests worldwide continued to lead to an oversupply of agricultural commodities and the strong U.S. made it more challenging for U.S. products to be competitive in international markets. However, recent Federal Reserve monetary policy stance via discount interest rate cuts

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has caused the dollar to depreciate in value against these major currencies and will affect trade balances. Iowas export of value-added and manufacturing goods has increased 25.2 percent from 2007 to 2008. For many years Canada has been the most significant destination for Iowa exports. For the last six years, Mexico has been Iowas second leading trading partner and has replaced Japan and Germany as the second leading export country, partially due to the increase of value-added products shipped to Mexico. Iowas record level of exports has been fueled by large percentage increases in soybeans, corn, pork, machinery parts, and agricultural equipment. Overall, Iowa has continued to enjoy an increased percentage share of U.S. total exports, as it has increased steadily from 0.69% in 2002, 0.72% in 2003, 0.8% in 2004, 2005, 2006, and 2007, and 0.9% in 2008. Gross Domestic Product by State. In 2008, Iowas real gross domestic product by state (formerly gross state product) was $110.4 billion, which reflected 2.1% growth over the previous year. Contributions to the percent change in Iowas real gross domestic product by state were agriculture, forestry, and fishing and hunting (10.05% increase), professional and technical services (8.62% increase), educational services (4.67% increase), accommodation and food services (4.4% increase), health care and social assistance (4.39% increase), administrative and waste services (4.06% increase), information (4.03%), among others. The nations real gross domestic product ($11.52 trillion) grew by 0.7% between 2007 and 2008. 2008 is the most recent data for this category. Table A-2 below sets forth U.S. and Iowa per capita personal income for certain years from 2000 and 2004 through 2007. Table A-2 United States and Iowa Per Capita Income
Year Iowa

2000 2004 2005 2006 2007

U.S. 29,676 33,072 34,685 36,629 36,564

26,723 30,645 31,473 33,017 34,796

Iowa as % of U.S. 90.0 92.7 90.7 90.1 90.2

____________ Source: U.S. Department of Commerce, Bureau of Economic Analysis. Table A-3 below summarizes the States personal income, monthly initial jobless claims, new incorporations and average annual unemployment rates for certain years from 2000 and 2004 through 2008.

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Table A-3 Iowa Economic Statistics

Personal Income Initial Jobless

Claims
Per Month

Year 2000 2004 2005 2006 2007 2008 __________

($ Billions) 78.2 90.5 93.3 98.5 104.0 110.1

New Incorporations Filed

Average Annual

Unemployme nt
Rate

12,778 13,990 14,450 14,967 14,465 13,970

6,251 11,786 11,291 12,294 15,933 15,488

2.6 4.7 4.6 3.7 3.8 4.1

Sources: Labor Market Information Unit, Iowa Workforce Development, U.S. Department of Commerce, Secretary of State.

Table A-4 below summarizes the unemployed and employed members of the States residential civilian labor force for certain years from 2000 and 2004 through 2008. Table A-4 Iowa Resident Labor Force (000s)
2000 2004 2005 2006 Residential Civilian Labor Force 1,601.9 1,609.7 1,630.0 1,656.9 Unemployed 44.8 74.7 70.4 62.2 Percent Unemployed 2.8 4.6 4.3 3.8 Employed 1,557.1 1,535.0 1,559.6 1,594.6 Percent Employed 97.2 95.4 95.7 96.2 __________ Source: Labor Market Information Unit, Iowa Workforce Development 2007
1,664.4 62.3 3.7 1,602.1 96.3

2008
1,676.0 69.0 4.1 1,607.0 95.9

Components of the Iowa Economy Nonagricultural Economy. Over the past eight years, significant changes have occurred in the mix of nonfarm industries. While payroll jobs in Iowa grew by 3.0%, jobs in the professional and business services sector grew by 12.9% and the financial services sector grew by 14.7%. Conversely, manufacturing jobs decreased by 9.4%. Table A-5 summarizes the Iowas nonfarm workforce by industry category for certain years from 2000 and 2004 through 2008.

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Table A-5 Iowa Employment by Industry* (000s)

2000 2004 1,457.3 2.1 68.6 223.3 304.6 33.7 96.9 108.4 191.5 127.2 56.4 244.6 2005 1,480.5 2.1 71.4 229.1 306.7 33.0 98.3 113.3 195.1 130.5 56.3 245.2 2006 1,503.0 2.2 74.7 231.1 308.8 32.8 100.6 116.9 199.1 133.0 56.6 247.3 2007 1,518.3 2.1 72.7 229.6 308.9 33.5 102.6 121.4 203.2 137.0 57.6 249.7 2008 1,522.2 2.1 73.0 227.8 309.2 33.3 102.9 121.5 206.7 135.3 57.7 252.7

Nonagricultural wage and salary Mining Construction Manufacturing Trade, Transportation Information Financial Activities Professional and Business Services Educational and Health Leisure and Hospitality Other Services Government

1,478.4 2.1 63.9 251.5 315.8 40.4 89.7 107.6 181.9 125.5 56.8 243.3

___________ * Includes non-residents Source: Labor Market Information Unit, Iowa Workforce Development

Table A-6 below summarizes Iowas nonagricultural employment, as a percentage of total nonagricultural wages and salaries paid, for certain years from 2000 and 2004 through 2008. Table A-6 Iowa Nonagricultural Wage And Salary Employment 2000 2004 2005 2006 Mining 0.1% 0.1% 0.1% 0.1% Construction 4.3 4.7 4.8 5.0 Manufacturing 17.0 15.3 15.5 15.4 Trade, Transportation, Utilities 21.4 20.9 20.7 20.5 Information 2.7 2.3 2.2 2.2 Financial Activities 6.1 6.6 6.6 6.7 Professional and Business Services 7.3 7.4 7.7 7.8 Educational and Health 12.3 13.1 13.2 13.2 Leisure and Hospitality 8.5 8.7 8.8 8.8 Other Services 3.8 3.9 3.8 3.8 Government 16.5 16.8 16.6 16.5 __________ Source: Labor Market Information Unit, Iowa Workforce Development. 2007 0.1% 4.8 15.1 20.3 2.2 6.8 8.0 13.4 9.0 3.8 16.4 2008 0.1% 4.8 15.0 20.3 2.2 6.8 8.0 13.6 8.9 3.8 16.6

The growing diversification of Iowas economy has caused the States economy to more closely resemble that of the nation. Growth in professional and business services, education and health has offset relative declines in manufacturing and government.

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Table A-7 below summarize Iowas total earned income, by industry type, for the years 2004 through 2008 on a nominal dollar basis. The data in Table A-7 is based on the North American Industry Classification System (NAICS). Table A-7 Iowa Income by NAICS Industry* ($ Millions)
2004 2005 3,119 152 4,541 13,311 3,871 4.951 2,885 1,716 5,837 862 6,892 553 1,584 1,993 11,659 68,420 2006 2,157 162 4,861 14,038 4,040 5,047 2,984 1,807 6,456 905 7,163 599 1,672 2,059 12,135 71,944 2007 3,779 174 4,787 14,445 4,283 5,161 3,174 1,871 6,883 971 7,538 638 1,782 2,212 12,765 75,420 2008 5,168 186 4,914 14,849 4,582 5,329 3,151 1,938 7,296 1,052 7,983 646 1,878 2,279 13,356 78,580

Agriculture 3,367 Mining 142 Construction 4,175 Manufacturing 12,840 Wholesale Trade 3,609 Retail Trade 4,881 Transportation and Warehousing 2,752 Information 1,683 Finance and Insurance 5,497 Educational Services 831 Health Care and Social Assistance 6,572 Arts, Entertainment, and Recreation 552 Accommodation and Food Services 1,515 Other Services, except Public Administration 1,927 Government and Government Enterprises 11,121 Total Earned Income 65,326 __________

* Income includes wages and salaries, other labor income, proprietors income, and corporate dividends that originate within a given industry in Iowa.

Source: U.S. Department of Commerce, Bureau of Economic Analysis. Agricultural Economy. The agricultural sector remained relatively stable during the last six years. Approximately 86% of the land area in the state is in farms. The Iowa Department of Agriculture and Land Stewardship, reports that in 2007, Iowa led the nation in the production of pork, corn, soybeans and eggs. Iowas total cash receipts for farm commodities in 2007 totaled $19.7 billion - the third highest in the country. The state produces approximately 19% of the nations corn for grain and about 16% of the nations soybeans. Iowa produces more ethanol per year than any other state, now producing well over 2 billion gallons annually. The Economic Research Service of the United States Department of Agriculture also reports that Iowas total agricultural exports for 2007 (the most current data) were valued at $20.42 billion, ranking Iowa second in the nation in agricultural exports. Net farm income more than doubled from 2003 to 2004, showed a 30.1 percent decrease in 2005, slightly improved to show a decrease of 15.8% in 2006 and experienced a large 61.3% increase in 2007 as shown in Table A-8. Cash receipts from A-12

all commodities (Table A-9) increased by 4.0% from 2005 to 2006 and by 30.0 percent from 2006 to 2007. According to the Federal Reserve Bank of Chicago, the value of farmland in Iowa decreased by 6% from October 1, 2008 to January 1, 2009. However, for over 2008, the value of farm land in Iowa increased 4 percent. Table A-8 below summarizes realized gross and net income from farming in Iowa for certain years from 2000 and 2004 through 2007. Table A-8 Realized Gross and Net Income from Farming in Iowa (1) ($ Thousands)
2000 2004 4,926,346 8,568,766 5,775,466 7,465,987 1,031,606 1,280,134 11,733,418 17,314,886 2,424,665 5,564,829 2005 6,579,098 8,132,566 1,282,052 15,993,716 3,888,822 2006 2007 6,824,880 10,675,262 7,995,727 8,998,927 1,415,740 1,480,862 16,236,346 21,155,051 3,015,077 5,333,999

Final crop output Final animal output Services and forestry Final agricultural sector output Net farm income

______________ Source: Economic Research Service, U.S.D.A. (1) The components of Iowas farm economy has, for a number of years, been split about equally between livestock and crops. Table A-9 below summarizes cash receipts from the various components of farming in Iowa for the years 2000 and 2004 through 2007. Table A-9 Cash Receipts from Farming in Iowa ($ Millions)
2000 2004 2005 10,778.1 14,032.5 14,523.0 5,824.1 7,283.2 7,905.3 5,005.7 5,958.7 6,751.8 455.2 621.4 609.9 337.1 671.0 509.9 26.1 32.5 34.3 4,954.0 6,754.3 6,617.6 2.2 4.5 2.8 2,744.9 4,001.5 3,700.2 2,102.6 2,613.5 2,775.1 14.8 23.8 25.4 4.0 3.8 3.2 85.5 107.3 111.1 2006 15,108.2 7,879.1 6,732.3 532.1 578.8 35.9 7,229.1 4.3 4,330.6 2,760.9 24.0 3.5 105.9 2007 19,674.2 7,466.1 5,958.8 621.4 670.7 32.5 8,568.8 4.5 4,001.5 2,613.5 23.8 3.8 111.0

All commodities Livestock and products Meat animals Dairy products Poultry/eggs Miscellaneous livestock Crops Food grains Feed crops Oil crops Vegetables Fruits/nuts All other crops

______________ Source: Economic Research Service, USDA.

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Iowa Outlook The Iowa Economic Forecast is prepared using the Iowa Forecasting Model which has been developed and is maintained by the Institute for Economic Research at the University of Iowa. The model is estimated each quarter using the latest national state historical data series. The data is obtained from commercial and government electronic data services such as Citicorps Citibase and the Census State Data Center of the U.S. Department of Commerce. Table A-10 sets forth certain historic and projected economic information on the State based on these sources. Table A-10 Iowa Income and Employment Forecast
Personal Income ($ Billions) Percent Change Year Ago Real Personal Income ($ Billlions) Percent Change Year Ago Non-Farm Payroll Jobs (000's) Percent Change Year Ago 2004 90.52 7.86 82.69 4.84 1,457.25 1.17 2005 93.21 3.07 82.47 (0.18) 1,480.50 1.60 2006 97.15 4.23 83.27 0.97 1,504.23 1.60 2007 103.97 7.02 86.78 4.22 1,519.07 0.99 2008 109.49 5.30 89.28 2.88 1,523.17 0.27 2009 113.63 3.78 89.46 0.20 1,487.75 (2.33)

________________ Source: Institute for Economic Research, University of Iowa, February 2009.

STATE FINANCIAL INFORMATION AND RECENT RESULTS The States finances include receipts, expenditures and moneys accounted for in various fund types, account groups, departments and agencies of the State, as well as boards, commissions, authorities and universities for which the States executive, legislative and judicial branches are accountable. For GAAP reporting purposes, the States financial statements take into account all such types and categorizes them as general, special revenue, capital projects, enterprise, internal service, trust and agency and certain other types of funds. Under GAAP, general fund reporting includes funds and accounts outside the States budget-based General Fund, including road use tax funds, capital project funds and other funds that are dedicated, by constitutional or statutory provision or federal grant restrictions, to be used for a specified purpose. Virtually all revenues and moneys available for appropriation by the States Legislature and Governor are accounted for in the States General Fund. Set forth below is a summary of the significant revenue sources and expenditure categories for the States General Fund. Major Sources of General Fund Revenues The following are the major sources of General Fund revenues under existing State law:

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Individual Income Tax. Most single taxpayers are entitled to an exemption on their first $9,000 of income; most other taxpayers are entitled to an exemption on their first $13,500 of income. A graduated tax rate structure is imposed on the taxable income of individuals, estates and trusts. For tax year 2008, rates ranged from 0.36 percent on the first $1,407 of taxable income to 8.98 percent on taxable income in excess of $63,315. The actual effective State income tax rate is less than the stated rates because 100 percent of the Federal income taxes paid by an individual are deductible from such individuals taxable income for purposes of State individual income taxation. Corporate Income Tax. Corporations doing business in the State are subject to tax on that portion of income attributable to business conducted in the State. Tax rates range from six percent on the first $25,000 of taxable income to 12 percent on taxable income in excess of $250,000. The actual effective income tax rate is less because 50 percent of the Federal income taxes paid by a corporation are deductible from such corporations taxable income for purposes of State corporate income taxation. Sales Tax. The States sales tax rate is six percent. The sales tax is imposed on the gross receipts from the sale in the State of tangible personal property and certain enumerated services. Exemptions include food, prescription drugs, items and services used in processing goods for retail sales and certain items used in the production of agricultural products. Use Tax. The States use tax rate is six percent. The use tax is imposed on the use in the State of tangible personal property and services which would be subject to State sales tax if purchased in the State. Credit is given for sales tax paid to another state. Other Taxes and Revenues. Other taxes levied by the State for deposit in the General Fund include excise taxes on cigarettes, tobacco and certain alcoholic beverages, an inheritance tax, and an insurance premium tax. Other revenues include receipts from racing and gaming and profits from State controlled wholesale distribution of liquor. Major Sources of General Fund Expenditures The following are the major sources of General Fund expenditures under existing State law: Education. The education programs include expenditures for elementary and secondary education, vocational rehabilitation, community colleges, three State universities, two special schools for the blind and the deaf governed by the Board of Regents, and education assistance programs under the College Aid Commission. The arts programs, public television, historical preservation and the State library system are also programs included under the education function. Human Services. The Department of Human Services expenditures provide payments and services to individuals who experience personal, economic and social problems. These programs, such as the Aid to Dependent Children, Food Stamps, and Medical Services are partially reimbursed by the Federal government.

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Administration and Regulation. This area includes the responsibilities of the Department of Commerce, the Department of Employment Services and the Department of Inspections and Appeals. The Departments programs are designed to provide help for the States unemployed and to provide proper regulation of various areas such as health facilities, welfare activities and various industries in the State. Health and Human Rights. This area includes the responsibilities of the Civil Rights Commission and the Department of Elder Affairs, the Department of Health, and the Department of Human Rights. The various programs are designed to eliminate discrimination, secure and maintain maximum independence and dignity for older Iowans, protect Iowans rights, and to promote, protect and ensure the health and well-being of the citizens of the State. Justice and Public Defense. The justice programs include expenditures for the States unified Court System, the Attorney Generals Office, the Department of Corrections which includes both penal institutions and local community based corrections, and the Board of Parole. Transportation. Expenditures in the Department of Transportation include, among others, those for highways, aeronautics, railroads, and river transportation. Public Safety expenditures include the Iowa Law Enforcement Academy, the Department of Public Defense which includes Veterans Affairs and the Office of Disaster Services, and the Department of Public Safety which includes state-wide law enforcement activities. Recent State Financial Results 2008-2009 Fiscal Year. The State, like most of the nation, experienced reasonable revenue growth during the first half of 2008, but then experienced a downturn in revenues during the last half of the year. The States estimates that net revenues for the year will total approximately $12.5 billion representing a 3.9% increase over the prior fiscal year. Tax revenues for Fiscal Year 2009 are estimated to total approximately $7.7 billion, up approximately 4.2% from the prior fiscal year. Total expenditures for Fiscal Year 2009 are expected to be approximately $11.8 billion, representing a 5.3% increase over the prior year. Table A-11 below sets forth the States financial results on a GAAP basis for the 2006-07 and 2007-08 Fiscal Years, and presents a projection of such results on a GAAP basis for the 2008-09 Fiscal Year. The amounts shown for Fiscal Years 2006-07 and 2007-08 are derived from audited financial statements. The States Comprehensive Annual Financial Reports, including the States general purpose financial statements, for the fiscal years ending June 30, 2008, 2007, 2006 and 2005 are available on the States website at http://das.sae.iowa.gov/financial_reports/index.html. Reference is made to such annual reports for financial information with respect to the State. Only the States Comprehensive Annual Financial Reports are incorporated herein by reference, and the State makes no representation with respect to any other information found on its website.

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2009 and 2010 Fiscal Years. The Revenue Estimating Conference (REC) met in March of 2009 to revise the estimates of general fund revenues during the 2009 and 2010 fiscal years. For the 2009 fiscal year, the RECs revised estimate of net general fund receipts totaled $5.97 billion. This estimate reflects an estimated decrease over the 2008 Fiscal Year actual receipts of 1.9%. For the 2010 fiscal year, the revised estimate of net general fund receipts totaled $5.75 billion, which reflects an estimated decrease over 2009 fiscal year actual receipts of 3.6%. During the 2009 legislative session, the Legislature updated the FY2009 General Fund budget to reflect the RECs revised revenue projections, and also adopted the FY2010 General Fund budget based upon the RECs revenue projections. On a budget basis, the FY2009 General Fund ending balance is estimated to be $44.7 million and the FY2010 General Fund ending balance is estimated to be $97.4 million.

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Table A-11 Statement of Revenues, Expenditures, and Changes in Fund Balances Fiscal Years Ended June 30 GAAP Basis (in Thousands)
Actual FY 2007 REVENUES: Taxes Receipts from Other Entities Investment Income Fees, Licenses & Permits Refunds & Reimbursements Sales, Rents & Services Miscellaneous GROSS REVENUES Less Revenue Refunds NET REVENUES EXPENDITURES: Current: Administration & Regulation Education Health & Human Rights Human Services Justice & Public Defense Economic Development Transportation Agriculture & Natural Resources Capital Outlay Debt Service: Bond Principal Retirement Bond Interest & Fiscal Charges Total Expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers In Transfers Out Leases, Installment Purchases & Other TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JULY 1, RESTATED FUND BALANCE JUNE 30 $6,798,117 3,490,800 120,475 676,432 334,508 23,535 111,415 11,555,282 682,894 10,872,388 Actual FY 2008 $7,386,422 4,130,534 100,845 686,892 328,246 24,831 109,120 12,766,890 759,015 12,007,875 Estimated FY 2009 $7,696,652 4,378,366 60,507 718,489 338,093 25,328 108,574 13,326,009 854,651 12,471,358 *

859,153 3,011,966 357,023 3,864,422 765,972 220,032 457,439 162,319 736,939 16,070 12,113 10,463,448 408,940

885,498 3,259,018 378,357 4,239,990 867,276 217,008 413,467 172,555 731,917 49,245 12,691 11,227,022 780,853

903,208 3,388,080 405,683 4,546,211 884,622 192,741 421,736 188,820 872,513 9,920 10,936 11,824,471 646,887

259,014 (719,067) 4,730

341,614 (879,988) 848

358,695 (1,281,487) 0

(455,323) (46,383) 2,099,731 $2,053,348

(537,526) 243,327 2,053,348 $2,296,675

(922,793) (275,905) 2,296,675 $2,020,770

* Taxes and Transfers Out include $357.5 million of School Infrastructure tax, which reflects the change from a local option sales tax to a statewide sales tax, for FY 2009.

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APPENDIX B

DEFINITIONS AND SUMMARY OF PRINCIPAL DOCUMENTS

DEFINITIONS In addition to terms defined elsewhere in this Official Statement, the following are definitions of certain terms used in the Master Indenture of Trust (the Master Indenture), the Series 2009 Supplemental Master Indenture of Trust (the Series 2009 Supplemental Indenture and, together with the Master Indenture, the Indenture) and this Official Statement, unless the context otherwise clearly requires. Reference is hereby made to the Indenture for complete definitions of all terms. Account or Accounts means the accounts created within a Fund by the Indenture or under the terms of any Supplemental Indenture. Act means, collectively, S.F. 376, Iowa Code Section 8.57 (2009), as amended by S.F. 376, Section 26, H.F. 811, Section 100, and Senate File 478, Section 29, Iowa Code Section 123.53 (2009), as amended by S.F. 376, Iowa Code Section 99D.17 (2009), and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104. Alcoholic Beverages Division means the Alcoholic Beverages Division of the Department of Commerce of the State, its successors and assigns. Annual Debt Service means the amount of Debt Service coming due during a Fiscal Year and, with respect to a series of Bonds, the amount of Debt Service coming due during a Fiscal Year for such series of Bonds. Annual Valuation means the fixing by the Trustee of the value of the assets held in the Bond Reserve Fund as of the first Business Day immediately succeeding December 15 of each year, pursuant to the Master Indenture. Such valuation shall be based upon the amortized cost of the assets, exclusive of accrued interest thereon. Beneficial Owner means the person recorded as the beneficial owner of such Bond by a Participant on the records of such Participant, or such persons subrogee. Beer and Liquor Revenues means the funds required to be deposited in the Beer and Liquor Control Fund pursuant to Iowa Code Section 123.53(1) (2009) which are not necessary for the payment of the costs of purchasing liquor for resale by the Division, the remittances to local authorities or other resources as required by Iowa Code Chapter 123 (2009), and for other obligations and expenses of the Division which are paid from the Beer and Liquor Control Fund. Bond Counsel means a law firm appointed by the Treasurer and having a national reputation in the field of municipal law, whose opinions are generally accepted by purchasers of municipal bonds. Bond Fund means the Fund by that name created by the Master Indenture. Bond Reserve Fund means the Fund by that name created by the Master Indenture. Bond Reserve Fund Requirement means an amount equal to the sum of the Series Bond Reserve Fund Requirements for each series of Bonds at the time Outstanding. B-1

Bondholder or holder of Bonds or owner of Bonds or holder means the registered owner of any Bond. Bonds means all the IJOBS Program Special Obligation Bonds of the Issuer which are authorized to be issued pursuant to supplements to the Master Indenture. Business Day means a day of the year on which banks located in the city in which the principal corporate trust office of the Trustee is located are not required or authorized to remain closed and on which The New York Stock Exchange is not closed. Cash Funded Reserve Requirement has the definition given to such term in Section 4.05 of the Supplemental Indenture. Code means the Internal Revenue Code of 1986, as amended from time to time, and the regulations from time to time promulgated or proposed thereunder. Cost of Issuance Fund means the Fund by that name created by the Master Indenture. Counsel means an attorney or firm of attorneys duly admitted to practice law before the highest court of any state. Debt Service shall mean the aggregate principal (whether at maturity or pursuant to sinking fund redemption requirements), interest and other payments on Bonds for the period or periods in question as specified in the provisions being applied and, with respect to a series of Bonds, the aggregate principal (whether at maturity or pursuant to sinking fund redemption requirements), interest and other payments on such series of Bonds for the period or periods in question as specified in the provisions being applied. If Bonds are issued with a variable rate, there shall be taken into account in determining the Debt Service the amount of principal and interest payable for such period or periods, assuming that the interest rate for such period or periods is (a) the greater of (1) the average interest rate on such Bonds for the most recently completed sixty (60) months or the period such Bonds have been Outstanding if such Bonds have been Outstanding less than sixty (60) months, or (2) the rate to be determined pursuant to clause (b) below assuming the Outstanding Bonds bearing interest at a variable rate were being issued on the date of calculation; and (b) for proposed additional bonds to be issued at a variable rate (1) on the basis that, in the opinion of Bond Counsel to be delivered at the time of the issuance thereof, interest on such additional Bonds would be excluded from gross income for federal income tax purposes, the greater of (i) the average of the Security Industry and Financial markets Association Municipal Swap Index (SIFMA Index) for the twelve (12) month period ending seven (7) days preceding the date of calculation plus 100 basis points, or (ii) the average of the SIFMA Index for the sixty (60) month period ending seven (7) days preceding the date of calculation plus 100 basis points; and (2) on a basis other than as described in clause (1), the greater of (i) the average of the London Interbank Offered Rate (LIBOR) for the time period most closely resembling the reset period for the additional bonds for the twelve (12) month period ending seven (7) days preceding the B-2

date of calculation plus 100 basis points, or (ii) the average of LIBOR for the time period most closely resembling the reset period for the addition bonds for the sixty (60) month period ending seven (7) days preceding the date of calculation plus 100 basis points; and provided that if the SIFMA Index or LIBOR ceases to be published, the index to be used in its place will be the index which the Issuer determines most closely replicates such index, as set forth in a certificate of the Issuer filed with the Trustee. Debt Service Payment means a payment to be made on each Transfer Day pursuant to the Indenture. Department of Management means the Department of Management of the State, its successors and assigns. Division means the Alcoholic Beverages Division of the Department of Commerce of the State of Iowa. Eligible Investments means any of the following which are at the time of investment legal investments under the laws of the State for the moneys held under the Master Indenture which are proposed to be invested therein: (i) direct obligations of the United States of America or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. (ii) bonds, debentures, notes, participation certificates or other evidences of indebtedness issued or guaranteed by any agency or corporation which has been or may hereafter be created by or pursuant to an Act of Congress as an agency or instrumentality of the United States (including but not limited to the fully guaranteed portion of an obligation partially guaranteed by any of the foregoing, if the Trustee's ownership of such portion is accepted in writing by an officer of the guaranteeing agency or instrumentality). (iii) Direct and general obligations of any state within the United States or any political subdivision of the State, which is at the time of purchase rated in the AA or a higher rating category as defined on the date of the Master Indenture by a Rating Agency, or in an equivalent or higher rating category based on any subsequent redefinition. (iv) Negotiable certificates of deposit issued by any national banking association or by a bank or trust company organized under the laws of any state, or interest-bearing time deposits with any such institution, or an obligation of the parent corporation of any such institution, provided that the institution issuing the certificate of deposit or accepting the time deposit or issuing the obligation has a combined capital and surplus (or, with respect to the parent company, has stockholders' equity or capital and retained earnings) of at least $50,000,000, and is rated in the AA or a higher rating category as defined on the date of the Master Indenture by a Rating Agency, or in an equivalent or higher rating category based on any subsequent redefinition.

B-3

(v) Any repurchase agreement or similar financial transaction with a national banking association or a bank or trust company organized under the laws of any state (including the Trustee), or with a government bond dealer reporting to, trading with and recognized as a primary dealer by the Federal Reserve Bank of New York, which agreement is secured by a perfected security interest in any one or more of the securities described in clauses (i) through (iii), inclusive, which securities are held by an independent third party and which have an aggregate market value at least equal to the amount invested. (vi) Money market funds which are fully invested in any of the securities described in clauses (i) through (iii), inclusive, and (v). (vii) Guaranteed investment contracts issued, secured or guaranteed by a corporation or national banking association which has a long-term debt rating by a Rating Agency in any of the two highest generic rating categories. (viii) Obligations of an insurance company which has a long-term debt rating by a Rating Agency in either of the two highest generic rating categories or obligations insured by an insurance company which has an insurance claims-paying ability rating or an insurance financial strength rating from a Rating Agency in either of the two highest generic rating categories. Eligible Investments may be further defined in a Supplemental Indenture. Event of Default means any occurrence or event specified in the Indenture. Extraordinary Event means the modification, amendment or interpretation of Section 54AA or 6431 of the Code (as such Sections were added by Section 1531 of the American Recovery and Reinvestment Act, pertaining to Build America Bonds) in a manner pursuant to which the States Subsidy Payments from the United States Treasury are reduced or eliminated. Fiscal Year means the State's fiscal year. Funds or Fund means the funds created by the Master Indenture or under the terms of any Supplemental Indenture and the Revenue Bonds Debt Service Fund. Gaming Revenues means the funds received by the State pursuant to Iowa Code Section 99D.14 (2009) and Iowa Code Section 99D.15, as amended by H.F. 811, Section 102 (relating to fees and taxes imposed in connection with racing and related wagering) and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104 (relating to taxes imposed in connection with gambling). Gaming Revenues Appropriation means the first $55,000,000 of Gaming Revenues directed to be deposited in the general fund of the State in a Fiscal Year commencing with the Fiscal Year beginning July 1, 2010 pursuant to Iowa Code Section 8.57(6)(e)(1)(a)(i), as enacted by S.F. 376, Section 26, which are required under Section 8.57(6)(e)(1)(a)(ii), as enacted by S.F. 376, Section 26 to be deposited in the Revenue Bonds Debt Service Fund.

B-4

Gaming Revenues Deficit means the amount determined by subtracting the amount of Gaming Revenues received and deposited in the Revenue Bonds Debt Service Fund during a Fiscal Year from $55,000,000. Governmental Obligations means direct general obligations of, or obligations the payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America or as defined in any Supplemental Indenture. H.F. 811 means House File 811, 83rd G.A., 1st Sess. (Iowa 2009). Indenture means the Master Indenture of Trust dated as of July 1, 2009 between the State, acting through the Treasurer, and the Trustee, and all supplements and amendments to the Master Indenture. Interdepartmental Agreement means the Interdepartmental Agreement dated as of July 1, 2009 by and among the Treasurer, the Department of Management and the Alcoholic Beverages Division of the Department of Commerce of the State of Iowa, as amended from time to time. Interest Payment Date means any date on which an installment of interest is payable on the Bonds. March Quarterly Report means the Quarterly Report prepared by the Treasurer on or before the March Quarterly Report Date. March Quarterly Report Date means the Quarterly Report Date which occurs on March 10 of each year. Maximum Annual Debt Service shall mean the maximum amount of Annual Debt Service in any current or future Fiscal Year. Net Annual Debt Service means, with respect to the Series 2009B Bonds, Annual Debt Service on the Series 2009B Bonds for a Fiscal Year less the Subsidy Payments expected to be received with respect to the interest paid on the Series 2009B Bonds for such Fiscal Year. Opinion of Counsel means an opinion in writing of a Counsel, who may but need not be counsel to the Issuer or the Trustee. Outstanding or Bonds Outstanding means all Bonds which have been authenticated and delivered by the Trustee under the Master Indenture, except: (a) Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity; (b) Bonds deemed paid as described under the heading Discharge of Indenture; and

B-5

(c) Bonds in lieu of which other Bonds have been authenticated under the Master Indenture. Participant means a broker-dealer bank or other financial institution from time to time for which DTC holds Series 2009A Bonds and/or Series 2009B Bonds. Paying Agent means the Trustee or any other bank or trust company designated pursuant to the Master Indenture to serve as a paying agency or place of payment for the Bonds, and any successors designated pursuant to the Master Indenture. Pledged Funds means the moneys, assets, revenues and amounts on deposit in the Revenue Bonds Debt Service Fund (other than the moneys, assets, revenues and amounts on deposit in the Unpledged Funds Account of the Revenue Bonds Debt Service Fund), the Bond Fund, the Bond Reserve Fund and any other sums of money pledged pursuant to the Master Indenture. Pledged Funds does not include the Rebate Fund. Principal Payment Date means any date on which principal of the Bonds is payable. Quarterly Report means the quarterly report prepared by the Treasurer pursuant to the Master Indenture and the Interdepartmental Agreement. Quarterly Report Dates means September 10, December 10, March 10 and June 10 of each Fiscal Year. Rating Agency means a nationally recognized securities rating agency which has rated a series of the Bonds. Rebate Fund means the Fund by that name created by the Master Indenture. Record Date means, with respect to any Interest Payment Date, unless otherwise provided with respect to a particular series of Bonds in the Supplemental Indenture authorizing such Bonds, the fifteenth day of the month next preceding the month in which such Interest Payment Date occurs. Registered Owner means the owner of a Bond as set forth on the registration books of the Issuer as kept by the Registrar as provided in the Master Indenture. Registrar means the Trustee or any other entity appointed as such pursuant to the Master Indenture and any successor thereto. Restricted Yield means 4.429% Revenue Bonds Beer and Liquor Revenues Appropriation means that portion of the Beer and Liquor Revenues which is appropriated by the State for deposit into the Revenue Bonds Debt Service Fund during a Fiscal Year. Revenue Bonds Debt Service Account means the account by that name within the Revenue Bonds Debt Service Fund as described in the Master Indenture.

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Revenue Bonds Debt Service Fund means the Revenue Bonds Debt Service Fund created and established in the office of the Treasurer pursuant to the Act. Revenue Bonds Pledged Funds Account or Pledged Funds Account means the account by that name within the Revenue Bonds Debt Service Fund as described in the Master Indenture and under the heading Funds The Revenue Bonds Debt Service Fund below. Revenue Bonds Unpledged Funds Account or Unpledged Funds Account means the account by that name within the Revenue Bonds Debt Service Fund as described in the Master Indenture and under the heading Funds The Revenue Bonds Debt Service Fund below. Series Bond Reserve Fund Requirement means the amount of debt service reserve required for a series of Bonds determined at the time of issuance of such a series of Bonds. Series 2009 Bonds means, collectively, the Series 2009A Bonds and the Series 2009B Bonds. Series 2009A Bond Reserve Fund Requirement means (i) until July 1, 2027, an amount equal to $32,111,318.76, which is the least of (a) the maximum amount of principal and interest coming due on the Series 2009A Bonds during any fiscal year, (b) 10% of the stated principal amount of the Series 2009A Bonds, or (c) 125% of the average annual principal and interest coming due on the Series 2009A Bonds, and (ii) after July 1, 2027 an amount equal to $5,257,406.26. Series 2009B Bond Reserve Fund Requirement means (i) until July 1, 2027, an amount equal to $22,095,000.00, which is the least of (a) the maximum amount of Net Annual Debt Service for the Series 2009B Bonds, (b) 10% of the stated principal amount of the Series 2009B Bonds, or (c) 125% of average Net Annual Debt Service for the Series 2009B Bonds, (ii) after July 1, 2027, an amount equal to $44,655,598.00, and (iii) after July 1, 2028 an amount equal to $45,982,694.00. Series 2009A Bonds means the Issuers $380,120,000 IJOBS Program Special Obligation Bonds, Series 2009A. Series 2009B Bonds means the Issuers $220,950,000 IJOBS Program Special Obligation Bonds, Taxable Series 2009B (Build America Bonds Direct Payment). S.F. 376 means Senate File 376, 83rd G.A., 1st Sess. (Iowa 2009). S.F. 478 means Senate File 478, 83rd G.A., 1st Sess. (Iowa 2009). State or Issuer means the State of Iowa. Subsidy Payments means the credit allowed and paid to the State pursuant to Section 6431 of the Code with respect to any Bonds described in Section 54AA of the Code. Supplemental Indenture means an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture for the purpose of creating a particular

B-7

series of Bonds issued under the Master Indenture or amending or supplementing the terms of the Master Indenture. Taxable Bonds means Bonds the interest on which is includable in the gross income of the holders thereof for federal income tax purposes. Taxable Bond Reserve Fund Requirement means an amount equal to the sum of the Series Bond Reserve Fund Requirements for each series of Taxable Bonds at the time Outstanding. Tax-Exempt Bonds means Bonds the interest on which is not includable in the gross income of the holders thereof for federal income tax purposes. Tax Exemption Agreement means the Tax Exemption Agreement or similar agreements, if any, entered into by the Issuer in connection with the issuance of each series of Bonds for the purpose of complying with the provisions of the Code in order to establish and maintain the federally tax exempt status of such series of Bonds. Tax-Exempt Bond Reserve Fund Requirement means an amount equal to the sum of the Series Bond Reserve Fund Requirements for each series of Tax-Exempt Bonds at the time Outstanding. Transfer Day means the day which is two Business Days prior to the fifteenth day of each calendar month. Treasurer means Treasurer of the State. Treasury Rate means, as of any redemption date of the Series 2009B Bonds, the yield to maturity as of such redemption date of United States Treasury Securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(H19) that has become publicly available seven Business Days prior to the redemption date (excluding inflation indexed securities) (or if such Statistical Release is no longer published, any publicly available source of similar data)) most nearly equal to the period from the redemption date to the maturity date of the Series 2009B Bonds to be redeemed; provided, however that if the period from the redemption date to such maturity is less than one year, the weekly average yield on actually traded United States Treasury Securities adjusted to a constant maturity of one year will be used. Trustee means Wells Fargo Bank, National Association, its successors and assigns. Trust Estate means the property, rights, Pledged Funds, and other amounts pledged and assigned to the Trustee pursuant to the Granting Clauses of the Master Indenture described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Pledge.

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SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE The following is a summary of certain provisions of the Master Indenture. This summary is not comprehensive and reference is hereby made to the Master Indenture for a complete recital of its terms. Pledge Pursuant to the Master Indenture, the State pledges to the Trustee, for the benefit of the bondholders: A. All right, title and interest of the State in and to the Revenue Bonds Debt Service Fund and the moneys, assets and revenues of the Revenue Bonds Debt Service Fund, and each account therein except the Revenue Bonds Unpledged Funds Account, including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive and receipt for all payments of any amounts directed by law to be deposited in the Revenue Bonds Debt Service Fund and all rights to bring actions and proceedings for the collection of any amounts directed by law to be deposited in the Revenue Bonds Debt Service Fund, and all rights to do any and all things which the State or the Treasurer is or may become entitled to do under or due to the provisions of the Act providing for the deposit of amounts in the Revenue Bonds Debt Service Fund and authorizing the pledge of the moneys, assets and revenues of the Revenue Bonds Debt Service Fund; provided, however, that to the extent that the Act may have pledged or assigned to the Trustee all amounts in the Revenue Bonds Debt Service Fund, the Trustee releases the Revenue Bond Debt Service Unpledged Funds Account from such pledge or assignment, it being the intent of the Issuer and the Trustee that the Revenue Bonds Unpledged Funds Account shall not be subject to the lien of the Master Indenture or serve as security for the Bonds. B. All right, title and interest of the State in and to the Bond Reserve Fund, and the Bond Fund and other funds now or hereafter held by the Trustee under the terms of the Indenture (other than the Rebate Fund). C. All moneys and securities and all other property of every kind and of every name and nature which are now or from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for security under the Indenture to the Trustee by the Issuer or by anyone in its behalf, or with its written consent, and all cash and securities now or hereafter held in the Pledged Funds and all investment earnings on (i) the Capitalized Interest Account of the Bond Fund, (ii) the Cost of Issuance Fund, (iii) the Bond Reserve Fund, and (iv) the Revenue Bonds Debt Service Fund other than investment earnings on the Revenue Bonds Unpledged Funds Account. Limited Special Obligations THE BONDS ARE LIMITED SPECIAL OBLIGATIONS OF THE STATE AND DO NOT CONSTITUTE A DEBT OR INDEBTEDNESS OF THE STATE, NOR OF ANY POLITICAL SUBDIVISION OF THE STATE, OR A PLEDGE OF THE FULL FAITH AND B-9

CREDIT OF THE STATE OR A CHARGE AGAINST THE GENERAL CREDIT OR GENERAL FUND OF THE STATE. THE ISSUANCE AND SALE OF THE BONDS DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OR A POLITICAL SUBDIVISION OF THE STATE TO APPLY MONEYS FROM OR TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER TO, OR TO CONTINUE THE APPROPRIATION OF FUNDS FOR THE PAYMENT OF THE BONDS. THE PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS ARE PAYABLE SOLELY FROM, AND SECURED BY A PLEDGE OF, THE PLEDGED FUNDS. Payment of Principal and Interest The State has covenanted in the Indenture that it will promptly pay the principal of and interest on every Bond issued under the Master Indenture at the place, on the dates and in the manner provided in the Master Indenture and in the Bonds according to the true intent and meaning thereof, provided that the principal and interest are payable by the Issuer solely from Pledged Funds, and nothing in the Bonds or the Master Indenture shall be considered as assigning or pledging any other funds or assets of the Issuer other than such Pledged Funds. Covenants Concerning Gaming Revenues and Beer and Liquor Revenues So long as there is a Gaming Revenues Appropriation and/or a Revenue Bonds Beer and Liquor Revenues Appropriation for a Fiscal Year, the Treasurer will monitor the amount and availability of Gaming Revenues and Beer and Liquor Revenues such Fiscal Year and will prepare a Quarterly Report on or before each Quarterly Report Date estimating the amount of Gaming Revenues and Beer and Liquor Revenues that will be available for the remainder of such Fiscal Year; provided that the Treasurer shall not be required to prepare a Quarterly Report for any period in a Fiscal Year after the Treasurer has deposited $55,000,000 into the Revenue Bonds Debt Service Fund from Gaming Revenues and/or Beer and Liquor Revenues for such Fiscal Year. To the extent that the Gaming Revenues for such Fiscal Year are estimated to be insufficient to provide for the entire amount of the Gaming Revenues Appropriation for such Fiscal Year, the Treasurer shall call upon the Department of Management, the Racing and Gaming Commission and the Alcoholic Beverages Division to take appropriate actions pursuant to the Interdepartmental Agreement to make up any such deficiency for such Fiscal Year from Beer and Liquor Revenues received during such Fiscal Year. Further, to the extent that Gaming Revenues and Beer and Liquor Revenues received during such Fiscal Year are insufficient to make up such deficiencies, such deficiency shall be made up from Beer and Liquor Revenues received during the subsequent Fiscal Year on the same basis. Additional Bonds So long as (a) there is no default under the Indenture, and (b) the issuance of a particular series of Bonds will not constitute a default under the Indenture, the State may issue one or more series of Bonds, to be authenticated and delivered for the purposes specified in the Supplemental Indenture pursuant to which such series of Bonds is issued. All Bonds shall be payable solely from the Pledged Funds pledged pursuant to the Master Indenture to the payment of Bonds. The Bonds of each such series shall be authenticated by

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Trustee and, upon payment to the Treasurer of the proceeds of said sale of Bonds, shall be delivered by the Trustee to or upon the order of the purchasers thereof, but only upon there being filed with the Trustee the following: (a) Original executed counterparts of the Supplemental Indenture authorizing the issuance of the particular series of Bonds. (b) A written order to Trustee by the Treasurer to authenticate and deliver the particular series of Bonds to the purchaser or purchasers therein identified upon payment to the Treasurer of a specified sum plus accrued interest. (c) A duly executed certificate from the Trustee that upon the issuance of the series of Bonds the amount in the Bond Reserve Fund will be equal to the Bond Reserve Fund Requirement (provided that such a certificate shall not be required in connection with the issuance of the initial series of Bonds). (d) An opinion of Bond Counsel that the issuance of the series of Bonds will not impair the tax-exempt status of interest on Bonds previously issued. Each series of Bonds issued pursuant to the Master Indenture shall be equally and ratably secured under the Master Indenture with all other series of Bonds theretofore or thereafter issued pursuant to the Master Indenture without preference, priority or distinction of any Bond or Bonds over any other Bond or Bonds. Funds The Master Indenture establishes the following Funds to be held by the Trustee: the Bond Fund and a Capitalized Interest Account within the Bond Fund, (2) the Cost of Issuance Fund, (3) the Bond Reserve Fund, and (4) the Rebate Fund. Within each Fund or Account within a Fund the Trustee is required to maintain a separate Tax-Exempt Bonds Account or Subaccount and a Taxable Bonds Account or Subaccount. Bond Fund The Master Indenture provides that there shall be deposited into the Capitalized Interest Account of the Bond Fund all accrued interest received, if any, at the time of issuance and delivery of the Bonds; provided that, unless otherwise specified in a Supplemental Indenture, accrued interest and any amounts intended as capitalized interest received with regard to Taxable Bonds shall be deposited in the Taxable Bonds Subaccount of the Capitalized Interest Account, and accrued interest and any amounts intended as capitalized interest received with regard to Tax-Exempt Bonds shall be deposited in the Tax-Exempt Bonds Subaccount of the Capitalized Interest Account. In addition, there shall be deposited into the Bond Fund, as and when received, (a) all Debt Service Payments, (b) amounts received from the Treasurer for the payment of the principal of, premium, if any, and interest on the Bonds, whether at the stated maturity thereof or as a result of a redemption prior to maturity, or otherwise, (c) all Subsidy Payments, and (d) all other moneys (including any amounts intended as capitalized interest, which shall be deposited in the Capitalized Interest Account as provided in the Indenture and any transfers from the Bond B-11

Reserve Fund) received by the Trustee under and pursuant to any of the provisions of the Indenture which are required or which are accompanied by directions that such moneys are to be paid into the Bond Fund. The Treasurer covenants and agrees that, should there be an Event of Default, the Treasurer shall fully cooperate with the Trustee and with the Bondholders to fully protect the rights and security of the Bondholders and shall diligently proceed in good faith and use its best efforts so that at all times sufficient amounts will be available to promptly meet and pay the principal of and premium, if any, and interest on the Bonds as the same become due and payable. Nothing in the Master Indenture shall be construed as requiring the Issuer or the Treasurer to use any funds or revenues from any source other than as set forth in the Master Indenture. Beginning on the first Transfer Day of each Fiscal Year and continuing on each subsequent Transfer Day thereafter, until an amount sufficient to pay the Annual Debt Service due and payable on the Bonds during such Fiscal Year (or such other amount as specified in a Supplemental Indenture) shall have been transferred to the Bond Fund from the Revenue Bonds Pledged Funds Account, the Treasurer shall pay to the Trustee, as a Debt Service Payment on the Bonds, all funds on deposit in the Revenue Bonds Pledged Funds Account on such Transfer Day. Notwithstanding the foregoing, the Debt Service Payment due on the Transfer Day immediately prior to a Principal Payment Date shall be an amount equal to the Annual Debt Service due and payable on the Bonds during the Fiscal Year in which such Transfer Day occurs, (or such other amount as specified in a Supplemental Indenture) minus (i) the amounts on deposit in the Bond Fund on such Transfer Day and (ii) any amounts previously paid to Bondholders on any Interest Payment Date occurring during such Fiscal Year and prior to such Transfer Day. All earnings on funds in the Bond Fund shall be deposited as received in the Bond Fund. The Trustee shall, fifteen days after each Interest Payment Date occurring during a Fiscal Year, transfer any funds held in the Bond Fund (other than amounts deposited in a Capitalized Interest Account of the Bond Fund, which will be disbursed as provided in the Supplemental Indenture authorizing the issuance of Bonds related to such amounts) in excess of the amount needed to pay remaining unpaid Annual Debt Service on all Bonds during such Fiscal Year to the Treasurer for deposit in the Revenue Bonds Unpledged Funds Account. Notwithstanding any provision in the Master Indenture to the contrary, unless otherwise provided in a Supplemental Indenture, any amounts to be deposited in the Bond Fund pursuant to the Master Indenture or any Supplemental Indenture (other than accrued interest, any amounts intended as capitalized interest and any transfers from the Bond Reserve Fund, which shall be deposited as otherwise provided in the Master Indenture or in a Supplemental Indenture) shall be deposited as follows: (x) in the Tax-Exempt Bonds Account of the Bond Fund in an amount equal to the amount of such deposit multiplied by the percentage determined by dividing (i) the Annual Debt Service on such Tax-Exempt Bonds for the Fiscal Year during which such deposit is made (reduced by the amount, if any, transferred to the Tax-Exempt Bonds Account from the Bond Reserve Fund during such Fiscal Year), less any amounts of Debt Service with respect to such Tax-Exempt Bonds previously paid for such Fiscal Year by (ii) the Annual Debt Service on all Bonds for such Fiscal Year less any amounts of Debt Service with respect to all Bonds

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previously paid for such Fiscal Year, and (y) the remaining amounts to be so deposited shall be deposited in the Taxable Bonds Account of the Bond Fund. Notwithstanding any provision in the Master Indenture to the contrary and unless otherwise specified in a Supplemental Indenture, amounts on deposit in the Tax-Exempt Bonds Subaccount of the Capitalized Interest Account of the Bond Fund and the Tax-Exempt Bonds Account of the Bond Fund consisting of proceeds of Tax-Exempt Bonds may be used only to pay principal of, premium, if any and interest on Tax-Exempt Bonds, and amounts on deposit in the Taxable Bonds Subaccount of the Capitalized Interest Account of the Bond Fund and the Taxable Bonds Account of the Bond Fund consisting of proceeds of Taxable Bonds may be used only to pay principal of, premium, if any and interest on Taxable Bonds. Except as described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Funds Revenue Bonds Debt Service Fund below, moneys in the Bond Fund shall be used solely for the payment of the principal of and premium, if any, and interest on the Bonds and for the redemption of the Bonds prior to maturity. Cost of Issuance Fund There shall be deposited in the Cost of Issuance Fund such amounts as are set forth in the Supplemental Indenture authorizing each series of Bonds; provided that, in the event both TaxExempt Bonds and Taxable Bonds are issued, such amounts as are set forth in such Supplemental Indenture shall be deposited in the Tax-Exempt Bonds Account of the Cost of Issuance Fund and the Taxable Bonds Account of the Cost of Issuance Fund. The Trustee is authorized and directed to make disbursements from the respective account of the Cost of Issuance Fund in accordance with certificates signed by the Treasurer setting forth the amount to be disbursed and the recipient of the disbursement and that the disbursement is a cost incurred in connection with the issuance of Bonds under the Master Indenture; provided that no proceeds of Tax-Exempt Bonds may be used to pay costs of issuance related to Taxable Bonds and, unless otherwise provided in a Supplemental Indenture, no proceeds of Taxable Bonds may be used to pay costs of issuance related to Tax-Exempt Bonds. All earnings on funds in the Cost of Issuance Fund shall be deposited as received in the Bond Fund, unless the Treasurer, in consultation with Bond Counsel, determines that it is necessary to transfer such earnings to another fund or account. Any amount remaining in the Cost of Issuance Fund after payment of all amounts directed to be paid therefrom by the Treasurer shall be deposited in the Revenue Bonds Capitals Fund. Bond Reserve Fund There shall be deposited in the Bond Reserve Fund (or in the Tax-Exempt Bonds Account of the Bond Reserve Fund and the Taxable Bonds Account of the Bond Reserve Fund in the event both Tax-Exempt Bonds and Taxable Bonds are issued) such amounts as are set forth in the Supplemental Indenture authorizing each series of Bonds. Amounts in the Bond Reserve Fund shall be used only for the payment of principal, interest, redemption premium, if any, and the Debt Service Payments with respect to the Bonds. If at any time there are insufficient moneys in the Bond Fund on an Interest Payment Date to pay the principal of, premium, if any, and interest on the Bonds, the Trustee shall use amounts in the Bond Reserve Fund for such

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purpose and shall notify the Treasurer of such use. As soon after receipt of any such notice that funds are available in the Revenue Bonds Debt Service Fund for such purpose, the Treasurer shall transfer moneys from the Revenue Bonds Debt Service Fund in amounts sufficient to replenish the amount in the Bond Reserve Fund to the Bond Reserve Fund Requirement. In addition, if the amounts on deposit in the Bond Fund on any Transfer Day immediately prior to a Principal Payment Date are insufficient to satisfy the Debt Service Payment for such Transfer Day determined as described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Funds Bond Fund above to be due on such day, the Trustee shall immediately transfer from the Bond Reserve Fund to the Bond Fund such amount as is necessary to make up such deficiency and shall account for such transfer in the Annual Valuation for such year. The Trustee shall perform an Annual Valuation of amounts on deposit in the Bond Reserve Fund and shall provide a copy of each Annual Valuation to the Treasurer. If, upon the Annual Valuation it is determined that amounts on deposit in the Bond Reserve Fund are in excess of the Bond Reserve Fund Requirement (such amounts on deposit in the Bond Reserve Fund in excess of the Bond Reserve Fund Requirement are referred to as Excess Funds), the Trustee shall notify the Treasurer of the Excess Funds, and the Treasurer shall have the discretion to retain the Excess Funds in the Bond Reserve Fund or transfer the Excess Funds to the Bond Fund. The Treasurer agrees to direct the Trustee to transfer the Excess Funds to the Bond Fund (unless the Treasurer, in consultation with Bond Counsel, determines that it is necessary to transfer such Excess Funds to another fund) or retain them in the Bond Reserve Fund. If the Treasurer makes no such direction, the Trustee shall retain the Excess Funds in the Bond Reserve Fund. In the event the amount in the Bond Reserve Fund is less than the Bond Reserve Fund Requirement, the Trustee shall notify the Treasurer of such deficiency. The Treasurer shall then transfer moneys from the Revenue Bonds Debt Service Fund or shall deposit other moneys appropriated therefor in amounts sufficient to replenish the amount in the Bond Reserve Fund to the Bond Reserve Fund Requirement. Funds deposited to replenish the Bond Reserve Fund as described under this heading shall be deposited as follows: (x) in the Tax-Exempt Bonds Account of the Bond Reserve Fund in an amount equal to the amount of such deposit multiplied by the percentage determined by dividing (i) (A) the excess of the sum of the Series Bond Reserve Fund Requirements for all Tax-Exempt Bonds Outstanding over (B) the amount then on deposit in the Tax-Exempt Bonds Account of the Bond Reserve Fund by (ii) (A) the excess of the sum of the Series Bond Reserve Fund Requirements for all Bonds Outstanding over (B) the amount then on deposit in the Bond Reserve Fund, and (y) the remaining amounts to be so deposited shall be deposited in the Taxable Bonds Account of the Bond Reserve Fund. If there is existing no Event of Default under the Master Indenture, the moneys in the Bond Reserve Fund shall be paid into the Bond Fund when such moneys in the Bond Reserve Fund, by themselves or together with other moneys in the Bond Fund, are equal to or greater than the amount necessary to pay all the principal amount of all Outstanding Bonds in full together with all accrued interest and premium, if any, thereon.

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Notwithstanding any provision in the Master Indenture to the contrary and unless otherwise specified in a Supplemental Indenture, amounts on deposit in the Tax-Exempt Bonds Account of the Bond Reserve Fund may be used only to pay principal of, premium, if any, and interest on Tax-Exempt Bonds or transferred to the Tax-Exempt Bonds Account of the Bond Fund for such purpose, and amounts on deposit in the Taxable Bonds Account of the Bond Reserve Fund may be used only to pay principal of, premium, if any, and interest only on Taxable Bonds or transferred to the Taxable Bonds Account of the Bond Fund for such purpose. All earnings on funds in the Bond Reserve Fund shall be deposited as received in the Bond Fund unless the Treasurer (in consultation with Bond Counsel) directs the Trustee to deposit such earnings in the Bond Reserve Fund or into another fund; provided, however, that if the amount on deposit in the Bond Reserve Fund is less than the Bond Reserve Fund Requirement, such earnings shall be retained in the Bond Reserve Fund. In the event that the Annual Valuation shows that the amount on deposit in the Bond Reserve Fund is less than the Bond Reserve Fund Requirement and there are not amounts in the Revenue Bonds Debt Service Fund sufficient to replenish the amount on deposit in the Bond Reserve Fund to the Bond Reserve Fund Requirement, the Treasurer shall, in accordance with Iowa Code Section 12.89(3)(d), as enacted by S.F. 376, Section 3, on or before the January 1 immediately succeeding the date of such Annual Valuation, make and deliver to the Governor of the State and to both houses of the general assembly of the State of Iowa a certificate stating the sum required to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement and requesting that the budget and appropriation bills approved for such fiscal year include amounts sufficient to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement. Within thirty days after the beginning of the session of the general assembly next following the delivery of such certificate to the Governor and both houses of the general assembly pursuant to Iowa Code Section 12.89(3)(d), as enacted by S.F. 376, Section 3, the Governor may submit to both houses of the general assembly printed copies of a budget including the amount necessary to restore the Bond Reserve Fund to the Bond Reserve Fund Requirement. The Treasurer will use its best efforts to have such budget request submitted by the Governor and approved by the general assembly. Any amounts appropriated by the general assembly as a result of such request and paid to the Treasurer will be deposited by the Treasurer into the Bond Reserve Fund as described under this heading. Rebate Fund The Trustee shall establish within the Rebate Fund one or more subaccounts as may be necessary to account for proceeds of each series of the Bonds and the investment earnings thereon and to comply with the provisions of the Tax Exemption Agreement relating to such series of Bonds and the provisions of Section 148 of the Code. The Trustee shall make information regarding each series of the Bonds and investments under the Master Indenture available to the Treasurer and shall make deposits and disbursements from the Rebate Fund in accordance with the corresponding Tax Exemption Agreement, shall invest the amounts on deposit in each subaccount of the Rebate Fund pursuant to the corresponding Tax Exemption Agreement, shall deposit income from such investments immediately upon receipt thereof in the corresponding subaccount of the Rebate Fund and shall

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maintain records for each investment sufficient to establish that its purchase price is the fair market value as determined by the rules set out in the corresponding Tax Exemption Agreement. If a deposit to the Rebate Fund is required as a result of the computations made pursuant to a Tax Exemption Agreement, the Trustee shall, upon receipt of direction from the Treasurer, accept such payment and deposit such payment in the appropriate subaccount of the Rebate Fund for the benefit of the Issuer. Records of the actions described under this heading, and a Tax Exemption Agreement must be retained by the Trustee until six years after the corresponding series of the Bonds have matured or have been redeemed. The provisions of the Indenture notwithstanding, (i) the Rebate Fund shall not be considered a part of the Trust Estate created by the Master Indenture (ii) the Rebate Fund is a separate special trust fund held for the benefit of the United States, and (iii) the Trustee is authorized to transfer monies on deposit in any of the trust funds established under the Master Indenture to the Rebate Fund as necessary to make any required deposit into or disbursement from the Rebate Fund. Investment of Moneys Any moneys held as part of any Fund, as well as any proceeds of the Bonds, and not required for immediate disbursement whether deposited with the Trustee or with other depositories as provided in the Master Indenture, shall be invested and reinvested by the Trustee or other depository, at the direction of the Treasurer in Eligible Investments. All such Eligible Investments purchased shall mature or be redeemable or be subject to repurchase by another entity on a date or dates on or prior to the time when the moneys so invested will be required for expenditure. The Trustee or other depository may make any and all such investments through its bond department or through the bond department of any financial institution which is an affiliate of the Trustee or other depository and may trade with itself or any of its affiliates in doing so. Moneys in separate Funds may be commingled for the purpose of investment or deposit. Any investment losses shall be borne by the Fund in which the lost moneys had been deposited. The Trustee or other depository shall sell and reduce to cash a sufficient amount of such investments in the respective Fund whenever the cash balance therein is insufficient to pay the amount contemplated to be paid therefrom. In computing the amount in any Fund held under the provisions of the Master Indenture (except for purposes of complying with Section 148 of the Code), obligations purchased as an investment of moneys therein shall be valued at their amortized cost, exclusive of accrued interest. The Trustee is specifically authorized to enter into agreements with itself or any other person, which agreements guarantee the repurchase of Eligible Investments at specific prices. Revenue Bonds Debt Service Fund Pursuant to the Act, the Revenue Bonds Debt Service Fund has been created and established as a separate and distinct fund in the office of the Treasurer. Pursuant further to the Act, the first $55,000,000 in Gaming Revenues directed to be deposited in the general fund of the State in each Fiscal Year are appropriated for deposit in the Revenue Bonds Debt Service Fund and, in the event Gaming Revenues are insufficient to deposit such amount in the Revenue Bond Debt Service Fund, Beer and Liquor Revenues are appropriated for deposit in the Revenue

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Bonds Debt Service Fund to the extent of any Gaming Revenues Deficit; provided, however, that such Gaming Revenues and Beer and Liquor Revenues are not pledged to the payment of the Bonds unless and until deposited in the Revenue Bonds Pledged Funds Account; and further provided, however, that the State may take action to deappropriate such Gaming Revenues and Beer and Liquor Revenue which have not been deposited in the Revenue Bonds Debt Service Fund without causing an Event of Default under the Master Indenture. The Treasurer shall establish two accounts within the Revenue Bonds Debt Service Fund to be designated as the Revenue Bonds Pledged Funds Account and the Revenue Bonds Unpledged Funds Account. Gaming Revenues and Beer and Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund shall be deposited as follows: (a) Gaming Revenues and Beer and Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund in each Fiscal Year shall first be deposited in the Revenue Bonds Pledged Funds Account in the amount necessary to pay Annual Debt Service for such Fiscal Year (reduced by the amount, if any, required to be transferred to the Bond Fund from the Bond Reserve Fund during such Fiscal Year by the terms of a Supplemental Indenture); and (b) all remaining Gaming Revenues and Beer and Liquor Revenues shall be deposited into the Revenue Bonds Unpledged Funds Account to pay the fees and expenses of trustees, paying agents, remarketing agents, financial advisors, underwriters, depositories, guarantors, bond insurers, liquidity or credit facility providers, interest rate indexing agents, and other professional service providers, the administration of the Bonds payable during the Fiscal Year in which such deposit is made and to make deposits, if any, required by a Supplemental Indenture to establish or restore a cash funded reserve account for the Bonds of any series. All earnings on the Revenue Bonds Debt Service Fund shall be deposited in the Revenue Bonds Pledged Funds Account; provided that if moneys in the Revenue Bonds Pledged Funds Account plus amounts previously transferred from the Revenue Bonds Pledged Funds Account to the Bond Fund are then sufficient to pay Annual Debt Service for the Fiscal Year in which such earnings are to be deposited, such earnings shall be deposited in the Revenue Bonds Unpledged Funds Account. Any funds remaining in the Revenue Bonds Pledged Funds Account and any Gaming Revenues and Beer and Liquor Revenues received by the Treasurer for deposit in the Revenue Bonds Debt Service Fund after there has been deposited in the Bond Fund an amount equal to Annual Debt Service for the Fiscal Year during which such deposits were made shall be deposited in the Revenue Bonds Unpledged Funds Account. Any amounts on deposit in the Revenue Bonds Debt Service Fund at the end of each Fiscal Year shall be held, expended or transferred as provided in the Act. Covenants Regarding Arbitrage The Treasurer and the Trustee covenant for the benefit of each owner of the Bonds that no use will be made of the proceeds of the Bonds or of any moneys in the Funds and that they will not knowingly take any action, or omit to take any action, which action or omission will cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code and the regulations prescribed thereunder, and in the event any such action or omission shall be brought to the attention of the Treasurer, the Treasurer will, promptly upon having such action or omission brought to the Treasurers attention, take such reasonable actions based upon advice of counsel as may rescind or otherwise negate such action or omission. Events of Default

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The following events occurs, are declared to be and constitute an Event of Default pursuant to the Indenture: (a) Default in the payment of the interest on any Bond when and as the same shall have become due and payable. (b) Default in the payment of the principal of or premium, if any, on any Bond after the principal has become due, whether at maturity or upon call for redemption. (c) Default in the performance or observance of any of the other covenants, agreements or conditions on the part of the Issuer or the Treasurer contained in the Master Indenture or in the Bonds and the failure to remedy the same for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, shall have been given to the Treasurer by the Trustee; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, Trustee will not unreasonably withhold its consent to an extension of time if corrective action (as detailed in a notice to the Trustee) is instituted within the applicable period and diligently pursued until the failure is corrected. Remedies Upon the occurrence of an Event of Default, the Trustee shall have the following rights and remedies: (a) The Trustee may pursue any available remedy at law or in equity or by statute to enforce the payment of the principal of and interest on the Bonds then outstanding. (b) The Trustee may by action or suit in equity require the Issuer and the Treasurer to account as if they were the trustees of an express trust for the owners of the Bonds and may then take such action with respect to the Pledged Funds as the Trustee shall deem necessary or appropriate and in the best interest of the Bondholders. The Trustee shall give notice of any Event of Default to the Treasurer as promptly as practicable after the occurrence of an Event of Default becomes known to the Trustee. If an Event of Default shall have occurred, and if requested so to do by the owners of 25% or more in aggregate principal amount of all Bonds then Outstanding and indemnified as provided in the Master Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers described under this heading as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No right or remedy by the terms of the Master Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other right or remedy, but each and every such right or remedy shall be cumulative and shall be in addition to any other B-18

right or remedy given to the Trustee or to the Bondholders under the Master Indenture or now or hereafter existing at law or in equity or by statute. The assertion or employment of any right or remedy shall not prevent the concurrent or subsequent assertion or employment of any other right or remedy. No delay or omission in exercising any right or remedy accruing upon any default or Event of Default shall impair any such right or remedy or shall be construed to be a waiver of any such default or Event of Default or acquiescence therein; and every such right or remedy may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or Event of Default under the Master Indenture, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce any rights of the Trustee and of the Bondholders under the Master Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate and of the Pledged Funds, issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Remedies Vested in Trustee All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceeding related thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment shall be for the equal and ratable benefit of the owners of all the Outstanding Bonds. Right of Bondholders to Direct Proceedings Anything in the Master Indenture to the contrary notwithstanding, the owners of a majority in aggregate principal amount of Bonds then Outstanding shall have the right, at any time during the continuance of an Event of Default, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Master Indenture, or for the appointment of a receiver or any other proceedings under the Master Indenture; provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Master Indenture. Limitation on Rights and Remedies of Bondholders No owner of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of the Master Indenture or for the execution of any trust of the Master Indenture or for the appointment of a receiver or any other remedy under the Master Indenture, unless (a) a default has occurred, (b) such default shall have become an Event of Default and the owners of not less than 25% in aggregate principal amount of Bonds then B-19

Outstanding shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers granted to the Trustee under the Master Indenture or to institute such action, suit or proceeding in its own name, (c) such owners of Bonds shall have offered to the Trustee indemnity as provided in the Master Indenture, and (d) the Trustee shall for 60 days after receipt of such request and indemnification fail or refuse to exercise the rights and remedies granted to the Trustee under the Master Indenture, or to institute such action, suit or proceeding in its own name; and such request and offer of indemnity are declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Master Indenture, and to any action or cause of action for the enforcement of the Master Indenture, or for the appointment of a receiver or for any other remedy under the Master Indenture; it being understood and intended that no one or more owners of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of the Master Indenture by its, his or their action or to enforce any right under the Master Indenture except in the manner provided in the Master Indenture, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner provided in the Master Indenture and for the equal and ratable benefit of the owners of all Bonds then Outstanding. However, nothing contained in the Master Indenture shall affect or impair the right of any Bondholder to enforce the payment of the principal of and interest on any Bond at and after the maturity or redemption date of such principal or interest, or the obligation of the Issuer to pay the principal of and interest on each of the Bonds issued under the Master Indenture to the respective registered owners thereof at the time, place, from the source and in the manner in the Master Indenture and in the Bonds expressed. Application of Moneys All moneys received by the Trustee pursuant to any right given or action taken as a result of an Event of Default, shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, be applied, along with any other moneys available for such purposes, as follows: (a) Unless the principal of all the Bonds shall have become due and payable, all such moneys shall be applied: FIRST To the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment of interest, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; SECOND To the payment to the persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due at stated maturity or pursuant to a call for redemption (other than Bonds called for redemption for the payment of which moneys are held pursuant to the other

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provisions of the Master Indenture), in the order of their due dates and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto without any discrimination or privilege; and THIRD To be held for the payment to the persons entitled thereto as the same shall become due of the amounts payable pursuant to the Master Indenture (including principal of Bonds due upon call for redemption) and, if the amount available shall not be sufficient to pay in full amounts due on any particular date, payment shall be made ratably according to the priorities set forth in subparagraphs FIRST and SECOND above. (b) If the principal of all the Bonds shall have become or have been declared due, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or privilege. Whenever moneys are to be applied as described under this heading, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless the Trustee shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal and past-due interest to be paid on such dates shall cease to accrue. Defaulted principal and interest on a Bond shall be payable to the person in whose name such Bond is registered at the close of business on a Record Date for the payment of defaulted principal and interest established by notice mailed by the Trustee to the registered owners of Bonds not more than fifteen (15) days preceding such Record Date. Such notice shall be mailed to the person in whose name the Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing. The Trustee shall not be required to make payment to the owner of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Whenever all principal of and interest on all Bonds have been paid under the provisions described under this heading and all expenses and charges of the Trustee, and any co-registrar or transfer agent have been paid, any balance remaining in the Funds shall be paid as described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Discharge of Indenture below. Supplemental Indentures

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Supplemental Indentures Creating Series of Bonds The Issuer and the Trustee may from time to time enter into a Supplemental Indenture in order to issue a series of Bonds. Such Supplemental Indenture shall, with respect to the series of Bonds issued thereby, set forth the date thereof, and the date or dates upon which principal of and premium, if any, and interest on such Bonds shall be payable, and shall contain such other terms and provisions as shall be established in the Supplemental Indenture. Any Supplemental Indenture authorized as described under this heading may be executed without the consent of the Bondholders, notwithstanding the provisions of the Master Indenture. Supplemental Indentures Not Requiring Consent of Bondholders In addition to the Supplemental Indentures described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Supplemental Indentures Supplemental Indentures Creating Series of Bonds above, the Issuer and the Trustee may, without the consent of or notice to any of the Bondholders, enter into any indenture or indentures supplemental to the Master Indenture for any one or more of the following purposes: (a) Indenture; To cure any ambiguity or formal defect or omission in the Master

(b) To grant to or confer upon the Trustee for the benefit of the Bondholders any additional benefits, rights, remedies, powers or authorities that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or to make any change which, in the judgment of the Trustee, is not to the material prejudice of the Bondholders; (c) To subject to the Master Indenture additional revenues, properties or collateral; (d) To modify, amend or supplement the Master Indenture in such manner as to permit continued compliance with a Tax Exemption Agreement or to maintain the tax exempt status of the Bonds under applicable federal law or regulations; (e) To modify, amend or supplement the Master Indenture or any indenture supplemental to the Master Indenture in such manner as to permit the qualification of the Master Indenture or any indenture supplemental to the Master Indenture and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of the United States of America or of any of the states of the United States of America, and, if they so determine, to add to the Master Indenture or any indenture supplemental to the Master Indenture such other terms, conditions and provisions as may be permitted by said Trust Indenture Act of 1939 or similar federal statute; (f) To evidence the appointment of a separate or co-Trustee or a co-registrar or transfer agent or the succession of a new Trustee, Paying Agent or B-22

Registrar under the Master Indenture or the appointment of a remarketing agent under the Master Indenture; or (g) To make any other change that, in the judgment of the Trustee, does not materially affect the rights of any Bondholders. Supplemental Indentures Requiring Consent of Bondholders Exclusive of supplemental indentures described under the headings SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Supplemental Indentures Supplemental Indentures Creating Series of Bonds and SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Supplemental Indentures Supplemental Indentures Not Requiring Consent of Bondholders above and subject to the terms and provisions described under this heading, and not otherwise, the owners of not less than two-thirds in aggregate principal amount of the Bonds then Outstanding which are affected, shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Trustee of such other indenture or indentures supplemental to the Master Indenture as shall be deemed necessary and desirable by the Trustee and the Treasurer for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture or in any supplemental indenture; provided, however, that no provision described under this heading shall permit, or be construed as permitting (1) without the consent of the owners of all then Outstanding Bonds, (a) an extension of the maturity date of the principal of or the interest on any Bond, or (b) a reduction in the principal amount of any Bond or the rate of interest thereon, or (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, or (e) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under the Master Indenture or (2) any modification of the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of the Trustee without the written consent of the Trustee. If at any time the Treasurer shall request the Trustee to enter into any such supplemental indenture for any of the purposes described under this heading, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by registered or certified mail to each owner of a Bond at the address shown on the registration books. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal corporate trust office of the Trustee for inspection by all Bondholders. If, within sixty (60) days, or such longer period as shall be prescribed by the Treasurer, following the mailing of such notice, the owners of not less than two-thirds in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as provided in the Master Indenture, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture

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permitted and provided as described under this heading, the Master Indenture shall be and be deemed to be modified and amended in accordance therewith. Discharge of Indenture If the Issuer shall pay or cause to be paid to the owner of any Bond secured by the Master Indenture the principal of and interest due and payable, and thereafter to become due and payable, upon such Bond, or any portion of such Bond in an amount equal to an authorized denomination under the Supplemental Indenture authorizing the series of Bonds of which the Bond is a part, such Bond or portion thereof shall cease to be entitled to any lien, benefit or security under the Master Indenture. If the Issuer shall pay or cause to be paid to the owners of all the Bonds secured by the Master Indenture the principal of and interest due and payable, and thereafter to become due and payable thereon, and shall pay, or cause to be paid all other sums payable under the Master Indenture by the Issuer, then, and in that case, the right, title and interest of the Trustee in the Master Indenture shall thereupon cease, terminate and become void. In such event, the Trustee shall assign, transfer and turn over to the Treasurer the Trust Estate. Any Bond shall be deemed to be paid as described under this heading and for all purposes of the Master Indenture when (a) payment of the principal of and premium, if any, on such Bond, plus interest thereon to the due date thereof (whether such due date is by reason of maturity or upon redemption as provided in the Master Indenture), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee in trust and irrevocably setting aside exclusively for such payment (1) moneys sufficient to make such payment and/or (2) Governmental Obligations maturing as to principal and interest in such amounts and at such time as will insure the availability of sufficient moneys to make such payment, the sufficiency of which money shall be verified by an independent certified public accountant approved by the Trustee (any such moneys or Governmental Obligations once having been so set aside being no longer a part of the Trust Estate), and (b) all necessary and proper fees, compensation and expenses of the Trustee and any co-registrar or transfer agent pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee. At such times as a Bond shall be deemed to be paid under the Master Indenture, as aforesaid, such Bond shall no longer be secured by or entitled to the benefits of the Master Indenture, except for the purposes of any such payment from such moneys or Governmental Obligations. Notwithstanding the foregoing paragraph, no deposit under clause (a)(ii) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid (1) until the Treasurer shall have given the Trustee, in form satisfactory to the Trustee, irrevocable instructions: (i) stating the date when the principal of each such Bond is to be paid, whether at maturity or on a redemption date (which shall be any redemption date permitted by the Master Indenture); (ii) to call for redemption pursuant to the Indenture any Bonds to be redeemed prior to maturity pursuant to paragraph (i) above; and

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(iii) if all the Bonds are not to be redeemed within 30 days, to mail, as soon as practicable, in the manner prescribed by the Master Indenture, a notice to the owners of such Bonds that the deposit required by (a)(ii) above has been made with the Trustee and that said Bonds are deemed to have been paid as described under this heading and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal or redemption price, if applicable, on said Bonds as specified in (i) above; and (2) if any Bonds are to be redeemed within the next 30 days, until proper notice of redemption of those Bonds has been given. Any moneys so deposited with the Trustee as provided in the two foregoing paragraphs may at the direction of the Treasurer also be invested and reinvested in Governmental Obligations, maturing in the amounts and at the times as set forth above, and all income from all such Governmental Obligations in the hands of the Trustee for the purposes described under this heading which is not required for the payment of the Bonds and interest thereon with respect to which such moneys shall have been so deposited, shall be paid to the Treasurer as and when realized if not needed to pay any fees or expenses provided for under the Master Indenture. No deposit described under this heading shall be made or accepted under the Master Indenture and no use made of any such deposit unless the Trustee shall have received an opinion of Bond Counsel to the effect that such deposit and use would not cause the Bonds to be treated as arbitrage bonds within the meaning of Section 148 of the Code. Notwithstanding any provision of the Master Indenture which may be contrary to the provisions described under this heading, all moneys or Governmental Obligations set aside and held in trust pursuant to the provisions of the Master Indenture described under this heading for the payment of the Bonds (including interest thereon) shall be applied to and used solely for the payment of the particular Bonds (including interest thereon) with respect to which such moneys or obligations have been so set aside in trust. Anything in described under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Supplemental Indentures above to the contrary notwithstanding, if moneys or obligations have been deposited or set aside with the Trustee pursuant to the provisions of the Master Indenture described under this heading for the payment of Bonds and interest thereon when due and such Bonds and interest shall not have in fact been actually paid in full when due, no amendment to the provisions described under this heading shall be made without the consent of the owner of each Bond affected thereby. SUMMARY OF CERTAIN PROVISIONS OF THE SERIES 2009 SUPPLEMENTAL INDENTURE The following is a summary of certain provisions of the Series 2009 Supplemental Indenture. This summary is not comprehensive and reference is hereby made to the Series 2009 Supplemental Indenture for a complete recital of its terms.

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Issuance of Series 2009 Bonds Pursuant to the Series 2009 Supplemental Indenture, the State authorizes the issuance of the Series 2009 Bonds. Covenants and Representations The Supplemental Indenture contains a number of covenants and representations by the State. The following is a summary of certain of those covenants and representations. Payment of Principal and Interest The Issuer covenants that it will promptly pay the principal of and interest on every Series 2009 Bond issued under the Series 2009 Supplemental Indenture at the place, on the dates and in the manner provided in the Series 2009 Supplemental Indenture and in the Series 2009 Bonds according to the true intent and meaning thereof, provided that the principal and interest are payable by the Issuer solely from Pledged Funds, and nothing in the Series 2009 Bonds or the Series 2009 Supplemental Indenture shall be considered as assigning or pledging any other funds or assets of the Issuer other than the Pledged Funds. Performance of Covenants The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Series 2009 Supplemental Indenture, in any and every Series 2009 Bond executed, authenticated and delivered under the Series 2009 Supplemental Indenture and in all of its proceedings pertaining to the Series 2009 Supplemental Indenture; that the Treasurer is duly authorized under the Constitution and laws of the State, including particularly the Act, to issue the Series 2009 Bonds authorized by the Series 2009 Supplemental Indenture and to execute the Series 2009 Supplemental Indenture; that all actions on its part for the issuance of the Series 2009 Bonds and the execution and delivery of the Series 2009 Supplemental Indenture have been duly and effectively taken, and that the Series 2009 Bonds in the hands of the owners thereof are and will be valid and enforceable obligations of the Issuer according to the terms thereof and of the Series 2009 Supplemental Indenture. Covenants Regarding Series 2009A Bonds The Issuer will not knowingly take any affirmative action or omit to take any action, which action or omission will adversely affect the exemption from federal income taxation of interest paid on the Series 2009A Bonds, and, in the event any such action or omission shall be brought to the attention of the Treasurer, it will, promptly upon having any such action or omission brought to its attention, take such reasonable actions based upon advise of counsel as may rescind or otherwise negate or cure such action or omission. Covenants Regarding Series 2009B Bonds The Issuer will take all actions required by law or applicable regulations as necessary to provide for the collection to the fullest extent possible of the Subsidy Payments and will not knowingly take action or omit to take any action, which action or omission will adversely affect

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the ability of the Issuer to collect to Subsidy Payments to the fullest extent possible. Such actions include but are not limited to (a) making an irrevocable election with respect to the Series 2009B Bonds to have Section 54AA and 6431 of the Code apply to the Series 2009B Bonds, and (b) filing or causing to be filed IRS Form 8038-CP or such other form required by the Internal Revenue Service on or prior to the date such form is required to be filed for each Interest Payment Date. In addition, the Treasurer shall designate the Trustee as the entity to receive Subsidy Payments with respect to the Series 2009B Bonds. Cash Funded Reserve Account There is established by the Treasurer under the Series 2009 Supplemental Indenture and ordered created with the Trustee an account to be designated as the Cash Funded Reserve Account, which account shall be a separate and distinct account and not a part of the Bond Reserve Fund until the Transfer Date (hereinafter defined). Beginning with the Fiscal Year commencing on July 1, 2010 and continuing for each subsequent Fiscal Year to and including the Fiscal Year commencing July 1, 2027, the Treasurer shall transfer moneys available in the Revenue Bonds Unpledged Funds Account of the Revenue Bonds Debt Service Fund to the Cash Funded Reserve Account during each such Fiscal Year until there has been accumulated in the Cash Funded Reserve Account the following required balances (each the Cash Funded Reserve Requirement as of the end of the corresponding Fiscal Year) as of the end of the following Fiscal Years: For the Fiscal Year Beginning July 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Required Balance at the end of the Fiscal Year $1,327,094 $2,654,188 $3,981,282 $5,308,376 $6,635,470 $7,962,564 $9,289,658 $10,616,752 $11,943,846 $13,270,940 $14,598,034 $15,925,128 $17,252,222 $18,579,316 $19,906,410 $21,233,504 $22,560,598 $1,327,096

Amounts on deposit in the Cash Funded Reserve Account on July 1, 2027 (the Initial Transfer Date) and July 1, 2028 (the Last Transfer Date) shall be transferred to the Taxable

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Bonds Account of the Bond Reserve Fund on such dates and deposited into a separate subaccount to be established and maintained by the Trustee therein to be designated as the Cash Funded Subaccount. Prior to the Last Transfer Date amounts on deposit in the Cash Funded Reserve Account may be used to pay the principal of and interest on and the Debt Service Payments with respect to the Series 2009B Bonds when due but only to the extent that there are not sufficient amounts on deposit in the Taxable Bonds Account of the Bond Fund and the Taxable Bonds Account of the Bond Reserve Fund for such purpose. Notwithstanding anything in the Master Indenture to the contrary, amounts on deposit in the Cash Funded Reserve Account and the Cash Funded Subaccount of the Taxable Bonds Account of the Bond Reserve Fund shall be invested at yields not to exceed the Restricted Yield. The Trustee shall perform an Annual Valuation of amounts on deposit in the Cash Funded Reserve Account and shall provide a copy of each Annual Valuation to the Treasurer. If, upon the Annual Valuation or at any other time it is determined that the amount on deposit in the Cash Funded Reserve Account is less than the applicable Cash Funded Reserve Requirement, the Trustee shall notify the Treasurer of such deficiency. The Treasurer shall then transfer moneys from the Revenue Bonds Unpledged Funds Account as soon as moneys are available therein (whether in such Fiscal Year or in subsequent Fiscal Years) in amounts sufficient to bring the amount on deposit in the Cash Funded Reserve Account to equal the applicable Cash Funded Reserve Requirement. All earnings on funds in the Cash Funded Reserve Account shall be deposited into the Cash Funded Reserve Account unless the Treasurer directs the Trustee to deposit such earnings in another fund; provided however, that if the amount on deposit in the Cash Funded Reserve Account is less than the applicable Cash Funded Reserve Requirement, such earnings shall be retained in the Cash Funded Reserve Account. Earnings on the Bond Reserve Fund and the Capitalized Interest Account of the Bond Fund Notwithstanding any provision in the Master Indenture to the contrary, all earnings on the Bond Reserve Fund and the Capitalized Interest Account of the Bond Fund received on or before June 1, 2010 shall be deposited in the Revenue Bonds Capitals Fund.

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APPENDIX C

FORMS OF OPINIONS OF BOND COUNSEL

State of Iowa, Des Moines, Iowa 50319 July 22, 2009 Re: $380,120,000 State of Iowa Special Obligation Bonds, Series 2009A We have acted as bond counsel in connection with the issuance by the State of Iowa (the State) of its $380,120,000 Special Obligation Bonds, Series 2009A (the Series 2009A Bonds), dated July 22, 2009. The Series 2009A Bonds were issued by the State pursuant to Senate File 376, 83rd G.A., 1st Sess. (Iowa 2009), Iowa Code Section 8.57 (2009), as amended by S.F. 376, Section 26, H.F. 811, Section 100, and Senate File 478, Section 29, Iowa Code Section 123.53 (2009), as amended by S.F. 376, Iowa Code Section 99D.17 (2009), and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104 (collectively, the Act), and under and pursuant to the Master Indenture of Trust dated as of July 1, 2009 (the Master Indenture) from the State to Wells Fargo Bank, National Association, as trustee (the Trustee), and the Series 2009 Supplemental Master Indenture of Trust dated as of July 1, 2009 (the Supplemental Indenture and with the Master Indenture, the Indenture) from the State to the Trustee for the purpose of providing financing for the Iowa Jobs Bond Program established in Sections 16.191 through 16.197, inclusive, of the Code of Iowa and to provide funds for certain infrastructure projects of the State and to fund certain grant and loan programs of the State (collectively, the Projects), to pay capitalized interest, to fund a Bond Reserve Fund and to pay certain costs of issuance. At the time of issuance of the Series 2009A Bonds, the State also issued its $220,950,000 Special Obligation Bonds, Taxable Series 2009B (Build America Bonds Direct Pay) (the Series 2009B Bonds) under and pursuant to the Indenture. The Series 2009A Bonds are subject to redemption prior to maturity at the times, in the manner and upon the terms set forth in the Indenture and in the Series 2009A Bonds. In such connection, we have reviewed (i) the Indenture; (ii) an Interdepartmental Agreement dated as of July 1, 2009, (the Interdepartmental Agreement) by and among the Treasurer of the State (the Treasurer), acting on behalf of the State, the Department of Management of the State and the Alcoholic Beverages Division of the Department of Commerce of the State; (iii) an opinion of the Attorney General of the State of Iowa, dated the date hereof, as counsel to the State; (iv) the certifications of the State, the Treasurer, the Trustee and others as to certain factual matters; and (vi) such other documents, certificates and opinions as we consider necessary in order to render this opinion. We have not undertaken to verify independently, and have assumed, the genuineness thereof and of the signatures thereon, and the accuracy of the factual matters represented, warranted or certified therein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings, and judicial decisions and cover certain matters not directly addressed by such C-1

authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and other relevant documents, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions, or events will not cause the interest paid on the Series 2009A Bonds and received by the Bondowners of the Series 2009A Bonds to be included in gross income of such Bondowners for federal income tax purposes. Failure to comply with certain of such covenants and agreements may cause the inclusion of interest on the Series 2009A Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series 2009A Bonds. We call attention to the fact that the rights and obligations under the Indenture, and the Series 2009A Bonds 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, and to the limitations on legal remedies against the State. We express no opinion with respect to any indemnification or choice of law provisions contained in the documents described herein. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Preliminary Official Statement dated June 30, 2009 or the final Official Statement dated July 16, 2009 (together, the Official Statement) or other offering materials relating to the Series 2009A Bonds (except to the extent, if any, stated in the Official Statement) and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement). Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: (1) The State, acting by and through the Treasurer has complied with applicable provisions of the Constitution and laws of the State of Iowa now in force, and the State, acting by and through the Treasurer has full power and authority to execute and deliver the Master Indenture and the Supplemental Indenture and to carry out the terms thereof. (2) The Master Indenture and the Supplemental Indenture have been duly and validly authorized, executed and delivered by the State and, assuming due and valid authorization, execution and delivery by the Trustee are valid instruments binding on the State, enforceable in accordance with their terms. (3) The Series 2009A Bonds have been duly authorized, issued and delivered by the State and are valid and binding limited special obligations of the State, enforceable upon the State in accordance with their terms, and payable solely from the sources provided therefor in the Indenture. The Series 2009A Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Series 2009A Bonds do not directly, indirectly or contingently obligate the State or a political subdivision of the State to apply moneys from or to

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levy or pledge any form of taxation whatever to, or to continue the appropriation of funds for the payment of the Series 2009A Bonds. The principal of, premium, if any, and interest on the Series 2009A Bonds are payable solely from, and secured by a pledge of the moneys, assets, revenues and amounts on deposit in the Revenue Bonds Pledged Funds Account, the Bond Fund and the Bond Reserve Fund established in the Indenture. (4) Interest on the Series 2009A Bonds, including any original issue discount properly allocable to an owner thereof, is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code), is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations under the Code, and is not included in adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. We express no opinion regarding other federal tax consequences arising with respect to the Series 2009A Bonds. (5) Interest on the Series 2009A Bonds is exempt from the taxes imposed by Division II (Personal Net Income Tax) and Division III (Business Tax on Corporations) of Chapter 422 of the Code of Iowa, 2009, as amended (the Iowa Code); it should be noted, however, that interest on the Series 2009A Bonds is required to be included in adjusted current earnings to be used in computing the state alternative minimum taxable income of corporations and financial institutions for purposes of Sections 422.33 and 422.60 of the Iowa Code. Interest on the Series 2009A Bonds is subject to the taxes imposed by Division V (Taxation of Financial Institutions) of Chapter 422 of the Iowa Code. We express no opinion regarding other State tax consequences arising with respect to the Series 2009A Bonds. DORSEY & WHITNEY LLP

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State of Iowa, Des Moines, Iowa 50319 July 22, 2009 Re: $220,950,000 State of Iowa Special Obligation Bonds, Taxable Series 2009B (Build America Bonds Direct Pay)

We have acted as bond counsel in connection with the issuance by the State of Iowa (the State) of its $220,950,000 Special Obligation Bonds, Taxable Series 2009B (Build America Bonds Direct Pay) (the Series 2009B Bonds), dated July 22, 2009. The Series 2009B Bonds were issued by the State pursuant to Senate File 376, 83rd G.A., 1st Sess. (Iowa 2009), Iowa Code Section 8.57 (2009), as amended by S.F. 376, Section 26, H.F. 811, Section 100, and Senate File 478, Section 29, Iowa Code Section 123.53 (2009), as amended by S.F. 376, Iowa Code Section 99D.17 (2009), and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104 (collectively, the Act), and under and pursuant to the Master Indenture of Trust dated as of July 1, 2009 (the Master Indenture) from the State to Wells Fargo Bank, National Association, as trustee (the Trustee), and the Series 2009 Supplemental Master Indenture of Trust dated as of July 1, 2009 (the Supplemental Indenture and with the Master Indenture, the Indenture) from the State to the Trustee for the purpose of providing funds for certain infrastructure projects of the State (collectively, the Projects), to pay capitalized interest, to fund a Bond Reserve Fund and to pay certain costs of issuance. At the time of issuance of the Series 2009B Bonds, the State also issued its $380,120,000 Special Obligation Bonds, Series 2009A (the Series 2009A Bonds) under and pursuant to the Indenture. The Series 2009B Bonds are subject to redemption prior to maturity at the times, in the manner and upon the terms set forth in the Indenture and in the Series 2009B Bonds. In such connection, we have reviewed (i) the Indenture; (ii) an Interdepartmental Agreement dated as of July 1, 2009, (the Interdepartmental Agreement) by and among the Treasurer of the State (the Treasurer), acting on behalf of the State, the Department of Management of the State and the Alcoholic Beverages Division of the Department of Commerce of the State; (iii) an opinion of the Attorney General of the State of Iowa, dated the date hereof, as counsel to the State; (iv) the certifications of the State, the Treasurer, the Trustee and others as to certain factual matters; and (v) such other documents, certificates and opinions as we consider necessary in order to render this opinion. We have not undertaken to verify independently, and have assumed, the genuineness thereof and of the signatures thereon, and the accuracy of the factual matters represented, warranted or certified therein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings, and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any C-4

such actions or events are taken or occur. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and other relevant documents, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions, or events will not cause a decrease in or elimination of the Subsidy Payments (as defined in the Indenture) with respect to the Series 2009B Bonds. Failure to comply with certain of such covenants and agreements may cause a decrease in or elimination of the Subsidy Payments with respect to the Series 2009B Bonds. We call attention to the fact that the rights and obligations under the Indenture, and the Series 2009B Bonds 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, and to the limitations on legal remedies against the State. We express no opinion with respect to any indemnification or choice of law provisions contained in the documents described herein. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Preliminary Official Statement dated June 30, 2009 or the final Official Statement dated July 16, 2009 (together, the Official Statement) or other offering materials relating to the Series 2009B Bonds (except to the extent, if any, stated in the Official Statement) and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement). Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: (1) The State, acting by and through the Treasurer has complied with applicable provisions of the Constitution and laws of the State of Iowa now in force, and the State, acting by and through the Treasurer has full power and authority to execute and deliver the Master Indenture and the Supplemental Indenture and to carry out the terms thereof. (2) The Master Indenture and the Supplemental Indenture have been duly and validly authorized, executed and delivered by the State and, assuming due and valid authorization, execution and delivery by the Trustee are valid instruments binding on the State, enforceable in accordance with their terms. (3) The Series 2009B Bonds have been duly authorized, issued and delivered by the State and are valid and binding limited special obligations of the State, enforceable upon the State in accordance with their terms, and payable solely from the sources provided therefor in the Indenture. The Series 2009B Bonds are limited special obligations of the State and do not constitute a debt or indebtedness of the State, nor of any political subdivision of the State, or a pledge of the full faith and credit of the State or a charge against the general credit or general fund of the State. The issuance and sale of the Series 2009B Bonds do not directly, indirectly or contingently obligate the State or a political subdivision of the State to apply moneys from or to levy or pledge any form of taxation whatever to, or to continue the appropriation of funds for the payment of the Series 2009B Bonds. The principal of, premium, if any, and interest on the Series 2009B Bonds are payable solely from, and secured by a pledge of the moneys, assets,

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revenues and amounts on deposit in the Revenue Bonds Pledged Funds Account, the Bond Fund and the Bond Reserve Fund established in the Indenture. (4) Interest on the Series 2009B Bonds is includable in gross income for federal income tax purposes. We express no opinion regarding other federal tax consequences arising with respect to the Series 2009B Bonds. (5) Interest on the Series 2009B Bonds is exempt from the taxes imposed by Division II (Personal Net Income Tax) and Division III (Business Tax on Corporations) of Chapter 422 of the Code of Iowa, 2009, as amended (the Iowa Code); it should be noted, however, that interest on the Series 2009B Bonds is required to be included in adjusted current earnings to be used in computing the state alternative minimum taxable income of corporations and financial institutions for purposes of Sections 422.33 and 422.60 of the Iowa Code. Interest on the Series 2009B Bonds is subject to the taxes imposed by Division V (Taxation of Financial Institutions) of Chapter 422 of the Iowa Code. We express no opinion regarding other State tax consequences arising with respect to the Series 2009B Bonds. DORSEY & WHITNEY LLP

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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

CONTINUING DISCLOSURE AGREEMENT between

THE STATE OF IOWA, And WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee,

________________________ Dated as of July 1, 2009 _________________________

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THIS CONTINUING DISCLOSURE AGREEMENT, dated as of the 1st day of July, 2009 (this Agreement), between the STATE OF IOWA (the State), acting by and through the Treasurer of the State of Iowa (the Treasurer), and Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States acting as trustee under the Master Indenture hereinafter described (the Trustee). WITNESSETH: WHEREAS, pursuant to Senate File 376, 83rd G.A., 1st Sess. (Iowa 2009) (S.F. 376); Iowa Code Section 8.57(6)(e), as amended by S.F. 376, Section 26, H.F. 811, 83rd G.A., 1st Sess. (H.F. 811), Section 100, and Senate File 478, 83rd G.A., 1st Sess., Section 29 (S.F. 478); Iowa Code Section 123.53 (2009), as amended by S.F. 376 Sections 31 and 32; Iowa Code Section 99D.17 (2009); and Iowa Code Section 99F.11 (2009), as amended by H.F. 811, Section 104 (collectively, the Act), the State is permitted to issue its bonds in amounts which provide net proceeds of not more than $545,000,000 in order to provide financing for certain infrastructure projects of the State (the Program); and WHEREAS, the State is issuing its IJOBS Program Special Obligation Bonds, Series 2009A (the Series 2009A Bonds) in the aggregate principal amount of $380,120,000 and its IJOBS Program Special Obligation Bonds, Taxable Series 2009B (Build America Bonds-Direct Payment) (the Series 2009B Bonds and, together with the Series 2009A Bonds, the Bonds) in the aggregate principal amount of $220,950,000 for the purpose of providing financing for the Program; and WHEREAS, the Bonds are to be issued pursuant to the provisions of a Master Indenture of Trust dated as of July 1, 2009 (the "Master Indenture") by and between the State and the Trustee, and a Series 2009 Supplemental Master Indenture of Trust dated as of July 1, 2009 (the Supplemental Indenture) (the Master Indenture, as supplemented by the Supplemental Indenture, is referred to herein as the Indenture) by and between the State and the Trustee; and WHEREAS, to provide for the public availability of information relating to the Bonds and the security therefor and to comply with rules and regulations applicable to the disclosure of information in the municipal bond market, which will enhance the marketability of the Bonds, the parties desire to enter into this Agreement; and WHEREAS, it is contemplated that this Agreement may be amended or supplemented from time to time, without the consent of the Bondholders, to the extent the parties hereto deem it necessary or desirable to comply, or to assure that the Bonds comply, with applicable law, regulations and rules relating to continuing disclosure regarding tax-exempt securities, including rules promulgated by the Securities and Exchange Commission under Rule 15c2-12 or otherwise. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto DO HEREBY AGREE as follows:

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Section 1. Definitions. Terms used with initial capital letters but not defined herein shall have the meanings given such terms in the Master Indenture, unless the context hereof clearly requires otherwise. Section 2. Appointment of Trustee as Agent. The State hereby appoints the Trustee as its agent for the purpose of disclosing the information described in this Agreement in the manner set forth herein. The Trustee hereby accepts such appointment, subject to the terms and conditions of this Agreement. In the event that the Trustee, in its reasonable opinion, determines that during the continuation of an Event of Default under the Master Indenture the activities of the Trustee hereunder conflict with any of its duties and responsibilities under the Master Indenture, the Trustee need not undertake such activities hereunder. The Trustee will promptly inform the Treasurer in writing of any such determination. The inability of the Trustee to undertake certain activities under this Agreement as provided in the immediately preceding paragraph shall not relieve or otherwise affect the responsibilities, if any, of any of the State to comply with applicable law, rules or regulations relating to the disclosure of current information relating to the Bonds or the security therefor. The rights and immunities granted the Trustee in Article VIII of the Master Indenture shall apply as well to the activities of the Trustee hereunder. Section 3. Reports. The State shall provide to the Trustee timely notice of any of the following events of which the Treasurer has actual knowledge and which the Treasurer determines would be material to a decision by a reasonable investor to purchase or sell a Bond and which is not otherwise generally available to the public (as used herein, Material Events): (i) (ii) (iii) Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled difficulties; draws on credit enhancements reflecting financial

(iv)

(v) (vi)

Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Series 2009A Bonds; Modifications to rights of Bondholders;

(vii)

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(viii) The giving of notice to redeem any Bonds other than for a sinking fund redemption; (ix) (x) (xi) (xii) Defeasances relating to the Bonds; Release, substitution, or sale of property securing repayment of the Bonds; Rating changes; and Failure to comply with the requirements of Section 4 below.

Section 4. Financial Information. The Treasurer will annually furnish the Trustee no later than 210 days after the end of each fiscal year, commencing with the fiscal year ending June 30, 2009: (A) the Comprehensive Annual Financial Report of the State; and (B) to the extent not included in the financial statements referred to in paragraph (A) above, the information, as of the end of the most recent fiscal year, in the tables included in the Official Statement under RACING AND GAMING IN IOWA-Historic Revenues and in the tables included in the Official Statement under IOWA ALCOHOLIC BEVERAGES DIVISION-Current Operations, Gross Revenues and Profits. The information to be disclosed may be incorporated by reference from other documents, including official statements. Section 5. Disclosure to Public. The Trustee is authorized and directed to provide to the Municipal Securities Rulemaking Board (the MSRB) in an electronic format as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB, the following information: (a) (b) the financial information provided pursuant to Section 4 of this Agreement; any Material Event reported to the Trustee under Section 3 of this Agreement;

(c) timely notice of any of the following events of which a responsible officer of the Trustee has actual knowledge: (i) (ii) default in payment of principal of or interest on any Bonds; the issuance of a statutory notice of deficiency by the Internal Revenue Service or any other decision which holds in effect, or the delivery by Bond Counsel to any person of an opinion of Counsel, concluding in effect that the interest payable on any Series 2009A Bond is includable for

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federal income tax purposes in the gross income of an owner of Series 2009A Bonds; (iii) the amendment or supplementing of the Indenture or any provision thereof or any waiver of any such provisions, together with a copy of such amendment, supplement or waiver; the giving of the notice of redemption of any Bonds or the receipt by the Trustee of irrevocable instructions to give any such notice, together with a copy of such notice of redemption; the discharge of the Indenture or the defeasance of any Bonds under Article VI of the Indenture; and any reduction in or the withdrawal of any rating of the Bonds by a Rating Agency.

(iv)

(v)

(vi)

At the written request of the State, the Trustee shall also furnish promptly to the MSRB a copy of any other information provided by the State for such dissemination. Section 6. Disclosure to Bondholders. The Trustee is further authorized and directed to supply to any Bondholder who requests such information any information transmitted to the MSRB under Section 5 hereof, at the time of such transmission or, if such information is transmitted with a subsequent time of release, at the time such information is to be released. Nothing in this Agreement is intended to limit the ability of the Trustee to communicate with the Bondholders in such manner and at such times as it shall deem appropriate in executing the trusts under the Indenture. The Trustee shall not be required to forward any such communication to the MSRB, unless and only to the extent it is specifically described in Section 5. The Trustee may, in its discretion, however, make any communication with Bondholders available to the MSRB, unless the Trustee determines that such disclosure would adversely affect the security or interests of the Bondholders. Section 7. Costs and Expenses of Trustee. The Treasurer hereby agrees, subject to Section 14 hereof, to pay reasonable compensation to the Trustee for, and all costs and expenses of the Trustee incurred in, performing the services required of it under this Agreement. Section 8. Defaults and Remedies. Failure of the State or the Trustee to comply with any provisions of this Agreement on its part to be observed shall constitute a default hereunder and any party hereto aggrieved thereby, including the Bondholders, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained herein. Notwithstanding anything to the contrary contained herein, in no event shall a default under this Agreement constitute an Event of Default under the Indenture.

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Section 9. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the State and the Trustee and their respective successors and permitted assigns. In addition, this Agreement shall constitute a third-party beneficiary contract for the benefit of the holders from time to time of the Bonds. Said third-party beneficiaries shall be entitled to enforce performance and observance by the parties of the respective agreements and covenants herein contained as fully and completely as if said third-party beneficiaries were parties hereto; provided that this Agreement may be amended or supplemented from time to time without notice to or the consent of such third-party beneficiaries. Nothing in this Agreement, express or implied, shall give to any person, other than the parties hereto and their respective successors and permitted assigns as provided herein, and the holders of the Bonds, any benefit or other legal or equitable right, remedy or claim under this Agreement. Prior Filings. The State represents that it is currently in compliance with Section 10. the annual financial information reporting requirements in any other agreements or resolutions of the State entered into in connection with the issuance of bonds by the State. Section 11. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. Section 12. Amendments, Changes and Modifications. This Agreement may not be effectively amended, changed, modified, altered or terminated nor may any provision be waived hereunder except in a writing executed by the parties hereto. This Agreement may be amended, supplemented or terminated without notice to or the consent of the Bondholders. Section 13. Execution Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Governing Law. This Agreement shall be governed by and construed in Section 14. accordance with the laws of the State of Iowa. Section 15. Limitation of Liability of State and Treasurer. No provision, covenant or agreement contained in this Agreement, or any obligation herein imposed upon the State or the Treasurer, or the breach thereof, shall constitute or give rise to or impose upon the State or the Treasurer a pecuniary liability, general obligation or a pledge of the full faith and credit of the State, the Treasurer, or any political subdivision of the State within the meaning of any constitutional or statutory limitation. Neither the full faith and credit nor the general funds of the State or the Treasurer, or the taxing power of the State, is pledged to the obligations of the State and the Treasurer hereunder.

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IN WITNESS WHEREOF, the STATE OF IOWA and WELLS FARGO BANK, NATIONAL ASSOCIATION have caused this CONTINUING DISCLOSURE AGREEMENT to be executed in their respective names, all as of the date first written above.

STATE OF IOWA BY: TREASURER OF THE STATE OF IOWA

_______________________________________ Michael L. Fitzgerald

WELLS FARGO BANK, NATIONAL ASSOCIATION

Attest:

By:_______________________________________ Carolynn R. Fisher, Assistant Vice President

__________________________ _____________, ____________

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