CORNERSTONES MUNICIPAL UTILITY DISTRICT

Minutes of Meeting of Board of Directors

June 14, 2005

     The Board of Directors of Cornerstones Municipal Utility District (the “District”) met at 1415 Louisiana, Fifth Floor, Harris County, Houston, Texas 77002, at 2:00 p.m. on June 14, 2005, in accordance with the duly posted notice of said meeting, with a quorum of directors present as follows:

     Tony Garza, President

     Gary Hughes, Vice President

     E.C. Norris, Secretary

     John Irwin, Assistant Secretary

     Darryl Box, Investment Officer

And being absent:

None

     Also present were Dave Scholler of Brown & Gay Engineers, Inc., Alex Garcia of Allen Boone Humphries Robinson, L.L.P., Marvin Zahradnik of Landev Engineers, Inc., and Mark Brooks of Young & Brooks.

     The president called the meeting to order and declared it open for such business as might come before it.

NORTH FORT BEND WATER AUTHORITY

     Board president Garza noted that the primary purpose of this special meeting is to discuss the pending creation of the North Fort Bend Water Authority and the District’s options with respect to meeting the Fort Bend Subsidence District surface water conversion mandates.  Cornerstones MUD was initially included in the West Harris County Regional Water Authority, but opted out because the District’s only water well is located in Fort Bend County, which is subject to a later surface water conversion requirement.  The area located within the West Harris County Regional Water Authority is required to convert 30% to surface water by 2010, 70% by 2020, and 80% by 2030.  Fort Bend County Region A, which includes the District’s water well, is required to convert 30% to surface water by 2013, and 60% by 2025.

     The board recognized Dave Scholler of Brown & Gay Engineers, Inc., and Alex Garcia of Allen Boone Humphries Robinson, L.L.P., who reported to the board as to the pending creation of the North Fort Bend Water Authority.  It is anticipated that the Authority will be created effective June 19, 2005, which will mark the beginning of the 60-day opt out period.  No projections have yet been made with respect to the proposed North Fort Bend Water Authority finances or pumpage fees.

     After discussion was concluded, it was the consensus of the group that remaining with the North Fort Bend Water Authority is probably the most viable option for the District, although opting out and contracting directly with the City of Houston is a possibility.  The board will continue to investigate and will plan to make a decision at the August board meeting.

     There being no further business to come before the board, the meeting was adjourned.

                                                                       _______________________________

                                                                       Secretary