CORNERSTONES MUNICIPAL UTILITY DISTRICT

Cornerstones Municipal Utility District

Minutes of Meeting of Board of Directors

The Board of Directors of Cornerstones Municipal Utility District (the “District”) met at 805 Hidden Canyon, Katy, Harris County, Texas at 7:00 p.m. on June 18, 2007, in accordance with the duly posted notice of said meeting, with a quorum of directors present as follows:

Tony Garza, President

John Irwin, Secretary

E.C. Norris, Assistant Secretary

Darryl Box, Investment Officer

Gary Hughes, Vice President

Also present were Kathie Naumow, Recording Secretary; Terry Holland of Myrtle Cruz, Inc.; Brenda McLaughlin of Bob Leared Interests; Dusty Lane of Eco-Resources, Inc.; Mark Brooks of Young & Brooks, and Doug Knopka of Cinco, LTD.

The meeting was called to order at 7:03 p.m. and declared open for such business as might come before it.

APPROVE MINUTES OF PRIOR MEETINGS

After discussion, upon motion duly made, seconded and unanimously carried, the Minutes of the May 21, 2007 meeting were approved.

QUESTIONS/COMMENTS FROM THE PUBLIC

TAX ASSESSOR/COLLECTOR'S REPORT

Brenda McLaughlin of Bob Leared Interests, the District's Tax Assessor/Collector, presented the Tax Assessor/Collector report. Taxes Receivable 8/31/2006: $26,036.43, reserve for uncollectables $635.83; adjustments $92.91. Original 2006 Tax Levy: $889,423.03, adjustments $430,166.62. Total Taxes Receivable: $1,345,083.16. Prior years taxes collected $18,614.07, 2006 taxes collected $1,296,579.02. Taxes Receivable at 5/31/2007: $29,890.07. 2006 Receivables: Debt Service $16,905.77; Maintenance $6,104.86. Month of 5/2007: beginning cash balance $53,868.54 total receipts $11,535.23, total disbursements $29,732.79, cash balance at 5/31/2007 $35,670.98. Total Disbursements for the month of June 2007 $8,195.76, remaining cash balance $27,475.22. The District is 99.999% collected for 1999, 99.995% collected for 2000, 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.976% for 2003 taxes, 99.901% for 2004, 99.695% for 2005 and 98.256% for 2006.

Brenda presented the Board with Delinquent Tax Report from the Purdue Brandon law firm. She recommended moving the following three personal property accounts to Uncollectible: Jerry A. Lomas c/o Chevron Tech Co. 1996 taxes, Astro Drywall & Insulation 2000 taxes, and Oil Change on the Run 2000-2002 taxes.

After discussion and upon motion duly made, seconded and unanimously carried, the Board approved the Tax Assessor/Collector's Report; and payments of the tax bills presented. After discussion and motion duly made, seconded and unanimously carried, the Board also approved moving the recommended accounts to uncollectible.

FINANCIAL ADVISOR

OPERATOR'S REPORT

Dusty Lane of Eco-Resources, Inc., the District's Operator, reported as to the Districts operations and facilities, and presented the May 2007 Operations Report. Total connections were 1494. Meter installations and inspections for Apr. 14 - May 13: New taps Installed - 0; Abandoned connections - 0; Sewer inspections completed - 0; Builder inspections completed - 0; Customer Service inspections completed - 0; Net Rental Meter Change - 0. Wastewater Treatment; Permitted Average Daily Flow - 3,000,000GPD. The required 7 samples were taken during 5/2007. TCEQ Chemical Analysis: Metals 12/4/06; Radio-Chemicals 08/11/05; Volatile Organic Chemicals 8/11/05; and Minerals 5/18/06. Water Production: Pumped 22,269,000 at Water Plant #1, Total supplied - 22,269,000, Daily Average - 718,355. Subsidence Information: Estimated number of months available - 13.33, Permit months remaining - 7, Percent of permitted production - 27.28. Water Accountability is at 94.5 for 4/5/07 - 5/3/07 and 95.1 for the four month average. Total Operations Charges $16,984.49. Actual work related costs - $9,500.00 for repairs. Total Current Billing $58,660.83. Total Aged Receivables $8,680.05. Total Accounts Receivables $67,340.88. Facility Checklist Completed: Water Plant #1 5/8/07. Inspections Completed: Fire Hydrants on 12/30/2006. Total deposits for May $59,313.70. Disconnects/Reconnects income was $300.00. Pull Fees: totals $134.77. Provided Discharge Monitoring Report, number exceeded all zero. Reported on repairs made and presented the Board with a copy of the Cornerstones M.U.D. delinquent list. Everyone has been duly notified of situation and it is being addressed. No customer requests. Distributed letter on Districts Storm Preparedness to the Board.

Upon motion duly made, seconded and unanimously carried, the Board approved the Operator's report and the Consumers Report and denied customer requests for adjustments.

ENGINEER'S REPORT

Marvin Zahradnik of Landev Engineers, Inc., the District's Engineer, informed the Board that he received a request from Mr. Matthews who is purchasing acres on future Royal Montreal for office buildings. He is asking for 2000 gal. per day for sanitary trunk lines on one tract. Should be submitting drawings to Harris County for storm sewer and water line. He has option in two other tracts. Tjian has not resubmitted any plans as of yet for their project.

Upon motion duly made, seconded and unanimously carried, the Board approved the Engineers report and capacity for Mr. Matthews.

BOOKKEEPER'S REPORT

Terry Holland of Myrtle Cruz, Inc., the District's Bookkeeper, presented the monthly report. Debt service funds available June 18, 2007 - $2,592,299.96. Total Debt Service Requirements for 2007: $1,354,107.50. General Operating: Previous cash balance May 21, 2007 - $3,787.12, total deposits $79,309.61. Beginning cash balance June 18, 2007 - $82,546.80. General Operating Funds available June 18, 2007 - $1,867,427.52. Included a copy of the Budget for fiscal year ending September 30, 2007, the Investment Report and the Tex Pool Performance sheet.

After discussion, upon motion duly made, seconded and unanimously carried, the Board approved the Bookkeepers report and payment of said bills and ordered checks issued on the appropriate District accounts in payment thereof.

CONDUCT HEARING ON TERMINATION OF WATER AND SEWER SERVICE

The Board conducted a hearing on the termination of utility service. The Operator presented a list of delinquent utility accounts that were delinquent by more than 60 days and reported that the customers have been given written notice 10 days prior to this meeting and the opportunity to appear before the Board of Directors to explain, contest or correct the utility service bill and to show reason why the utility service should not be terminated for nonpayment. None of the customers on the list were present or have presented any statement on the matter.

After discussion, upon motion duly made, seconded and unanimously carried, the Board authorized the Operator to terminate utility service to the unpaid accounts in accordance with standard procedures.

CINCO REGIONAL OPERATING COMMITTEE REPORT

Tony Garza was unable to attend the meeting. Dusty Lane reported they switched over to Chlorine. They went back to the old traveling bridge while bugs are being worked out in the new system. They still need to install catwalk.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS

N/A - Except that the trees need trimming.

PENDING BUSINESS

No pending business to report on.

After concluding and there being no further business to come before the Board, the meeting was adjourned at 7:32 p.m.

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Attachments: Bookkeeper's Report