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 November 19, 2007, 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, Assistant Secretary

Darryl Box, Investment Officer

John Irwin, Secretary

Also present were Kathie Naumow, Recording Secretary; Terry Holland of Myrtle Cruz, Inc.; Dusty Lane of Eco-Resources, Inc.; Rusty Leared of Bob Leared Interests, Mark Brooks of Young & Brooks, Doug Knopka of Cinco, LTD., and Doug Brewer of Cinco MUD 8.

The meeting was called to order at 7:01 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 September 17, 2007 and October 15, 2007 meetings were approved.

QUESTIONS/COMMENTS FROM THE PUBLIC

TAX ASSESSOR/COLLECTOR'S REPORT

Rusty Leared of Bob Leared Interests, the District's Tax Assessor/Collector, presented the Tax Assessor/Collector report to the Board. Taxes Receivable 8/31/2007: $17,217.07, Reserve for Uncollectables $999.76; Adjustments $0.00. Original 2007 Tax Levy: $1,158,056.50, Adjustments $37,669.02. Total Taxes Receivable: $1,211,942.83. Prior Years Taxes Collected $2,236.97; 2007 Taxes Collected $14,355.06. Taxes Receivable at 10/31/2007: $1,195,350.80. 2007 Receivables: Debt Service $686,843.23; Maintenance $494,527.23. Month of 10/2007: Beginning Cash Balance $25,130.21; Total Receipts $15,416.31, Total Disbursements $3,248.78, Cash Balance At 10/31/2007 $37,297.74. Total Disbursements for the month of November 2007 $19,140.26, Remaining Cash Balance $18,157.48. The District is 99.999% collected for 1999, 100.00% collected for 2000, 99.978% collected for 2001 taxes, 99.940% for 2002 taxes, 99.976% for 2003 taxes, 99.945% for 2004, 99.792% for 2005, 99.299% for 2006 and 1.201% for 2007.

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.

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 October 2007 Operations Report. Total Connections were 1495. Meter Installations and Inspections for Sep 14 - Oct 13: New Taps Installed - 0; Sewer Inspections Completed - 3; Builder Inspections completed - 1; Customer Service Inspections completed - 0; Net Rental Meter Change - 0. The required 7 samples were taken during Oct/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 22,928,000 at Water Plant #1, Total Supplied - 22,928,000, Daily Average - 764,267. Subsidence Information: Estimated Number of Months Available - 6.43, Permit Months Remaining - 2, Percent of Permitted Production - 60.86. Water Accountability is at 92.4 for 9/6/07 - 10/5/07 and 96.3 for the Four Month Average. Total Operations Charges $17,758.68. Actual work related costs - $9,900.00 for repairs. Total Current Billing $66,590.91. Total Aged Receivables $13,647.76. Total Accounts Receivables $80,238.67. Facility Checklist Completed: Water Plant #1 10/25/07. Inspections Completed: Fire Hydrants on 06/28/07. Total Deposits for October 2007 $70,581.63. Disconnects/Reconnects Income was $445.00. Pull Fees: totals $0.00. 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. Questioned the Board if they would like to approve no turn-off of utilities until after the holidays. Dusty informed the Board of the merger of ECO Resources with Aqua Services. The new name will be Southwest Water Services. He will bring a letter confirming the merger for the Board to sign and have Mark review the contract. SWWC is the Parent Company.

Upon motion duly made, seconded and unanimously carried, the Board approved the Operator's report and the Consumers Report and approved no turn offs until after the holidays.

ENGINEER'S REPORT

Mark Brooks presented the Engineers report for Marvin Zahradnik of Landev Engineers, Inc., the District's Engineer. The extension of Royal Montreal and associated drainage, water and sanitary contract will be starting the week after Thanksgiving. It should be completed in approximately three weeks. Landev has reviewed the submitted drawings for the Royal Montreal Business Park and the Cypress Station Car Wash No. 2. Landev and Eco-Resources comments have been forwarded for revisions and corrections.

Upon motion duly made, seconded and unanimously carried, the Board approved the Engineers report.

BOOKKEEPER'S REPORT

Terry Holland of Myrtle Cruz, Inc., the District's Bookkeeper, presented the monthly report. Debt Service Funds available November 19, 2007 - $1,473,270.27. Total Debt Service Requirements for 2007: $1,354,107.50. General Operating: Previous Cash Balance October 15, 2007 - $4,224.86, Total Deposits $70,580.37. Beginning Cash Balance November 19, 2007 - $70,412.96. General Operating Funds available November 19, 2007 - $1,905,913.67. Included copies of Cornerstones Energy Report, the Budget for Fiscal Year Ending September 30, 2008, the Debt Service Calculations for Yield Restriction Report, the Cinco Regional WWTP Improvements Report, the Investment Report, the Tex Pool Performance sheet and the Deposit/Collateral Report by District.

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 reported to the Board that repairs are completed on the Plant. The final pay estimate is $113,015.40. Our final payment will be in the amount of $22,366.39. The Cinco Regional Operating Committee has adopted a budget for 2008.

AUTHORIZE ANY NECESSARY ACTIONS WITH RESPECT TO GREENBELT TRACTS

There are a couple of sprinkler heads not functioning.

PENDING BUSINESS

Mark Brooks distributed copies of a notice received from the North Fort Bend Water Authority regarding the Proposed Adoption of Groundwater Reduction Plan Fee. Their meeting is scheduled for November 28, 2007 at the Golf Club at Cinco Ranch, 23030 Cinco Ranch Blvd., Katy, Texas 77450.

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