OFFICIAL STATEMENT DATED NOVEMBER 13, 2019

IN THE OPINION OF BOND COUNSEL, UNDER EXISTING LAW, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES AND INTEREST ON THE BONDS IS NOT SUBJECT TO THE ALTERNATIVE MINIMUM TAX ON INDIVIDUALS. SEE “TAX MATTERS” FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL.

THE BONDS HAVE NOT BEEN DESIGNATED “QUALIFIED TAX-EXEMPT OBLIGATIONS” FOR FINANCIAL INSTITUTIONS.

NEW ISSUE-Book-Entry-Only Insured Rating (AGM): S&P “AA” (stable outlook) Underlying Rating: S&P “A+” (Stable Outlook) See “MUNICIPAL BOND RATING” and

“MUNICIPAL BOND INSURANCE” herein. CINCO MUNICIPAL UTILITY DISTRICT NO. 1 (A political subdivision of the State of Texas located within Fort Bend County) $13,415,000 CONTRACT REVENUE BONDS SERIES 2019A

The Contract Revenue Bonds, Series 2019A (the “Bonds”) are obligations solely of Cinco Municipal Utility District No. 1 (the “Master District” or the “District”) payable solely from and to the extent of payments required to be made to the Trustee (as herein defined) by all utility districts within the Master District Service Area (the “Participants”) from proceeds of an unlimited annual ad valorem tax, levied by each Participant or from other revenues available to such Participant (the “Contract Payment”). Payment of Contract Payments by Participants and use of such proceeds by the District to pay debt service on the Bonds is governed by the Contract for Financing and Operation of Regional Waste Collection, Treatment and Disposal Facilities and Regional Water Supply and Delivery Facilities (the “Master District Contract”) as described more fully herein under “MASTER DISTRICT CONTRACT.” The Bonds are obligations of the Master District and are not obligations of the State of Texas, Fort Bend County, Harris County, the City of Houston, any of the Participants except the Master District, or any entity other than the Master District.

Dated: December 1, 2019 Due: December 1, as shown below The Bonds will be issued in fully registered form only, in denominations of $5,000 or any integral multiple of $5,000. Principal of the Bonds will be payable upon presentation of the Bonds at the principal payment office of the paying agent/registrar, initially The Bank of New York Mellon Trust Company, N.A. (the “Paying Agent”), in Houston, Texas. Interest accrues from December 1, 2019, and is payable June 1, 2020, and each December 1 and June 1 thereafter until maturity or prior redemption. The Bonds mature and are subject to redemption as shown below. The Bonds will be initially registered and delivered only in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Bonds. Beneficial owners of the Bonds will not receive physical certificates representing the Bonds, but will receive a credit balance on the books of the nominees of such beneficial owners. So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on the Bonds will be paid by the Paying Agent directly to DTC, which will, in turn, remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds. See “BOOK-ENTRY-ONLY SYSTEM.”

The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. See “MUNICIPAL BOND INSURANCE” herein.

MATURITY SCHEDULE Initial Initial Principal MaturityCUSIP Interest Reoffering Principal MaturityCUSIP Interest Reoffering Amount (December 1) Number(b) Rate Yield(c) Amount (December 1) Number(b) Rate Yield(c) $ 500,000 2020 17239Y NN8 4.000 % 1.470 %$ 495,000 2033 (a) 17239Y PB2 2.625 % 2.700 % 500,000 2021 17239Y NP3 4.000 1.530 *** *** *** *** *** 500,000 2022 17239Y NQ1 4.000 1.590 495,000 2036 (a) 17239Y PE6 2.750 2.800 500,000 2023 17239Y NR9 4.000 1.710 495,000 2037 (a) 17239Y PF3 2.750 2.850 500,000 2024 17239Y NS7 4.000 1.810 495,000 2038 (a) 17239Y PG1 2.750 2.900 500,000 2025 17239Y NT5 4.000 1.920 495,000 2039 (a) 17239Y PH9 2.750 2.930 500,000 2026 (a) 17239Y NU2 2.000 2.000 *** *** *** *** *** 500,000 2027 (a) 17239Y NV0 2.000 2.100 495,000 2042 (a) 17239Y PL0 3.000 3.010 500,000 2028 (a) 17239Y NW8 2.125 2.200 495,000 2043 (a) 17239Y PM8 3.000 3.020 500,000 2029 (a) 17239Y NX6 2.250 2.300 495,000 2044 (a) 17239Y PN6 3.000 3.030 495,000 2030 (a) 17239Y NY4 2.250 2.450 495,000 2045 (a) 17239Y PP1 3.000 3.040 495,000 2031 (a) 17239Y NZ1 2.500 2.550 495,000 2046 (a) 17239Y PQ9 3.000 3.050 495,000 2032 (a) 17239Y PA4 2.500 2.650

$990,000 Term Bonds due December 1, 2035 (a), 17239Y PD8 (b), 2.750% Interest Rate, 2.750% Yield (c) $990,000 Term Bonds due December 1, 2041 (a), 17239Y PK2 (b), 3.000% Interest Rate, 3.000% Yield (c)

(a) Bonds maturing on or after December 1, 2026, are subject to redemption prior to maturity at the option of the District, in whole of from time-to-time in part, on December 1, 2025, or on any date thereafter, at a price equal to the par value thereof plus accrued interest from the most recent interest payment date to the date fixed for redemption. The Term Bonds (as defined herein) are also subject to mandatory sinking fund redemption as more fully described herein. See “THE BONDS—Redemption Provisions.” (b) CUSIP Numbers have been assigned to the Bonds by CUSIP Service Bureau and are included solely for the convenience of the purchasers of the Bonds. Neither the District nor the Underwriter shall be responsible for the selection or correctness of the CUSIP Numbers set forth herein. (c) Initial reoffering yield represents the initial offering yield to the public which has been established by the Underwriter for offers to the public and which may be subsequently changed by the Underwriter and is the sole responsibility of the Underwriter. The initial reoffering yields indicated above represent the lower of the yields resulting when priced to maturity or to the first call date. Accrued interest from December 1, 2019 to the date fixed for delivery, is to be added to the price. The Bonds, when issued, will constitute valid and legally binding obligations of the District. THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN. Bond purchasers are encouraged to read this OFFICIAL STATEMENT prior to making an investment decision. The Bonds are offered by the Underwriter for such series subject to prior sale, when, as and if issued by the District and accepted by the Underwriter, subject, among other things, to the approval of the Bonds by the Attorney General of Texas and the approval of certain legal matters by Allen Boone Humphries Robinson LLP, Houston, Texas, Bond Counsel. See “LEGAL MATTERS.” Delivery of the Bonds in book-entry form through the facilities of DTC is expected on or about December 11, 2019, in Houston, Texas.

TABLE OF CONTENTS

MATURITY SCHEDULE ...... 1 TAX DATA ...... 35 USE OF INFORMATION IN OFFICIAL STATEMENT ...... 3 CONTRACT TAX ...... 35 SALE AND DISTRIBUTION OF THE BONDS ...... 4 TAX ROLL INFORMATION ...... 36 AWARD OF THE BONDS ...... 4 HISTORICAL CONTRACT TAX RATES AND COLLECTIONS ...... 36 SECURITIES LAWS ...... 4 TAX ADEQUACY FOR DEBT SERVICE ...... 37 OFFICIAL STATEMENT SUMMARY ...... 5 TAXING PROCEDURES...... 37 SELECTED FINANCIAL INFORMATION (UNAUDITED) ...... 10 AUTHORITY TO LEVY TAXES ...... 37 THE BONDS ...... 13 PROPERTY TAX CODE AND COUNTY-WIDE APPRAISAL DISTRICT ...... 37 DESCRIPTION ...... 13 PROPERTY SUBJECT TO TAXATION BY THE PARTICIPANTS ...... 38 METHOD OF PAYMENT OF PRINCIPAL AND INTEREST ...... 13 VALUATION OF PROPERTY FOR TAXATION ...... 39 SOURCE AND SECURITY OF PAYMENT ...... 14 PARTICIPANT AND TAXPAYER REMEDIES ...... 39 CONTRACT PAYMENTS BY THE PARTICIPANTS ...... 14 LEVY AND COLLECTION OF TAXES ...... 40 UNCONDITIONAL OBLIGATION TO PAY ...... 14 TAX PAYMENT INSTALLMENTS ...... 40 FUNDS ...... 14 ADDITIONAL PENALTIES ...... 40 REDEMPTION PROVISIONS ...... 15 ROLLBACK OF OPERATION AND MAINTENANCE TAX RATE ...... 40 AUTHORITY FOR ISSUANCE ...... 15 PARTICIPANT’S RIGHTS IN THE EVENT OF TAX DELINQUENCIES ...... 41 REGISTRATION AND TRANSFER ...... 16 THE EFFECT OF FIRREA ON TAX COLLECTIONS OF THE DISTRICT ...... 41 LOST, STOLEN OR DESTROYED BONDS ...... 16 INVESTMENT CONSIDERATIONS ...... 42 ISSUANCE OF ADDITIONAL DEBT ...... 16 GENERAL ...... 42 FINANCING PARKS AND RECREATIONAL FACILITIES ...... 17 RECENT EXTREME WEATHER EVENTS; HURRICANE HARVEY ...... 42 REMEDIES IN EVENT OF DEFAULT ...... 17 SPECIFIC FLOOD TYPE RISKS ...... 42 LEGAL INVESTMENT AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN OVERLAPPING DEBT AND TAX RATES ...... 43 TEXAS ...... 17 ENVIRONMENTAL REGULATIONS ...... 43 DEFEASANCE ...... 17 ONGOING LITIGATION ...... 45 BOOK-ENTRY-ONLY SYSTEM ...... 18 FEMA MITIGATION ...... 45 USE AND DISTRIBUTION OF BOND PROCEEDS ...... 20 TAX COLLECTIONS LIMITATIONS AND FORECLOSURE REMEDIES ...... 45 THE INDENTURE OF TRUST ...... 21 REGISTERED OWNERS’ REMEDIES ...... 46 EVENTS OF DEFAULT ...... 21 BANKRUPTCY LIMITATION TO REGISTERED OWNERS’ RIGHTS ...... 46 REMEDIES ...... 21 FUTURE DEBT...... 46 LIMITATION ON ACTION BY OWNERS ...... 21 MARKETABILITY OF THE BONDS ...... 46 AMENDMENTS TO THE INDENTURE OF TRUST ...... 22 CONTINUING COMPLIANCE WITH CERTAIN COVENANTS ...... 47 REMOVAL OR RESIGNATION OF TRUSTEE ...... 22 RISK FACTORS RELATED TO THE PURCHASE OF MUNICIPAL BOND APPOINTMENT OF SUCCESSOR TRUSTEE ...... 22 INSURANCE ...... 47 THE PARTICIPANTS ...... 23 CHANGES IN TAX LEGISLATION ...... 47 CREATION, AUTHORITY AND DESCRIPTION ...... 23 MUNICIPAL BOND RATING ...... 47 AUTHORIZED BONDS ...... 23 MUNICIPAL BOND INSURANCE ...... 47 OPERATIONS ...... 23 BOND INSURANCE POLICY ...... 47 CONTRACT TAX ...... 23 ASSURED GUARANTY MUNICIPAL CORP...... 47 DEBT SERVICE TAX ...... 23 LEGAL MATTERS ...... 49 MAINTENANCE TAXES ...... 24 LEGAL PROCEEDINGS ...... 49 STRATEGIC PARTNERSHIP...... 24 NO MATERIAL ADVERSE CHANGE ...... 49 ANNEXATION ...... 24 NO-LITIGATION CERTIFICATE ...... 50 CONSOLIDATION ...... 24 TAX MATTERS ...... 50 MANAGEMENT ...... 24 TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT FINANCIAL DATA ...... 24 BONDS ...... 51 FUTURE PARTICIPANTS ...... 24 NOT QUALIFIED TAX-EXEMPT OBLIGATIONS ...... 51 MASTER DISTRICT CONTRACT ...... 25 CONTINUING DISCLOSURE OF INFORMATION ...... 51 THE DISTRICT AND SERVICE AREA ...... 26 ANNUAL REPORTS ...... 51 CINCO RANCH DEVELOPMENT ...... 26 EVENT NOTICES ...... 52 GENERAL ...... 26 AVAILABILITY OF INFORMATION FROM MSRB ...... 52 DESCRIPTION AND LOCATION...... 26 LIMITATIONS AND AMENDMENTS ...... 52 STATUS OF DEVELOPMENT ...... 27 COMPLIANCE WITH PRIOR UNDERTAKINGS ...... 53 MANAGEMENT OF THE DISTRICT ...... 28 PREPARATION OF OFFICIAL STATEMENT ...... 53 BOARD OF DIRECTORS ...... 28 SOURCES AND COMPILATION OF INFORMATION ...... 53 DISTRICT CONSULTANTS ...... 28 FINANCIAL ADVISOR ...... 53 THE SYSTEM ...... 29 CONSULTANTS ...... 53 MASTER FACILITIES ...... 29 UPDATING THE OFFICIAL STATEMENT ...... 54 INTERNAL WATER DISTRIBUTION, WASTEWATER COLLECTION AND CERTIFICATION OF OFFICIAL STATEMENT ...... 54 STORM DRAINAGE FACILITIES ...... 29 MISCELLANEOUS ...... 54 FLOOD PROTECTION AND DRAINAGE ...... 29 REGULATION ...... 30 SUBSIDENCE AND CONVERSION TO SURFACE WATER SUPPLY ...... 30 AERIAL PHOTOGRAPH OPERATING STATEMENT ...... 31 PHOTOGRAPHS OF THE DISTRICT FINANCIAL INFORMATION CONCERNING THE MASTER APPENDIX A – Certain Financial Information Regarding the Participants DISTRICT AND THE PARTICIPANTS (UNAUDITED) ...... 32 APPENDIX B – Independent Auditor’s Report and Financial Statements of OVERLAPPING TAXES ...... 35 the District for the Year Ended September 30, 2018 APPENDIX C – Specimen Municipal Bond Insurance Policy

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USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized 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 representation must not be relied upon as having been authorized by the District. This OFFICIAL STATEMENT is not to be used in an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. All of the summaries of the statutes, resolutions, contracts, audited financial statements, engineering and other related reports referenced or described in this OFFICIAL STATEMENT are made subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions, and reference is made to such documents, copies of which are available from the District, c/o Allen Boone Humphries Robinson LLP, 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027. This OFFICIAL STATEMENT contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of opinion, or as to the likelihood that they will be realized. Any information and expressions of opinion herein contained 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 District or other matters described herein since the date hereof. However, the District has agreed to keep this OFFICIAL STATEMENT current by amendment or sticker to reflect material changes in the affairs of the District until the delivery of the Bonds to the Underwriter (as hereinafter defined) and thereafter only as described in “PREPARATION OF THE OFFICIAL STATEMENT—Updating the Official Statement.” The District has undertaken no other reporting obligations to purchasers of the Bonds except as described herein under “CONTINUING DISCLOSURE OF INFORMATION.” Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this OFFICIAL STATEMENT or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “MUNICIPAL BOND INSURANCE” and “APPENDIX C—Specimen Municipal Bond Insurance Policy.”

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SALE AND DISTRIBUTION OF THE BONDS

Award of the Bonds After requesting competitive bids for the Bonds, the District accepted the bid resulting in the lowest net effective interest rate, which bid was tendered by Raymond James & Associates, Inc. (the “Underwriter”) paying the interest rates shown on the cover page hereof, at a price of 99.8143% of the par value thereof plus accrued interest to the date of delivery which resulted in a net effective interest rate of 2.850256%, as calculated pursuant to Chapter 1204 of the Texas Government Code, as amended. The delivery of the Bonds is conditioned upon the receipt by the District of a certificate executed and delivered by the Underwriter for such series of Bonds on or before the date of delivery of the Bonds stating the prices at which a substantial amount of the Bonds of each maturity has been sold to the public. For this purpose, the term “public” shall not include any person who is a bond house, broker or similar person acting in the capacity of underwriter or wholesaler. Otherwise, the District has no understanding with the Underwriters regarding the reoffering yields or prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the respective Underwriters. The prices and other terms with respect to the offering and sale of the Bonds may be changed from time-to-time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Underwriter for the Bonds may over-allot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The District has no control over trading of the Bonds in the secondary market. Moreover, there is no guarantee that a secondary market will be made in the Bonds. In such a secondary market, the difference between the bid and asked price of utility district bonds may be greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued by more traditional municipal entities, as bonds of such entities are more generally bought, sold or traded in the secondary market. Securities Laws No registration statement relating to the offer and sale of the Bonds has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein and the Bonds have not been registered or qualified under the securities laws of any other jurisdiction. The District assumes no responsibility for registration or qualification of the Bonds under the securities laws of any other jurisdiction in which the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdiction.

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OFFICIAL STATEMENT SUMMARY The following is a brief summary of certain information contained herein which is qualified in its entirety by the detailed information appearing elsewhere in this OFFICIAL STATEMENT. The summary should not be detached and should be used in conjunction with more complete information contained herein.

HURRICANE HARVEY

General... The greater Houston area, including the Service Area (as defined below), is subject to occasional severe weather events, including tropical storms and hurricanes. If the District were to sustain damage to its facilities requiring substantial repair or replacement, or if substantial damage were to occur to taxable property within the Service Area as a result of such a weather event, the investment security of the Bonds could be adversely affected. The greater Houston area has experienced four storms exceeding a 0.2% probability (i.e. “500‐year flood” events) since 2015, including Hurricane Harvey, which made landfall along the Texas Gulf Coast on August 25, 2017, and brought historic levels of rainfall during the successive four days.

Impact on District... The Master District (as defined herein) provides water and sewer service to approximately 5,372 acres defined herein as the “Service Area.” According to Inframark Water & Infrastructure Services (the “Operator”), the operator for the Master District Facilities (as herein defined), a portion of the Master District’s wastewater system sustained significant damage from Hurricane Harvey with wastewater service restored within approximately 7 days after floodwaters receded. The Master District had no disruption of potable water service to customers in its Service Area, during or after the storm. However, approximately 2,226 homes out of approximately 10,000 homes within the Service Area experienced flooding or other material damage. A portion of the Service Area is in the Barker Reservoir pool and subject to inundation by the U.S. Army Corps of Engineers at its sole discretion. It is estimated that at least fifty percent (50%) of homes affected in the Service Area flooded during the Hurricane Harvey event as a result of the U.S. Army Corps of Engineers policies for release of water from Barker Reservoir. Some structures also had sewage backup due to flooding at the District’s South Wastewater Treatment Plant. The Service Area taxable value temporarily decreased as a result of damage resulting from flooding, though increased to a taxable value above 2017 levels by 2019. See “TAX DATA—Tax Roll Information” for historical values in the Service Area and Harvey related decreases from 2017 to 2018. If a future weather event significantly damaged all or part of the improvements within the District, the assessed value of property within the Service Area could be substantially reduced, which could result in a decrease in tax revenues and/or necessitate an increase in the Participant’s tax rate. Further, there can be no assurance that a casualty loss to taxable property within the Service Area will be covered by insurance (or that property owners will even carry flood or other casualty insurance), that any insurance company will fulfill its obligation to provide insurance proceeds, or that insurance proceeds will be used to rebuild or repair any damaged improvements within the Service Area. Even if insurance proceeds are available and improvements are rebuilt, there could be a lengthy period in which assessed values within the Service Area could be adversely affected. See “INVESTMENT CONSIDERATIONS—Hurricane Harvey.”

THE MASTER DISTRICT Description... Cinco Municipal Utility District No. 1 (the “Master District” or the “District”) is a political subdivision of the State of Texas, created by act of the 69th regular session of the Texas State Legislature on May 24, 1985, and operates pursuant to Chapter 49 and Chapter 54 of the Texas Water Code, as amended. The Master District serves as a regional provider of wastewater collection and treatment facilities and water supply and delivery facilities for an approximately 5,372 acre service area (the “Service Area”) comprised of the District and ten other municipal utility districts (collectively the “Participants”). In addition to acting as the Master District, the District provides water, wastewater and storm drainage facilities to the approximate 246 acres of land within its boundaries as a Participant in the Master District Contract described below. See “THE PARTICIPANTS” and “THE DISTRICT AND SERVICE AREA.” Location... The Service Area is located approximately 25 miles west of the central downtown business district of the City of Houston, Texas in Fort Bend and Harris Counties. The Service Area lies wholly within the exclusive extraterritorial jurisdiction of the City of Houston and within the boundaries of the Katy Independent School District. Access to the Service Area is provided via Interstate Highway 10 West to Fry Road, and Mason Road, each of which is a major thoroughfare into the Cinco Ranch Development. Access is also provided via Interstate Highway 10 West or U.S. Highway 59 South to Texas State Highway 99 (the “Grand Parkway”), a limited access state highway and the Westpark Toll Road. See “THE DISTRICT AND SERVICE AREA.”

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Status of Development... The Service Area has been developed consisting of residential and commercial development within the District and the Participants. Homes within the Service Area range in market value from approximately $100,000 to over $1,100,000. As of September 2019, approximately 10,000 residences had been constructed as well as six apartment communities. Commercial development includes a Kroger Center, Super Target Center, Lifetime Fitness Center, La Centerra town center development, multiple medical/dental offices, an assisted living facility, and other service oriented retail including restaurants, pharmacies and banks. In addition, there are approximately 499 acres of amenities and recreational facilities, including the Willow Fork Country Club and Golf Course located on approximately 165 acres in Cinco MUD Nos. 3, 5 and 6, which includes an 18-hole golf course, a 16,000 square foot clubhouse, a pro shop, 9 lighted tennis courts, and a swimming pool; The Golf Club at Cinco Ranch located in Cinco MUD No. 2 and the adjoining Cornerstones Municipal Utility District, consisting of 18 holes on approximately 194 acres and an approximate 10,600 square foot clubhouse; an 18 acre lake system, beach club and swimming lagoon; six lighted tennis courts; an extensive greenbelt system; and five recreation centers with swimming pools. Other improvements within the Service Area include 6 elementary schools, 4 junior high schools, a 155 acre site where Katy Independent School District has constructed a high school, administrative offices and a transportation facility, and the University of Houston West Campus, multiple churches, and a YMCA facility, all of which are exempt from ad valorem taxation. Of the 5,372 acres in the Service Area, all developable acres have been provided with internal water distribution, wastewater collection and storm drainage facilities necessary to the construction of taxable improvements. There are approximately 750 acres in the Service Area that are not developable. See “THE DISTRICT AND SERVICE AREA—Status of Development” and “APPENDIX A.”

Master Facilities... The Master District, in its capacity as a regional provider of the wastewater collection and treatment facilities and water supply and delivery facilities necessary to serve the Service Area (hereinafter collectively referred to as the “Master District Facilities”), has contracted with each of the Participants to construct and provide service from the Master District Facilities. See “INVESTMENT CONSIDERATIONS—Overlapping Debt and Tax Rates” and “THE SYSTEM—Master Facilities.” The Master District owns and operates the Master District Facilities. Each Participant, including the District in its capacity as provider of internal water distribution, wastewater collection and storm drainage, owns and operates the internal utilities within its own Participant’s boundaries. See “MASTER DISTRICT CONTRACT.” Flood Protection and Drainage Facilities... Except for approximately 78 acres of the Service Area, all of the Service Area lies within the Willow Fork Drainage District (“Willow Fork”) which encompasses approximately 5,718 acres of land. All of the land within the Service Area is drained through major outfall drainage facilities provided by Willow Fork. Willow Fork has financed the construction of (a) certain improvements to accommodate storm water drainage within the boundaries of Willow Fork (and certain areas outside the boundaries of Willow Fork), including the 5,372 acres of the Service Area and (b) certain parks and recreational facilities. Taxes levied by Willow Fork are in addition to taxes levied by the Participants. Willow Fork levied a total 2019 tax rate of $0.185 per $100 of assessed valuation. See “THE SYSTEM—Flood Protection and Drainage” and “INVESTMENT CONSIDERATIONS—Overlapping Debt and Tax Rates.” Payment History... The District, in its capacity as the Master District, has previously issued eighteen series of Contract Revenue Bonds and twelve series of Contract Revenue Refunding Bonds, including the $10,680,000 Contract Revenue Refunding Bonds Series 2019 expected to be issued on November 19, 2019 (the “Series 2019 Refunding Bonds”), of which $57,210,000 collectively remains outstanding (the “Outstanding Bonds”). The Master District has never defaulted on the payment of principal or interest on its bonded indebtedness. The District, in its capacity as a provider of internal utilities to the acreage within its boundaries, has issued three series of unlimited tax bonds and one series of unlimited tax refunding bonds, of which $1,975,000 collectively remains outstanding. The District has never defaulted on the payment of its bonded indebtedness. See “SELECTED FINANCIAL INFORMATION (UNAUDITED)—Outstanding Contract Revenue Bonds of the Master District.” None of the Participants has ever defaulted on its contractual obligation to make contract payments to the Master District. See “THE PARTICIPANTS” and “APPENDIX A.” Short-Term Debt… The District sold a Bond Anticipation Note in the principal amount of $4,690,000 on March 12, 2019, with a maturity date of March 10, 2020 (the “2019 BAN”). The 2019 BAN is payable solely from Bond proceeds. See “USE AND DISTRIBUTION OF BOND PROCEEDS.”

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THE BONDS Description... The $13,415,000 Contract Revenue Bonds, Series 2019A (the “Bonds”) are being issued pursuant to a resolution authorizing the issuance of the Bonds (the “Bond Resolution”) adopted by the District’s Board of Directors (the “Board”) as fully registered bonds. Interest accrues from December 1, 2019, and is payable on each June 1 and December 1, beginning on June 1, 2020. The Bonds are being issued as serial bonds maturing December 1 in each year 2020 through 2033, 2036 through 2039, and 2042 through 2046, both inclusive, and as term bonds on December 1 in each of the years 2035 and 2041 (the “Term Bonds”) in the amounts and paying interest at the rates shown on the cover page hereof. The Bonds will be issued in fully registered form only, in denominations of $5,000 or any integral multiple of $5,000. See “THE BONDS—Method of Payment of Principal and Interest.” Book-Entry-Only… The Depository Trust Company (defined as “DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered certificate will be issued for each maturity of the Bonds and will be deposited with DTC. Redemption… Bonds maturing on or after December 1, 2026 are subject to redemption at the option of the District prior to their maturity dates on December 1, 2025, or on any date thereafter at a price of par plus unpaid accrued interest from the most recent interest payment date to the date fixed for redemption. The Term Bonds are also subject to mandatory sinking fund redemption as more fully described herein. See “THE BONDS—Redemption Provisions.” Use of Proceeds... Proceeds of the Bonds will be used to redeem the 2019 BAN and pay for the additional items shown herein under “USE AND DISTRIBUTION OF BOND PROCEEDS.” In addition, proceeds of the Bonds will be used to pay administrative costs and certain other costs and engineering fees related to the issuance of the Bonds. Authority for Issuance... The Bonds are the nineteenth series of bonds issued by the Master District pursuant to the Master District Contract for the purpose of purchasing and constructing the Master District Facilities. The Master District is authorized by the Master District Contract to issue additional Contract Revenue Bonds for the purpose of constructing and acquiring all Master District Facilities necessary to provide service to the entire Service Area. Such additional bonds will be on parity with the Bonds. The Bonds are issued pursuant to the Master District Contract, the Indenture (as defined herein), the Texas Constitution, the terms and conditions of the Bond Resolution, Article XVI, Section 59 of the Texas Constitution, Chapters 49 and 54 of the Texas Water Code, Chapter 8167 of the Texas Special District Local Laws Code, an order of the Texas Commission on Environmental Quality (the “TCEQ”), and the general laws of the State of Texas. See “THE BONDS—Authority for Issuance—Issuance of Additional Debt” and “INVESTMENT CONSIDERATIONS—Future Debt.” Source and Security of Payment... Principal of and interest on the Bonds are payable from unconditional obligations of the Participants to make certain payments pursuant to the Master District Contract (the “Contract Payments”). By execution of the Master District Contract, each Participant has agreed to pay a pro rata share of debt service on the Bonds based upon the gross certified appraised valuation of each Participant as a percentage of the total gross certified appraised valuation of the Service Area. Each Participant is obligated to make such payments from the proceeds of an annual unlimited ad valorem tax levied by such Participant for such purpose on land within its boundaries (the “Contract Tax”), from revenues derived from the operations of such Participant’s water distribution and wastewater collection system, or from any other lawful source of such Participant’s income. No Participant is liable for the payments owed by any other Participant; however, failure of any Participant to make its Contract Payment could result in an increase in the Contract Payment amount paid by each of the other Participants. The Bonds are obligations of the Master District and are not obligations of the State of Texas, Fort Bend County, Harris County, the City of Houston, any of the Participants except the Master District, or any entity other than the Master District. See “THE BONDS—Source and Security of Payment—Unconditional Obligation to Pay” and “MASTER DISTRICT CONTRACT.” The Bonds are secured by an Indenture of Trust and a First Supplement to the Indenture of Trust (collectively, the “Indenture”) from the Master District to The Bank of New York Mellon Trust Company, N.A., Houston, Texas, as trustee (the “Trustee”). Pursuant to the Indenture, the Master District has assigned to the Trustee for the benefit of the Bonds, the Outstanding Bonds, and any additional contract revenue bonds issued by the Master District under the terms of the Indenture (collectively, the “Contract Revenue Bonds”) all of the Master District’s right, title and interest in and to the Contract Payments under the Master District Contract and the right to assert and enforce all of the Master District’s rights and remedies under the Master District Contract in the event of

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a default. Under the Indenture, the Trustee maintains a debt service fund for deposit of the Contract Payments in an amount equal to principal and interest due on the Contract Revenue Bonds in the succeeding annual period (the “Debt Service Fund”), and a reserve fund to be used to pay principal of and interest on the Contract Revenue Bonds when insufficient funds are available for such purpose in the Debt Service Fund, or to pay the principal of and interest on the Contract Revenue Bonds in connection with refunding or redemption (the “Reserve Fund”). See “THE INDENTURE OF TRUST.” The Reserve Requirement has been established in the Bond Indenture to be a sum of money equal to the maximum annual debt service requirements on the Contract Revenue Bonds. Any funds in excess of the Reserve Requirement held in the Reserve Fund may be deposited into the Debt Service Fund, as directed by the Master District’s Board of Directors.

Municipal Bond Rating and Municipal Bond Insurance... It is expected that S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), will assign its municipal bond rating of “AA” (stable outlook) to the Bonds with the understanding that upon delivery of the Bonds, a municipal bond insurance policy insuring the timely payment of the principal of and interest on the Bonds will be issued by Assured Guaranty Municipal Corp. (“AGM” or the “Insurer”). S&P has also assigned an underlying rating of “A+” to the Bonds. An explanation of their ratings may be obtained from S&P. See “INVESTMENT CONSIDERATIONS—Risk Factors Related to the Purchase of Municipal Bond Insurance,” “MUNICIPAL BOND RATING,” “MUNICIPAL BOND INSURANCE” and “APPENDIX C.”

Not Qualified Tax- Exempt Obligations... The Bonds are not “qualified tax-exempt obligations” within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended.

Bond Counsel... Allen Boone Humphries Robinson LLP, Bond Counsel, Houston, Texas. See “MANAGEMENT OF THE DISTRICT” and “LEGAL MATTERS.” Financial Advisor… Masterson Advisors LLC, Houston, Texas. Disclosure Counsel... McCall, Parkhurst & Horton L.L.P., Houston, Texas. Trustee… The Bank of New York Mellon Trust Company, N.A., Houston, Texas. See “THE INDENTURE OF TRUST.” Paying Agent/Registrar... The Bank of New York Mellon Trust Company, N.A., Houston, Texas. See “THE BONDS— Method of Payment of Principal and Interest.”

THE MASTER DISTRICT CONTRACT Participants... The Participants are the District and Cinco Municipal Utility District Nos. 2, 3, 5, 6, 7, 8, 9, 10, 12 and 14. Each Participant is a municipal utility district organized and operating pursuant to Article XVI, Section 59 of the Texas Constitution and Chapter 49 and Chapter 54 of the Texas Water Code, to provide water supply and distribution, wastewater collection and treatment and storm drainage services to the area within its boundaries. See “THE PARTICIPANTS” and “APPENDIX A.” Debt Service Payments... By execution of the Master District Contract, each of the Participants has agreed to make a contract payment (the “Contract Payment”) in an amount equal to its pro rata share of debt service on the Contract Revenue Bonds, including the Bonds, plus all charges and expenses of paying agents, registrars and trustees, and all amounts required to establish and maintain funds, including the Reserve Fund, established under the Bond Resolution and Indenture based upon the gross certified assessed valuation of each such Participant as a percentage of the total gross certified assessed valuation of the Service Area. Participants are obligated to pay their pro rata share from the proceeds of an annual unlimited ad valorem tax levied for such purpose (the “Contract Tax”) or from any other lawful source of funds. The Reserve Requirement has been established in the Bond Indenture to be, with respect to the Contract Revenue Bonds, a sum of money equal to the maximum annual debt service requirements on the Contract Revenue Bonds then outstanding. Any funds in excess of the Reserve Requirement held in the Reserve Fund may be deposited into the Debt Service Fund, as directed by the Master District’s Board of Directors. See “THE BONDS— Source and Security for Payment—Unconditional Obligation to Pay” and “MASTER DISTRICT CONTRACT.” The Participants are obligated severally, but not jointly, to make Contract Payments to the Master District. No Participant is obligated, contingently or otherwise, to make any Contract Payments owed by any other Participant; however, lack of payment by any Participant could result in an increase in the Contract Payment amount paid by each of the other Participants.

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Water and Sewer Revenue… Each Participant is obligated to pay monthly charges to the Master District for water and sewer services rendered pursuant to the Master District Contract. The monthly charges paid by each Participant to the Master District will be used to pay operations and maintenance expenses and to provide an operation and maintenance reserve equivalent to three (3) months of operations and maintenance expenses. The Master District Contract obligates each Participant to establish, maintain and from time to time adjust its rates, fees and charges for use of its wastewater collection system and water distribution system, or for the availability of such services, to the end that the gross revenues therefrom together with any taxes levied in support thereof and funds received from any other lawful source will be sufficient at all times to pay all operation and maintenance expenses of the Participant’s water distribution and wastewater collection system and its obligations to the Master District under the Master District Contract, including its obligation to pay its Contract Payment. See “MASTER DISTRICT CONTRACT.”

INVESTMENT CONSIDERATIONS The purchase and ownership of the Bonds are subject to special investment considerations and all prospective purchasers are urged to examine carefully this entire official statement with respect to the investment security of the Bonds, particularly the section captioned “INVESTMENT CONSIDERATIONS.”

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SELECTED FINANCIAL INFORMATION (UNAUDITED)

Contract Revenue Bonds of the Master District

Original Principal Outstanding Series Amount Bonds 1993-2006A$ 109,740,000 $ - 2008 5,415,000 235,000 2009(a) 9,985,000 1,525,000 2010(a) 5,285,000 - 2010A 2,610,000 480,000 2011(a) 8,960,000 3,370,000 2011A 1,000,000 100,000 2012 9,650,000 2,420,000 2013(a) 7,755,000 2,245,000 2014 25,340,000 24,640,000 2014(a) 10,105,000 9,255,000 2014A 2,360,000 2,260,000 2019 (a) (b) 10,680,000 10,680,000 $ 208,885,000 $ 57,210,000 The Bonds 13,415,000 13,415,000

Total$ 222,300,000 $ 70,625,000

(a) Contract Revenue Refunding Bonds. (b) The Series 2019 Refunding Bonds were sold on October 22, 2019 and are expected to be issued on November 19, 2019.

Assessed Valuation of the Participants % of 2018 2018 2019 % of 2019 Cinco Gross Assessed Assessed Gross Assessed Gross Assessed MUD Value(a) Gross Value Value(b) Value 1$ 204,381,625 5.41%$ 197,480,109 4.80% 2 592,120,064 15.68% 589,880,154 14.35% 3 215,476,730 5.71% 217,989,179 5.30% 5 212,874,388 5.64% 246,212,236 5.99% 6 253,377,071 6.71% 301,222,136 7.33% 7 362,306,063 9.59% 486,813,689 11.84% 8 217,393,299 5.76% 315,739,877 7.68% 9 385,424,543 10.21% 402,465,998 9.79% 10 293,250,316 7.77% 305,134,070 7.42% 12 404,952,176 10.72% 423,186,121 10.29% 14 634,467,410 16.80% 625,584,002 15.21%

Total$ 3,776,023,685 100.00%$ 4,111,707,571 100.00%

(a) As certified by the Fort Bend Central Appraisal District (“FBCAD”) and the Harris County Appraisal District (“HCAD”). FBCAD and HCAD are referred to herein as the “Appraisal Districts.” (b) FBCAD has certified $3,780,564,996 of appraised value in the Service Area and $8,051,130 remains uncertified. HCAD has certified $292,366,225 of appraised value and $30,725,220 remains uncertified. The Appraisal Districts’ uncertified value is subject to downward revision prior to certification. The 2019 Gross Appraised Value shown throughout this OFFICIAL STATEMENT is the total of the Appraisal Districts’ 2019 certified value and the Appraisal Districts’ uncertified value. No tax will be levied on any value until it has been certified by the Appraisal Districts. See “TAXING PROCEDURES.”

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Contract Revenue Bonds (including the Bonds and the Series 2019 Refunding Bonds) as a % of Value

2019 Gross Assessed Valuation of the Service Area of $4,111,707,571...... 1.72%

Status of Active Connections as of September 2019

Total Active Active(a) Cinco Developed Residential Other MUD Acreage Lots Connections Connections 1246 312 312 45 2767 1,328 1,324 412 3363 509 507 329 5433 535 529 212 6379 735 734 184 7632 1,220 1,217 306 8442 1,002 991 222 9486 1,261 1,258 145 10 581 846 844 403 12 348 202 202 1,120 14 695 2,060 2,054 157 Other(b) 73 - - - Totals 5,445 10,010 9,972 3,535

Estimated Population(c) 31,910

(a) Including commercial connections and irrigation. (b) An additional approximate 73 acres are included in the Cinco Ranch development that are not included within the boundaries of any of the Participants. This acreage consists of drainage easements, street rights-of-way and other public purpose property. (c) Based upon 3.2 persons per active single-family residence in the Service Area. Does not include any estimated population for multi-family.

Master District Debt Service Funds Available as of October 9, 2019

Debt Service Reserve Fund ...... $7,540,829 (a) Debt Service Fund ...... 12,992,060 (a) Total ...... $20,532,889

Master District Operating Funds Available as of October 9, 2019...... $ 1,603,681 Capital Projects Funds Available as of October 9, 2019 ...... $ 1,770,267

Debt Service Requirements (Includes the Bonds and the Series 2019 Refunding Bonds): Maximum Annual Debt Service Requirement (2020) (“MAD”)...... $ 7,788,326 (a,b) Average Annual Debt Service Requirement (2020-2046)...... $ 3,381,199 (b)

(a) Pursuant to the Bond Resolution, the District maintains a Reserve Fund balance equivalent to at least MAD. The District plans to transfer approximately $900,000 from the Debt Service Fund to the Debt Service Reserve Fund at the time of delivery of the Bonds. (b) See “FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED)— Contract Revenue Debt Service Requirements.”

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Select Tax Data of the Participants

2018 2018 2018 2018 Cinco Debt Service Maintenance Contract Total 2019 Total MUD Tax Tax Tax Tax Rate(a) Tax Rate 1$ 0.125 $ 0.128 $ 0.175 $ 0.428 0.445 2- 0.120 0.190 0.310 0.350 3 0.125 0.050 0.180 0.355 0.345 5 0.190 0.100 0.200 0.490 0.440 6 0.105 0.075 0.205 0.385 0.330 7 0.200 0.100 0.180 0.480 0.400 8 0.350 0.440 0.170 0.960 0.620 9- 0.220 0.175 0.395 0.395 10 0.165 0.165 0.175 0.505 0.530 12 - 0.120 0.130 0.250 0.250 14 0.175 0.120 0.195 0.490 0.525 Contract Tax Collection Rate (2014-2017) ...... 100.00% Contract Tax Collection Rate (2018) ...... 100.00%(b) ______(a) Does not include overlapping tax rates of Fort Bend County, Harris County, Katy Independent School District or Willow Fork Drainage District. See “TAX DATA—Overlapping Taxes.” (b) See “TAX DATA—Historical Contract Tax Rates and Collections.

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OFFICIAL STATEMENT CINCO MUNICIPAL UTILITY DISTRICT NO. 1 (A political subdivision of the State of Texas located within Fort Bend County) $13,415,000 CONTRACT REVENUE BONDS SERIES 2019A This OFFICIAL STATEMENT provides certain information in connection with the issuance by Cinco Municipal Utility District No. 1 (the “Master District” or the “District”) of its $13,415,000 Contract Revenue Bonds, Series 2019A (the “Bonds”). The Bonds are issued pursuant to the Contract for Financing and Operation of Regional Waste Collection, Treatment and Disposal Facilities and Regional Water Supply and Delivery Facilities (the “Master District Contract”), between the Master District and each of the Participants (as defined below), Article XVI, Section 59 of the Texas Constitution, the general laws of the State of Texas, a resolution authorizing the issuance of the Bonds (the “Bond Resolution”) adopted by the Board of Directors of the Master District (the “Board”), Chapters 49 and 54 of the Texas Water Code, an order of the Texas Commission on Environmental Quality (the “TCEQ”), Chapter 8167 of the Texas Special District Local Laws Code, and an Indenture of Trust by and between the Master District and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”).

This OFFICIAL STATEMENT includes descriptions, among others, of the Bonds, the Bond Resolution, and the Indenture, certain other information about the District, in both its capacity as the Master District and as a Participant, as described below and Cinco Municipal Utility District Nos. 2, 3, 5, 6, 7, 8, 9, 10, 12 and 14 (collectively with the District, the “Cinco MUDs” or “Participants”), the approximate 5,372 acre area (the “Service Area”) being provided with water and wastewater services by the Master District, regional waste collection, treatment and disposal facilities and regional water supply and delivery facilities (the “Master District Facilities”) constructed by the Master District, and the Master District Contract. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each document. Copies of documents referenced herein may be obtained from the District, c/o Allen Boone Humphries Robinson LLP, 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027.

THE BONDS

Description The Bonds will be dated December 1, 2019, with interest payable each June 1 and December 1, beginning June 1, 2020 (the “Interest Payment Date”), and will mature on the dates and in the amounts and pay interest at the rates shown on the cover page hereof. The Bonds are issued in fully registered form, in denominations of $5,000 or any integral multiple of $5,000. Method of Payment of Principal and Interest In the Bond Resolution, the Board has appointed The Bank of New York Mellon Trust Company, N.A., Houston, Texas as the initial Paying Agent/Registrar for the Bonds. The principal of the Bonds shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debts due the United States of America. In the event the book-entry system is discontinued, principal of the Bonds shall be payable upon presentation and surrender of the Bonds as they respectively become due and payable, at the principal payment office of the Paying Agent/Registrar in Houston, Texas and interest on each Bond shall be payable by check payable on each Interest Payment Date, mailed by the Paying Agent/Registrar on or before each Interest Payment Date to the Registered Owner of record as of the close of business on the May 15 or November 15 immediately preceding each Interest Payment Date (defined herein as the “Record Date”), to the address of such Registered Owner as shown on the Paying Agent/Registrar’s records (the “Register”) or by such other customary banking arrangements as may be agreed upon by the Paying Agent/Registrar and the Registered Owners at the risk and expense of the Registered Owners. If the date for payment of the principal of or interest on any Bond is not a business day, then the date for such payment shall be the next succeeding business day, as defined in the Bond Resolutions.

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Source and Security of Payment The Bonds are payable solely from payments the Participants make to the Trustee for the purpose of paying the debt service on the Bonds pursuant to the requirements of the Master District Contract. The Master District Contract provides that all Participants shall pay a pro rata share of debt service on the Bonds, the Outstanding Bonds and any additional contract revenue bonds or contract revenue refunding bonds issued by the Master District (collectively, the “Contract Revenue Bonds”) based upon each Participant’s gross certified assessed valuation as a percentage of the total gross certified assessed valuation in the Service Area. The debt service requirements shall be calculated to include the charges and expenses of paying agents, registrars and trustees utilized in connection with the Contract Revenue Bonds, the principal, interest and redemption requirements of the Contract Revenue Bonds and all amounts required to establish and maintain funds established under the Bond Resolution or Indenture. Each Participant is obligated to pay its pro rata share of the annual debt service on the Contract Revenue Bonds from the proceeds of an annual ad valorem tax, which is not limited as to rate or amount (the “Contract Tax”), revenues derived from the operation of its water distribution and wastewater collection system or from any other legally available funds of such Participant. Each Participant’s pro rata share of debt service requirements will be calculated annually by the Master District; however, the levy of a Contract Tax for the purpose of paying debt service on the Bonds is the sole responsibility of each Participant. The Bonds are obligations of the Master District and are not obligations of the State of Texas, Fort Bend County, Harris County, the City of Houston, any of the Participants except the Master District, or any entity other than the Master District. See “THE INDENTURE OF TRUST.” Contract Payments by the Participants No Participant is liable for the payments due by any other Participant. See “MASTER DISTRICT CONTRACT.” The Master District shall calculate on or before September 1 of each year, or as soon thereafter as practical, the amount of Contract Payments due from each Participant in the following calendar year. The Contract Payments shall be billed to each Participant by the Master District on or before September 1 of the year prior to the year in which such Contract Payments become due, or as soon thereafter as practical. Such Contract Payments shall be due and payable from each Participant directly to the Trustee semiannually on or before March 1 and September 1 of each year. Unconditional Obligation to Pay All charges imposed by the Master District to pay debt service on the Contract Revenue Bonds will be made by the Participants without set-off, counterclaim, abatement, suspension or diminution, nor will any Participant have any right to terminate the Master District Contract nor be entitled to the abatement of any such payment or any reduction thereof nor will the obligations of the Participants be otherwise affected for any reason, including without limitation acts or conditions of the Master District that might be considered failure of consideration, eviction or constructive eviction, destruction or damage to the Master District Facilities (as defined herein), failure of the Master District to perform and observe any agreement, whether expressed or implied, or any duty, liability or obligation arising out of or connected with the Master District Contract. All sums required to be paid by the Participants to the Master District for such purposes will continue to be payable in all events and the obligations of the Participants will continue unaffected, unless the requirement to pay is reduced or terminated pursuant to an express provision of the Master District Contract. If any Participant disputes the amount to be paid to the Master District, the Participant shall nonetheless promptly make payments as billed by the Master District, and if it is subsequently determined by agreement, arbitration, regulatory decision, or court decision that such disputed payment should have been less, the Master District will then make proper adjustments to all Participants so that the Participant will receive credit for its overpayments. Funds In the Bond Resolution, the Debt Service Fund and the Debt Service Reserve Fund are confirmed, and the proceeds from Contract Payments collected for and on account of the Bonds authorized by the Bond Resolution shall be deposited, as collected, in such fund. Accrued interest shall be deposited into the Debt Service Fund upon receipt. A Capital Projects Fund has been established, and is used to account for financial resources that are restricted, committed or assigned to expenditures for capital outlays (the “Capital Projects Fund”). As of October 9, 2019, the balance in the Capital Project Funds totaled $1,770,267. Of this, $671,520 is designated for the reverse osmosis system to be installed as part of the District’s new water well connected to the Jasper Aquifer. See “THE SYSTEM- Master Facilities.” These funds are derived from the District’s $25,340,000 Contract Revenue Bonds, Series 2014. The remaining $1,098,747 in the Capital Projects Funds is designated for the microfiltration system as part of the District’s new water well connected to the Jasper Aquifer. See “THE SYSTEM- Master Facilities.” These funds are derived from the District’s 2019 BAN.

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Redemption Provisions Mandatory Redemption: The Bonds maturing on December 1 in each of the years 2035 and 2041 (the “Term Bonds”) shall be redeemed, at a price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption (the “Mandatory Redemption Date”), on December 1 in each of the years and in the principal amounts set forth in the following schedule (with each such scheduled principal amount reduced by the principal amount as may have been previously redeemed through the exercise of the District’s reserved right of optional redemption, as provided under “Optional Redemption” below):

$990,000 Term Bonds $990,000 Term Bonds Due December 1, 2035 Due December 1, 2041 Mandatory Principal Mandatory Principal Redemption Date Amount Redemption Date Amount 2034$ 495,000 2040$ 495,000 2035 (maturity) 495,000 2041 (maturity) 495,000 On or before 30 days prior to each Mandatory Redemption Date set forth above, the Registrar shall (i) determine the principal amount of such Term Bond that must be mandatorily redeemed on such Mandatory Redemption Date, after taking into account deliveries for cancellation and optional redemptions as more fully provided for below, (ii) select, by lot or other customary random method, the Term Bond or portions of the Term Bond of such maturity to be mandatorily redeemed on such Mandatory Redemption Date, and (iii) give notice of such redemption as provided in the Bond Resolution. The principal amount of any Term Bond to be mandatorily redeemed on such Mandatory Redemption Date shall be reduced by the principal amount of such Term Bond, which, by the 45th day prior to such Mandatory Redemption Date, either has been purchased in the open market and delivered or tendered for cancellation by or on behalf of the District to the Registrar or optionally redeemed and which, in either case, has not previously been made the basis for a reduction under this sentence. Optional Redemption: The District reserves the right, at its option, to redeem the Bonds maturing on or after December 1, 2026, prior to their scheduled maturities, in whole or from time to time in part, in integral multiples of $5,000 on December 1, 2025, or any date thereafter, at a price of par value plus unpaid accrued interest on the principal amounts called for redemption from the most recent Interest Payment Date to the date fixed for redemption. If less than all of the Bonds are redeemed at any time, the maturities of the Bonds to be redeemed will be selected by the District. If less than all the Bonds of a certain maturity are to be redeemed, the particular Bonds to be redeemed shall be selected by the Paying Agent/Registrar by lot or other random method (or by DTC in accordance with its procedures while the Bonds are in book- entry-only form). If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in integral multiples of $5,000. Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a Bond or Bonds of like series maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. Notice of any redemption identifying the Bonds to be redeemed in whole or in part shall be given by the Paying Agent/Registrar at least thirty (30) days prior to the date fixed for redemption by sending written notice by first class mail to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the Register. Such notices shall state the redemption date, the redemption price, the place at which the Bonds are to be surrendered for payment and, if less than all the Bonds outstanding are to be redeemed, the numbers of the Bonds or the portions thereof to be redeemed. Any notice given shall be conclusively presumed to have been duly given, whether or not the Registered Owner receives such notice. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for payment of the redemption price of the Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When Bonds have been called for redemption in whole or in part and due provision has been made to redeem the same as herein provided, the Bonds or portions thereof so redeemed shall no longer be regarded as outstanding except for the purpose of receiving payment solely from the funds so provided for redemption, and the rights of the Registered Owners to collect interest which would otherwise accrue after the redemption date on any Bond or portion thereof called for redemption shall terminate on the date fixed for redemption. Authority for Issuance At bond elections held on various dates, the voters of each Participant approved the Master District Contract, thereby authorizing the Master District to issue the Outstanding Bonds, the Bonds and future contract revenue bonds and contract revenue refunding bonds. See “Issuance of Additional Debt” below. The Bonds are issued by the District pursuant to the Master District Contract, the terms and conditions of the Bond Resolution and the Indenture, Article XVI, Section 59 of the Texas Constitution, Chapter 49 and Chapter 54 of the Texas Water Code, an order of the TCEQ, Chapter 8167 of the Texas Special District Local Laws Code, and general laws of the State of Texas relating to the issuance of bonds by political subdivisions of the State of Texas. Before the Bonds can be delivered, the Attorney General of Texas must pass upon the legality of certain related matters. The Attorney General of Texas does not guarantee or pass upon the safety of the Bonds as an investment or upon the adequacy of the information contained in this OFFICIAL STATEMENT. 15

Registration and Transfer So long as any Bonds remain outstanding, the Paying Agent/Registrar shall keep the Register at its principal payment office and, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with the terms of the Bond Resolution. In the event the Book-Entry-Only System should be discontinued, Bonds shall be transferable only upon the presentation and surrender of such Bonds at the principal payment office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Bond in proper form for transfer, the Paying Agent/Registrar has been directed by the District to authenticate and deliver in exchange therefore, within three (3) business days after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount and paying interest at the same rate as the Bond or Bonds so presented. All Bonds shall be exchangeable upon presentation and surrender thereof at the principal payment office of the Paying Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination in an aggregate amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Paying Agent/Registrar is authorized to authenticate and deliver exchange Bonds. Each Bond delivered shall be entitled to the benefits and security of the Bond Resolution and the Indenture to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. Neither the District nor the Paying Agent/Registrar shall be required to transfer or to exchange any Bond during the period beginning on a Record Date and ending the next succeeding Interest Payment Date or to transfer or exchange any Bond called for redemption during the thirty (30) day period prior to the date fixed for redemption of such Bond. The District or the Paying Agent/Registrar may require the Registered Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the District. Lost, Stolen or Destroyed Bonds In the event the Book-Entry-Only System should be discontinued, upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefore a replacement Bond of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the District, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall, upon receipt of certain documentation from the Registered Owner and an indemnity bond, execute and the Paying Agent/Registrar shall authenticate and deliver a replacement Bond of like maturity, interest rate and principal amount bearing a number not contemporaneously outstanding. Registered owners of lost, stolen or destroyed Bonds will be required to pay the District’s costs to replace such Bonds. In addition, the District or the Paying Agent/Registrar may require the Registered Owner to pay a sum sufficient to cover any tax or other governmental charge that may be imposed. Issuance of Additional Debt The voters of the Participants have approved the Master District Contract, thereby authorizing the Master District to issue contract revenue bonds in an amount necessary to provide the facilities prescribed in the Master District Contract and to refund any outstanding contract revenue bonds. Any additional contract revenue bonds sold would be on a parity with the Bonds. The Master District Contract, the Indenture and the Bond Resolution impose no limitation on the amount of additional parity bonds which may be issued by the Master District. See “INVESTMENT CONSIDERATIONS—Future Debt.” The District (in its capacity as a Participant) and each other Participant may issue bonds for water, wastewater and drainage purposes, with the approval of the TCEQ, necessary to provide and maintain improvements and facilities consistent with the purposes for which the District or such Participant was created. See “THE PARTICIPANTS.” The District and each other Participant is also authorized by statute to engage in fire-fighting activities, including the issuance of bonds payable from taxes for such purpose. Before the District or any other Participant could issue fire- fighting bonds payable from taxes, the following actions would be required: (a) amendments to the existing City of Houston ordinance specifying the purposes for which the District or such Participant may issue bonds; (b) authorization of a detailed master plan and bonds for such purpose by the qualified voters in the District or such Participant; (c) approval of the master plan and issuance of bonds by the TCEQ; and (d) approval of bonds by the Attorney General of Texas. The Board of Directors of the District has not considered calling an election to authorize firefighting activities at this time. Issuance of bonds for fire- fighting activities could dilute the investment security for the Bonds.

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Financing Parks and Recreational Facilities

The District and each other Participant is authorized by statute to develop parks and recreational facilities, including the issuing of bonds payable from taxes for such purpose. Before the District or any other Participant could issue park bonds payable from taxes, the following actions would be required: (a) preparation of a detailed park plan; (b) authorization of park bonds by the qualified voters in the District; (c) approval of the park project and bonds by the TCEQ; and (d) approval of the bonds by the Attorney General of Texas. If the District does issue park bonds, the outstanding principal amount of such bonds may not exceed an amount equal to one percent of the value of the taxable property in the District. The Board of Directors of the District has not considered authorizing the preparation of a park plan or calling a park bond election at this time.

Remedies in Event of Default

Remedies available to Registered Owners of Bonds in the event of a default by the Master District in one or more of its obligations under the Bond Resolution are limited and generally must be exercised by the Trustee. See “THE INDENTURE OF TRUST—Remedies—Limitation on Action by Registered Owners.” The Registered Owners, acting through the Trustee except as otherwise set forth in the Indenture, may obtain a writ of mandamus requiring performance of the Master District’s obligations, but such remedy must be exercised upon each default and may prove time-consuming, costly and difficult to enforce. The Bond Resolution does not provide for acceleration of maturity of the Bonds, or any other additional remedy in the event of a default by the Master District and consequently, the remedy of mandamus may have to be relied upon from year-to-year. The Bonds are not secured by an interest in the Master District Facilities or any other property of the Master District. No judgment against the Master District is enforceable by execution of a levy against the Master District’s public purpose property. Further, the Registered Owners themselves cannot foreclose on property within the Master District or the Service Area or sell property within the Master District or the Service Area in order to pay the principal of and interest on the Bonds. The enforcement of a claim for payment on the Bonds would be subject to the applicable provisions of the federal bankruptcy laws, any other similar laws affecting the rights of creditors of political subdivisions, and general principles of equity. Certain traditional legal remedies may also not be available. See “INVESTMENT CONSIDERATIONS—Registered Owners’ Remedies—Bankruptcy Limitation to Registered Owners’ Rights” and “THE INDENTURE OF TRUST—Remedies—Limitation on Action by Registered Owners.”

Legal Investment and Eligibility to Secure Public Funds in Texas

The following is quoted from Section 49.186 of the Texas Water Code, and is applicable to the District:

“(a) All bonds, notes, and other obligations issued by a district shall be legal and authorized investments for all banks, trust companies, building and loan associations, savings and loan associations, insurance companies of all kinds and types, fiduciaries, and trustees, and for all interest and sinking funds and other public funds of the state, and all agencies, subdivisions, and instrumentalities of the state, including all counties, cities, towns, villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic.”

“(b) A district’s bonds, notes, and other obligations are eligible and lawful security for all deposits of public funds of the state, and all agencies, subdivisions, and instrumentalities of the state, including all counties, cities, towns, villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic, to the extent of the market value of the bonds, notes, and other obligations when accompanied by any unmatured interest coupons attached to them.”

The Public Funds Collateral Act (Chapter 2257, Texas Government Code) also provides that bonds of the District (including the Bonds) are eligible as collateral for public funds.

No representation is made that the Bonds will be suitable for or acceptable to financial or public entities for investment or collateral purposes. No representation is made concerning other laws, rules, regulations, or investment criteria which might apply to or which might be utilized by any of such persons or entities to limit the acceptability or suitability of the Bonds for any of the foregoing purposes. Prospective purchasers are urged to carefully evaluate the investment quality of the Bonds as to the suitability or acceptability of the Bonds for investment or collateral purposes.

Defeasance The Bond Resolution provides that the District may discharge its obligations to the Registered Owners of any or all of the Bonds to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law, such discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of the State of Texas a sum of money equal to the principal of, premium, if any, and all interest to accrue on the Bonds to maturity or redemption or (ii) by depositing with any place of payment (paying agent) of the Bonds or other obligations of the District payable from revenues or from ad valorem taxes or both, amounts sufficient to provide for the payment and/or redemption of the Bonds; provided that such deposits may be invested and reinvested only in (a) direct noncallable obligations of the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the District adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on

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the date the governing body of the District adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to the investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and which mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemption of the Bonds. Upon such deposit as described above, such Bonds shall no longer be regarded as outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as described above, all rights of the District to initiate proceedings to call the Bonds for redemption or take any other action amending the terms of the Bonds are extinguished; provided, however, that the right to call the Bonds for redemption is not extinguished if the District: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the Registered Owners of the Bonds immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. There is no assurance that the current law will not be changed in the future in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds.

BOOK-ENTRY-ONLY SYSTEM

The information in this section concerning DTC and DTC’s book-entry-only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Direct Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) prepayment or other notices sent to DTC or Cede & Co., its nominee, as the Registered Owner of the Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants will act in the manner described in this OFFICIAL STATEMENT. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedure” of DTC to be followed in dealing with DTC Direct Participants are on file with DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest 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. 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 DTC’s 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 include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned 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 a rating of AA+ from S&P Global Ratings. 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“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.

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To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s 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; DTC’s 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. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s 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 DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District (or the Trustee on behalf thereof) 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).

Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities 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 Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, interest payments and redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent, 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 District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

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USE AND DISTRIBUTION OF BOND PROCEEDS The construction costs below were compiled by BGE Inc., the District’s engineer (the “Engineer”) in a bond application submitted to the TCEQ. Non-construction costs are based upon either contract amounts, or estimates of various costs by the Engineer and Masterson Advisors LLC (the “Financial Advisor”). The actual amounts and the non-construction costs will be finalized after the sale of the Bonds and completion of agreed-upon procedures by the District’s auditor. The surplus funds may be expended for any lawful purpose for which surplus construction funds may be used.

I. CONSTRUCTION COSTS

 Manhole Rehabilitation………………………………………………$ 150,000  Lift Station Control Panel Upgrades ……………………………… 40,000  W as tewater Treatment Plan Modifications ……………………… 300,000  W W J1 Modifications ………………………………..……………… 100,000  W W J2 W ell Cons truction………………………………..………… 3,100,000  W W J2 Collection Line………………………………..…………… 290,000  W as tewater Treatment Plan Microfiltration………………...…… 4,750,000 (a)  Stormwater Prevention Flood Protection W all………………...… 300,000  Contingency………………...…………………………..…………… 903,000  Engineering………………………………..………………………… 2,420,200 Total Construction Costs………………………………………………$ 12,353,200

II. BOND ANTICIPATION NOTE COSTS

 Es timated Bond Anticipation Note Interes t……………………… $ 152,425  Is s uance Cos ts and Profes s ional Fees …………………………… 105,560 Total Bond Anticipation Note Costs……………………………………$ 257,985

II. NON-CONSTRUCTION COSTS

 Bond Dis count………………………………..……………………… 24,916 (b)  Contingency………………………………..………………………… 243,384 (b) Total Non-Construction Costs…………………………………………$ 268,300

III. ISSUANCE COSTS AND FEES

 Is s uance Cos ts and Profes s ional Fees …………………………… $ 442,478  Bond Application Report………………………………..………… 50,000  State Regulatory Fees ………………………………..……………… 43,037 Total Issuance Costs and Fees…………………………………………$ 535,515

TOTAL BOND ISSUE………………………………………………… $ 13,415,000

(a) A portion of these construction costs were funded with the 2019 BAN. See “FINANCIAL INFORMATION CONCERNING THE DISTRICT (UNAUDITED)—Short-Term Debt.” (b) The TCEQ approved a maximum Bond Discount of 2.0%. Contingency represents the difference in the estimated and actual amount of Bond Discount and can be used for purposes allowed and approved by the TCEQ.

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THE INDENTURE OF TRUST The Bonds are secured by an Indenture of Trust dated November 1, 1993 and First Supplement to the Indenture of Trust dated September 1, 1999 (collectively, the “Indenture”) from the Master District to The Bank of New York Mellon Trust Company, N.A., Houston, Texas, as Trustee. The Master District has assigned to the Trustee all of the Master District’s right, title and interest in and to the Contract Payments under the Master District Contract. Such Contract Payments, together with all amounts from time to time on deposit in the Debt Service Fund and Reserve Fund maintained by the Trustee pursuant to the Indenture, together with any other security from time to time hereafter granted to the Trustee shall constitute the “Pledged Revenues” held by the Trustee under the Indenture. Pursuant to the Indenture, the Trustee is to maintain the Debt Service Fund and Reserve Fund as trust funds to be held in trust solely for the benefit of the Registered Owners of the Contract Revenue Bonds. The Master District has covenanted in the Indenture that it will cause to be charged to each Participant, and collected and deposited into the Debt Service Fund, Pledged Contract Revenues in amounts sufficient, together with other Pledged Revenues, to provide for the payment of all interest due on the Bonds on or before each interest payment date and all principal payable on the Bonds on each principal payment date. The Debt Service Fund and the Reserve Fund are to be invested only in investments authorized by the laws of the State of Texas but must be invested in a manner such that the money required to be expended from any fund will be available at the proper time or times. Amounts in the Reserve Fund shall be used to pay interest on and principal of the Bonds when insufficient funds are available for such purpose in the Debt Service Fund or shall be applied toward the payment of principal of or interest on the Contract Revenue Bonds in connection with the refunding or redemption of such Contract Revenue Bonds. The Reserve Requirement has been established in the Bond Resolution to be, with respect to the Contract Revenue Bonds, a sum of money equal to the maximum annual debt service requirements on the Contract Revenue Bonds then outstanding. Any funds in excess of the Reserve Requirement held in the Reserve Fund may be deposited into the Debt Service Fund, as directed by the Master District’s Board of Directors. Pursuant to the Indenture, the Master District has assigned to the Trustee the right to assert and enforce all of the Master District’s rights and remedies under the Master District Contract in the event of a default. Events of Default The Indenture provides that an Event of Default shall be either of the following occurrences: (a) Failure to pay when due the principal, redemption price or interest on any Contract Revenue Bond; or (b) Failure to deposit to the Debt Service Fund money sufficient to pay any principal of or interest on any Contract Revenue Bond no later than the date when it becomes due and payable. Remedies Upon the occurrence of an Event of Default, the Trustee is required to give notice thereof to the Master District and, subject to the other provisions of the Indenture, may proceed to protect and enforce its rights and the rights of the Registered Owners of the Contract Revenue Bonds by suit, action or proceeding at equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in the Indenture, Bond Resolution or Contract Revenue Bonds or in aid of the execution of any power granted in the Indenture or for the enforcement of any of the legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or such Registered Owner, including, without limitation, requesting a writ of mandamus issued by a court of competent jurisdiction compelling the directors and other officers of the Master District or any Participant to make such payment (but only from and to the extent of the sources provided in the Indenture) or to observe and perform its other covenants, obligations and agreements in the Indenture. The Indenture provides that the Trustee may seek the appointment of receivers, may act without possession of the Contract Revenue Bonds, may act as attorney in fact for the Registered Owners of the Contract Revenue Bonds, no remedy is exclusive and that the delay or omission in the exercise of any right or remedy shall not constitute a waiver. The Indenture does not provide for any acceleration of maturity of the Contract Revenue Bonds or provide for the foreclosure upon any property or assets of the Master District, other than applying the Pledged Revenues in the manner provided in the Indenture. The Master District has assigned to the Trustee the right to assert and enforce all of the Master District’s rights and remedies under the Master District Contract in the event of a default. Limitation on Action by Owners The Indenture imposes certain limitations on Registered Owners of Contract Revenue Bonds to institute suits, actions or proceedings at law or in equity for the appointment of a receiver or other remedy unless and until the Trustee shall have received the written request of the Registered Owners of not less than 25% of all Contract Revenue Bonds then outstanding and the Trustee shall have refused or neglected to institute such suit, action or proceeding for a period of 10 days after having been furnished reasonable indemnity. Notwithstanding the foregoing, Registered Owners of more than 50% of the aggregate principal amount of the Contract Revenue Bonds then outstanding shall have the right, by written instrument delivered to the Trustee, to direct to the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture.

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Amendments to the Indenture of Trust Without the consent of the Registered Owners, the Master District and the Trustee may from time to time enter into one or more indentures supplemental to the Indenture, which shall form a part of the Indenture, for any one or more of the following purposes: (1) to cure any ambiguity, inconsistency or formal defect or omission in the Indenture; (2) to grant to or confer upon the Trustee for the benefit of the Registered Owners of the Contract Revenue Bonds any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Registered Owners of the Contract Revenue Bonds or the Trustee or either of them; (3) to subject to the lien of the Indenture additional revenues, properties or collateral; (4) to modify, amend or supplement the Indenture or any supplemental indenture in such manner as to provide further assurances that interest on the Contract Revenue Bonds will, to the greatest extent legally possible, be excludable from gross income for federal income tax purposes; (5) to obtain bond insurance for the Contract Revenue Bonds; (6) to permit any Contract Revenue Bonds to be issued in book entry only form; and (7) to permit the assumption of the Master District’s obligations hereunder by the City of Houston or other entity that may become the legal successor to the Master District; provided, however, that no provision in such supplemental indenture shall be inconsistent with the Indenture or shall impair in any manner the rights of the Registered Owners of the Contract Revenue Bonds. Except as provided in the preceding paragraph, any modification, change or amendment of this Indenture may be made only by a supplemental indenture adopted and executed by the Master District and the Trustee with the consent of the Registered Owners of not less than a majority of the aggregate principal amount of the Contract Revenue Bonds then outstanding. However, without the consent of the Registered Owner of each outstanding Contract Revenue Bond, no modification, change or amendment to this Indenture shall: (1) extend the time of payment of the principal thereof or interest thereon, or reduce the principal amount thereof or premium, if any, thereon, or the rate of interest thereon, or make the principal thereof or premium, if any, or interest thereon payable in any coin or currency other than that hereinbefore provided, or deprive such Registered Owner of the lien hereof on the revenues pledged hereunder; or (2) change or amend the Indenture to permit the creation of any lien on the revenues pledged hereunder equal or prior to the lien hereof, or reduce the aggregate principal amount of Contract Revenue Bonds.

Removal or Resignation of Trustee

The Trustee may be removed at any time by an instrument or concurrent instruments in writing, signed by the Registered Owners of a majority in principal amount of the Contract Revenue Bonds then Outstanding and delivered to the Trustee, with notice thereof given to the Master District.

The Trustee may at any time resign and be discharged from the trusts created by giving written notice to the Master District and by providing written notice to the Registered Owners of its intended resignation at least ninety (90) days in advance thereof. Such notice shall specify the date on which such resignation shall take effect and shall be sent by first class mail, postage prepaid to each Registered Owner of Contract Revenue Bonds. Resignation by the Trustee shall not take effect unless and until a successor to such Trustee shall have been appointed as hereinafter provided.

Appointment of Successor Trustee

In case the Trustee shall resign, or shall be removed or dissolved, or shall be in the course of dissolution or liquidation, or shall otherwise become incapable of acting, or in case the Trustee shall be taken under control of any public officer or officers or a receiver appointed by a court, a successor may be appointed by the Registered Owners of a majority in principal amount of the Contract Revenue Bonds then outstanding, by an instrument or concurrent instruments in writing, signed by such Registered Owners or their duly authorized representatives and delivered to the Trustee, with notice thereof given to the Master District; provided, however, that in any of the events above mentioned, the Master District may nevertheless appoint a temporary Trustee to fill such vacancy until a successor shall be appointed by the Registered Owners in the manner above provided, and any such temporary Trustee so appointed by the Master District shall immediately and without further act be automatically succeeded by the successor to the Trustee appointed by the Registered Owners. The Master District shall provide written notice to the Registered Owners of the appointment of any successor Trustee, whether temporary or permanent, in the manner provided for providing notice of the resignation of the Trustee as described above under “—Removal or Resignation of Trustee.” Any successor Trustee or temporary Trustee shall be a trust company or bank in good standing located in or incorporated under the laws of the State of Texas duly authorized to exercise trust powers and subject to examination by federal or state authority, having a reported capital and surplus of not less than $100,000,000.

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In the event that no appointment of a successor Trustee is made by the Registered Owners or by the Master District pursuant to the foregoing provisions of this Section at the time a vacancy in the office of the Trustee shall have occurred, the Registered Owner of any Contract Revenue Bond issued hereunder or the retiring Trustee may apply to any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice as it shall deem proper, if any, appoint a successor Trustee.

THE PARTICIPANTS Creation, Authority and Description All Participants (including the District) operate as municipal utility districts pursuant to Chapter 49 and Chapter 54 of the Texas Water Code. The creations of the Participants were initiated separately by their developer to finance the construction of water, wastewater and storm drainage facilities within their boundaries. Some of the Participants were created by a special act of the Texas Legislature and others were created by the Texas Water Commission (predecessor to the TCEQ). Each Participant, including the District, is empowered, among other things, to purchase, construct, operate and maintain all works, improvements, facilities and plants necessary for the supply and distribution of water; to collect, transport, and treat wastewater; and to control and divert storm water within its boundaries. Each Participant, including the District, may issue bonds and other forms of indebtedness to purchase or construct such facilities. Each Participant, including the District, is also empowered to establish, purchase, construct, operate, and maintain fire-fighting facilities, and road facilities independently or with one or more conservation and reclamation districts, parks and recreational facilities, in each case after approval by the City of Houston, the TCEQ and the voters of the District. Each Participant may issue bonds and other forms of indebtedness to purchase or construct such facilities. See “THE BONDS—Issuance of Additional Debt.” Authorized Bonds The District, in its capacity as a Participant, and each of the other Participants has voted bonds for purposes of providing internal water distribution, wastewater collection and storm drainage facilities, within its boundaries.

See “APPENDIX A” for a description of the voter authorized bonds, principal amount of bonds issued and principal amount of bonds outstanding for each Participant.

Operations

Each Participant has constructed the internal water distribution, wastewater collection system and storm sewers within its respective boundaries. Pursuant to the Master District Contract, each Participant is required to purchase potable water from the Master District and sell such water to its customers, and collect domestic wastewater from its customers, which the Master District treats and discharges. Each Participant sets its own retail rates for water and sewer service, and is required by the Master District Contract to do so at a level which will produce sufficient revenue to pay operating and maintenance charges of the Master District, to pay other costs of operating and maintaining its own utility system, and, together with tax revenues, to pay its Contract Payments.

Contract Tax

The District, in its capacity as the Master District, has the statutory authority and the authorization under the Master Contract to issue Contract Revenue Bonds. Each Participant’s pro rata share of the debt service requirements on the Contract Revenue Bonds (the “Contract Payment”) will be determined by dividing each Participant’s gross certified appraisal value by the total of the Service Area’s gross certified appraisal value. The Master District Contract obligates each Participant, including the District, to pay its pro rata share of debt service requirements on the Contract Revenue Bonds from the proceeds of an annual unlimited Contract Tax, from revenues derived from the operation of its water distribution and wastewater collection system, or from any other legally available funds. The debt service requirement shall include principal, interest and redemption requirements on the Contract Revenue Bonds, Paying Agent/Registrar fees, and all amounts necessary to establish and maintain funds established under the Bond Resolution and the Indenture. “APPENDIX B.”

Debt Service Tax

The Participants, including the District, have the statutory authority to issue unlimited tax bonds for the purpose of providing internal water distribution, wastewater collection and storm drainage facilities and parks and recreational facilities to the land within their boundaries. Such bonds are secured by a continuing, annual ad valorem tax adequate to provide funds to pay the principal of and interest on such bonds. Such tax is in addition to the Contract Tax. See “TAX DATA— Contract Tax”.

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Maintenance Taxes

The Participants, including the District, have the statutory authority to levy and collect an annual ad valorem tax unlimited in amount for the operation and maintenance of internal water distribution, wastewater collection, and storm drainage facilities. Such a maintenance tax must be authorized by the Participant’s voters prior to the levy of a maintenance tax. A maintenance tax is in addition to taxes which the Participant is authorized to levy for paying principal of and interest on its unlimited tax bonds and the Contract Tax. See “TAX DATA.”

Strategic Partnership

Each Participant is authorized to enter into a strategic partnership agreement (“SPA”) with the City of Houston to provide the terms and conditions under which (i) services would be provided and funded by the parties and (ii) the Participant would continue to exist for an extended period if the land within the Participant were to be annexed for full or limited purposes by the City of Houston. The terms of any such agreement would be determined by the City of Houston and the respective Participant. Cinco MUD No. 12 is the only Participant that currently is a party to an SPA with the City of Houston. The terms of its SPA prohibit a full (traditional municipal) annexation for a period of 30 years from the date of execution of the SPA.

Annexation

Under existing Texas law, since the Master District and each of the other Participants lie wholly within the extraterritorial jurisdiction of the City of Houston, each Participant must conform to a City of Houston consent ordinance. Generally, any Participant may be annexed by the City of Houston without the Participant’s consent, and the City of Houston cannot annex territory within a district unless it annexes the entire district; however, the City of Houston may not annex the District unless (i) such annexation has been approved by a majority of those voting in an election held for that purpose within the area to be annexed, and (ii) if the registered voters in the area to be annexed do not own more than fifty percent (50%) of the land in the area, a petition has been signed by more than fifty percent (50%) of the landowners consenting to the annexation. Notwithstanding the preceding sentence, the described election and petition process does not apply during the term of a strategic partnership agreement between the City, the Master District, and each of the other Participants specifying the procedures for full purpose annexation of all or a portion of the Master District.

If a Participant is annexed, the City of Houston will assume the Participant’s assets and obligations (including the Participant’s pro rata share of debt service on the Bonds) and dissolve the Participant within ninety (90) days, except as provided herein under “THE PARTICIPANTS—Strategic Partnership.” Annexation of territory by the City of Houston is a policy-making matter within the discretion of the Mayor and City Council of the City of Houston, and therefore, the District makes no representation that the City of Houston will ever annex the District or any Participant and assume its debt. Moreover, no representation is made concerning the ability of the City of Houston to make debt service payments should annexation occur.

Consolidation

The District, in its capacity as a Participant, has the legal authority to consolidate with other districts and, in connection therewith, to provide for the consolidation of its assets (such as cash and the utility system) and liabilities (such as the Bonds), with the assets and liabilities of districts with which it is consolidating. Although no consolidation is presently contemplated by the District, no representation is made concerning the likelihood of consolidation in the future.

Management

Each Participant is governed by a board of directors, consisting of five (5) members, which has control and management of all affairs of such Participant. A director’s election is held within the boundaries of each Participant on the second Saturday in May in even-numbered years. Directors are elected to serve four-year staggered terms. All such directors reside or own property within the Participant on whose board they serve. None of the Participants have any employees. Each Participant contracts for all services required to maintain its operations. The TCEQ exercises continuing supervisory jurisdiction over each Participant, and operation of each Participant’s water, wastewater and storm drainage facilities is subject to regulation by several other state and local agencies.

Financial Data

See “APPENDIX A” for financial information for each Participant.

Future Participants

The Master District has contracted with Participants covering the entire Service Area. The Service Area may only be enlarged upon the approval of two-thirds (2/3) of all Participants, in which case the Master District would have the right to contract with other participants for the expanded Service Area. Any contract with a participant outside the existing Service Area and any enlargements in size and capacity of the Master District Facilities is subject to the terms and conditions of the Master District Contract and must not impair the right of the existing Participants to receive services from the Master District, which are established under the Master District Contract for the number of connections reserved to the Participant, except with the consent of the Participant. The Master District agrees that it will only contract with other participants, if any, on substantially the same terms and conditions as are set out in the Master District Contract.

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MASTER DISTRICT CONTRACT Each of the Participants has executed the Master District Contract with the Master District and obtained the approval of the Master District Contract from its voters at an election held within its boundaries. The Master District Contract provides that all Participants shall pay a pro rata share of debt service on the Contract Revenue Bonds based upon each Participant’s total gross certified assessed valuation as a percentage of the total gross certified assessed valuation in the Service Area (defined herein as the “Contract Payments”). Calculation of the Contract Payment is based upon “gross” certified assessed value and does not make allowances for any exemptions granted by the Participants; however, allowances are made for exemptions provided under State law that do not require Participant action. Each Participant is obligated to pay its pro rata share of the annual debt service payments from the proceeds of an annual ad valorem Contract Tax which is not limited as to rate or amount, revenues derived from the operation of its water distribution and wastewater collection system or from any other legally available funds. The Contract Payments shall be calculated to include the charges and expenses of paying agents, registrars and trustees utilized in connection with the Contract Revenue Bonds, the principal, interest and redemption requirements of the Contract Revenue Bonds and all amounts required to establish and maintain funds established under the Bond Resolution or Indenture. Each Participant’s Contract Payments will be calculated annually by the Master District; however, the levy of a Contract Tax or the provisions of other funds to make its Contract Payments is the sole responsibility of each Participant. The Master District Contract also provides for operation and maintenance expenses for facilities constructed pursuant to the Master District Contract; duties of the parties; establishment and maintenance of funds; assignment; arbitration; amendments; force majeure; insurance; and other provisions. The Master District owns and operates the Master District Facilities. Each Participant within the Service Area (including the District in its capacity as provider of internal water distribution, wastewater collection and storm drainage to serve the acreage within the District’s boundaries) will own and operate the internal water distribution, wastewater collection and storm drainage lines within its boundaries. The internal facilities have been or are expected to be financed with unlimited tax bonds sold by each of the Participants, including the District. It is anticipated that the Master District Facilities will be constructed in stages to meet the needs of a continually expanding population within the Service Area. In the event that the Master District fails to meet its obligations to provide Master District Facilities as required by the Service Area, each Participant has the right pursuant to the Master District Contract to design, acquire, construct, or expand the Master District Facilities needed to provide it with service, and convey such Master District Facilities to the Master District in consideration of payment by the Master District of the actual reasonable necessary capital costs expended by it for such Master District Facilities. Each Participant is further obligated to pay monthly charges to the Master District for water and sewer services rendered pursuant to the Master District Contract. The monthly charges to be paid by each Participant to the Master District will be used to pay its share of operation and maintenance expenses and to provide for an operation and maintenance reserve equivalent to three (3) months of operation and maintenance expenses. Each Participant’s share of operation and maintenance expenses and reserve requirements is based upon a “unit cost” of operation and maintenance expense and reserve requirements, calculated by the Master District and expressed in terms of “cost per equivalent single- family residential connection.” Each Participant’s monthly payment to the Master District for operation and maintenance expenses will be calculated by multiplying the number of equivalent single-family residential connections reserved to it on the first day of the previous month by the unit cost per equivalent single-family residential connection. For the fiscal year ended September 30, 2019, the monthly cost per single family equivalent connection being charged by the Master District to each Participant is $28.00. In order to pass-through the groundwater pumpage fee imposed by the North Fort Bend Water Authority, the Master District has imposed an additional $19.50 charge per equivalent single-family connection to each Participant which will increase as North Fort Bend Water Authority increases its pumpage charges in the future. See “THE SYSTEM—Subsidence and Conversion to Surface Water Supply” herein. Pursuant to the Master District Contract each Participant is obligated to establish and maintain rates, fees and charges for its water and wastewater services which, together with taxes levied and funds received from any other lawful sources, are sufficient at all times to pay operation and maintenance expenses, and obligations pursuant to the Master District Contract, including its pro rata share of the Master District’s debt service requirements and monthly charges. All sums payable by each Participant to the Master District pursuant to the Master District Contract are to be paid by such Participant without set off, counterclaim, abatement, suspension or diminution. If any Participant fails to pay its share of these costs in a timely manner, the Master District Contract provides that the Master District shall be entitled to cancel, in whole or in part, any reservation or allocation of capacity in the Master District’s facilities by such Participant in addition to the Master District’s other remedies pursuant to the Master District Contract. As a practical matter, the Participants have no alternative provider of the services rendered by the Master District under the Master District Contract. See “THE BONDS—Source and Security of Payment—Unconditional Obligation to Pay.” 1) Between 2008 and 2010, each Participant, including the District, entered into a First Amendment to the Master District Contract (the “First Amendment”). The First Amendment expressly permitted the Master District to design, test, construct, maintain and finance a water re-use system in the Service Area, with a maximum of $20,000,000 authorized in bonds for such system (without prior approval from Participants).

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2) Between August and October 2019, each Participant, including the District, entered into a Second Amendment to the Master District Contract (the “Second Amendment”). The Second Amendment provides for the following: (a) an extension of the Master District Contract’s term for all Participants to January 1, 2063, (b) an expansion of the bond authorization for the Master District Facilities in the amount of $50,000,000 (c) an expansion of the bond authorization for the Master District re-use system in the amount of $30,000,000 and (d) the addition of residency requirements on Master District directors appointed to fill a board vacancy on the Master District Board of Directors. 3) Except as specifically amended in the First Amendment and Second Amendment, the Master District Contract with each Participant, including the District, remains in full force and effect.

THE DISTRICT AND SERVICE AREA Cinco Ranch Development The Master District (in its capacity as a provider of internal water, wastewater and storm drainage facilities) is one of eleven municipal utility districts, previously defined as the Participants, collectively consisting of approximately 5,372 acres of land comprising the Cinco Ranch development. In addition to the Participants, Willow Fork Drainage District (“Willow Fork”) was formed to cover approximately 5,718 acres of land, approximately 5,267 acres of which are within the Service Area. General The District is a municipal utility district created by legislation passed by the 69th regular session of the Texas State Legislature on May 24, 1985. The rights, powers, privileges, authority and functions of the District are established by the general laws of the State of Texas pertaining to utility districts, particularly Article XVI, Section 59 of the Texas Constitution, and Chapters 49 and 54 of the Texas Water Code. The District is empowered, among other things, to purchase, construct, operate and maintain all works, improvements, facilities and plants necessary for the supply and distribution of water; the collection, transportation, and treatment of wastewater; and the control and diversion of storm water to the acreage within its boundaries and, in its capacity as the Master District, to the Service Area. The District may issue bonds and other forms of indebtedness to purchase or construct such facilities. The District is also empowered to establish, operate, and maintain fire-fighting facilities, independently or with one or more conservation and reclamation districts, park and recreational facilities and road facilities, after approval by the TCEQ and the voters of the District.

The TCEQ exercises continuing supervisory jurisdiction over the Participants, including the District. In order to obtain the consent for creation of the Participants from the City of Houston, within whose extraterritorial jurisdiction the Participants lie, each Participant is required to observe certain requirements of the City of Houston which (1) limit the purposes for which the Participant may sell bonds to the acquisition, construction, and improvement of waterworks, wastewater, and drainage facilities, parks, and roads, (2) require approval by the City of Houston of Participant construction plans, and (3) permit connections only to single-family lots and commercial or multi-family/commercial platted reserves which have been approved by the Planning Commission of the City of Houston. Construction and operation of the Master District Facilities is subject to the regulatory jurisdiction of additional governmental agencies. See “THE SYSTEM— Regulation.”

Description and Location

The District encompasses approximately 246 acres of land, and in its capacity as Master District has a Service Area of approximately 5,372 acres, including the acreage within the District’s boundaries. The Master District and its Service Area are located approximately 25 miles west of the central downtown business district of the City of Houston. The District is located within Fort Bend County; however, the Service Area is located in both Fort Bend County (approximately 4,873 acres) and Harris County (approximately 472 acres). The Service Area lies wholly within the extraterritorial jurisdiction of the City of Houston and within the boundaries of the Katy Independent School District. Access to Cinco Ranch is currently provided by Interstate Highway 10 west to Fry Road and Mason Road, each of which is a major thoroughfare to Cinco Ranch. Access is also provided via IH 10 west or U.S. Highway 59 south to Texas State Highway 99 (the “Grand Parkway”), a limited access State highway. Peek Road, a major thoroughfare into Cinco Ranch, may be accessed from the Grand Parkway. Access is also provided by the Westpark Toll Road.

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Status of Development

Development of the Service Area currently consists of the residential and commercial development within the District and Cinco MUD Nos. 2, 3, 5, 6, 7, 8, 9, 10, 12 and 14 (Cinco MUD Nos. 11 and 13 have been dissolved). Homes within the Service Area range in price from approximately $100,000 to over $1,100,000. As of September 2019, approximately 10,000 residences and six apartment communities have been constructed. Commercial development includes a Kroger Center, Super Target Center, Lifetime Fitness Center, La Centerra town center development, multiple medical/dental offices, an assisted living facility, and many other service oriented retail including restaurants, pharmacies, banks, etc. In addition, there are approximately 499 acres of other amenities and recreational facilities including the Willow Fork Country Club and Golf Course located on approximately 165 acres in Cinco MUD Nos. 3, 5 and 6, which includes an 18- hole golf course, a 16,000 square foot clubhouse, a pro shop, 9 lighted tennis courts, and a swimming pool, and The Golf Club at Cinco Ranch located in Cinco MUD No. 2 and the adjoining Cornerstones Municipal Utility District, which includes an 18 hole golf course and 10,600 square foot clubhouse. Other amenities for Cinco Ranch include a 2,900 square foot visitors center and central sales office, an 18 acre lake system, beach club and swimming lagoon, six lighted tennis courts, an extensive greenbelt system, five recreation centers with swimming pools and a YMCA facility. Other improvements within the Service Area include 6 elementary schools, 4 junior high schools, a 155 acre site where Katy Independent School District has constructed a high school, administrative offices and a transportation facility, the University of Houston West Campus, multiple churches, and Fort Bend County library, all of which are exempt from taxation. Of the 5,372 acres in the Service Area, all developable acres have been provided with internal water distribution, wastewater collection and storm drainage facilities necessary to the construction of taxable improvements and 750 acres remain that are not developable. See “APPENDIX A.” The status of active connections within the Service Area as of September 2019 is shown below. This information was provided by the District’s operator, Inframark Water and Infrastructure Services (the “Operator”).

Total Active Active(a) Cinco Developed Residential Other MUD Acreage Lots Connections Connections 1 246 312 312 45 2 767 1,328 1,324 412 3 363 509 507 329 5 433 535 529 212 6 379 735 734 184 7 632 1,220 1,217 306 8 442 1,002 991 222 9 486 1,261 1,258 145 10 581 846 844 403 12 348 202 202 1,120 14 695 2,060 2,054 157 Other(b) 73 - - - Totals 5,445 10,010 9,972 3,535

Estimated Population(c) 31,910

(a) Including commercial connections and irrigation. (b) An additional approximate 73 acres are included in the Cinco Ranch developments that are not included within the boundaries of any of the Participants. This acreage consists of drainage easements, street rights-of-way and other public purpose property. (c) Based upon 3.2 persons per active single-family residence in the Service Area. No multi-family population estimate included.

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MANAGEMENT OF THE DISTRICT Board of Directors The District is governed by the Board consisting of five (5) directors which has control over and management supervision of all affairs of the District, including responsibilities related to the Master District in its capacity as the Master District. Directors are elected to four-year terms and elections are held on the second Saturday of May in even numbered years only. Three of the board members of the Board reside in the District and two board members own land within the District, subject to a note and deed of trust in favor of Westbrook Cinco East, LP, the developer of a majority of the Service Area. Directors have staggered four-year terms. The current members of the Board along with their titles and terms are listed as follows:

Name Board Title Term

G. Tim Lawrence President May 2020

Jim Cusack Vice President May 2020

Sharon Bauer Secretary May 2022

Kermit Palmer Assistant Vice President May 2022

Mike Price Assistant Secretary May 2020 District Consultants

The Master District does not have a general manager or other full-time employees, but contracts for certain necessary services as described below.

Bond Counsel/Attorney: The Master District has engaged Allen Boone Humphries Robinson LLP as general counsel to the Master District and as Bond Counsel in connection with the issuance of the Master District’s bonds. The fees of the attorneys in their capacity as Bond Counsel are contingent upon the sale and delivery of the Bonds.

Financial Advisor: Masterson Advisors LLC serves as the District’s Financial Advisor. The fee for services rendered in connection with the issuance of the Bonds is based on a percentage of the Bonds actually issued, sold and delivered and, therefore, such fee is contingent upon the sale and delivery of the Bonds.

Auditor: The financial statements of the District as of September 30, 2018, and for the year then ended, included in this offering document have been audited by BKD, LLP, independent auditors, as stated in their report appearing herein. See “APPENDIX B.” The District has engaged BKD, LLP to audit its financial statements for the year ended September 30, 2019.

Engineer: The Master District’s consulting engineer is BGE, Inc.

Tax Appraisal: The Fort Bend Central Appraisal District has the responsibility of appraising all property within the District. See “TAXING PROCEDURES.”

Tax Assessor/Collector: The Master District has appointed an independent tax assessor/collector to perform the tax collection function. Wheeler & Associates (the “Tax Assessor/Collector”) has been employed by the District to serve in this capacity.

Bookkeeper: The Master District has contracted with F. Matuska, Inc. for bookkeeping services.

Utility System Operator: The operator of the Master District’s internal water and wastewater system is Inframark Water & Infrastructure Services. Inframark Water & Infrastructure Services also serves as the operator of the Master District Facilities.

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THE SYSTEM

Master Facilities

Water Supply: The water supply facilities of the Master District currently consist of twelve water wells, one rated at 1,240 gallon per minute (“gpm”), one rated at 1,300 gpm, seven rated at 1,250 gpm; and three rated at 1,500 gpm, 5,570,000 gallons of ground storage; booster pump capacity of 26,900 gpm; and all related appurtenances. Projected to be completed in the fourth quarter of 2019, a microfiltration pretreatment reverse osmosis water plant will supplement the twelve water wells with an estimated 2.75 million gallons per day of water drawn from the Jasper Aquifer at full buildout. Any water drawn from such plant is currently exempt from pumpage fees imposed by the Authority (defined herein). The Master District has emergency water supply interconnects with Cornerstone Municipal Utility District, Cimarron Municipal Utility District, Grand Lakes Municipal Utility District No. 4, Fort Bend County MUD No. 124 and Cinco Southwest MUD No. 1. The major components of the Master District’s water supply system will serve approximately 16,380 equivalent single- family connections. The TCEQ has granted the District a waiver of the elevated storage capacity requirements on the basis of the District’s agreement to install an auxiliary power system, which has been completed. According to the Operations Report dated September 2019, the Master District has a current reserved water capacity of 14,785 equivalent single-family connections (including irrigation connections) and was serving 13,507 active connections.

The Master District has completed Phase I of its Reclaimed Water Program, installing approximately 55,000 linear feet of reclaimed pipelines within the Service Area. The Reclaimed Water Program uses high quality wastewater plant discharge for irrigation throughout the Service Area. Currently, the Authority (defined below) issues a $0.75 rebate per 1,000 gallons of re-use water and such re-use water is exempt from the pumpage fees assessed by the Authority. Phase II of he Reclaimed Water Program is estimated to include an additional 45,000 linear feet of distribution pipeline, as well as the purchase of a nearby water plant for conversion into a re-use facility.

Wastewater Treatment: The wastewater treatment facilities of the Master District consist of two plants with a total capacity of 4,210,000 gallons per day (“gpd”). Current wastewater treatment capacity at the Master District’s plants will serve 15,309 equivalent single-family connections. According to the Operations Report dated September 2019, the Master District has reserved wastewater capacity for 14,785 equivalent single-family connections (excluding irrigation) and was serving 13,507 active connections. The District is has also constructed portions of an effluent reuse system, to serve the service area.

Major Water Distribution and Wastewater Collection: Major water distribution facilities consist of waterlines ranging in size from 12-inch to 30-inch, generally located within the rights-of-way or adjacent to the following major thoroughfares within the service area: Texas State Highway 99, Cinco Ranch Boulevard, Peek Road, Highland Knolls Boulevard, Fry Road, Mason Road and Westheimer Parkway. These water distribution facilities supply water from the Master Water Supply Facilities to the Participant’s facilities.

Internal Water Distribution, Wastewater Collection and Storm Drainage Facilities

Internal water distribution, wastewater collection and storm drainage facilities have been constructed by the District, and Cinco MUD Nos. 2, 3, 5, 6, 7, 8, 9, 10, 12 and 14 to collectively serve more than 10,000 single-family residential lots, all recreational amenities and other development described herein, and the 242 acres developed as seven school campuses. Each Participant owns the internal facilities described herein. See “THE DISTRICT AND SERVICE AREA—Status of Development.”

Except for approximately 78 acres of the Service Area, all of the Service Area lies within the Willow Fork Drainage District (“Willow Fork”) which encompasses approximately 5,718 acres of land. All of the land within the Service Area is drained through major outfall drainage facilities provided by Willow Fork. Willow Fork has financed the construction of certain improvements to accommodate storm water drainage within the boundaries of Willow Fork (and certain areas outside the boundaries of Willow Fork), including the 5,372 acres of the Service Area.

Flood Protection and Drainage

Approximately 2,226 homes out of approximately 10,000 homes within the Service Area experienced flooding or other material damage as a result of Hurricane Harvey. The entire Service Area is in the Barker Reservoir pool and subject to inundation by the U.S. Army Corps of Engineers at its sole discretion. The cause of the flooding of at least fifty percent (50%) of homes in the Service Area that flooded during the Hurricane Harvey event was the result of the U.S. Army Corps of Engineers release of water from Barker Reservoir. Some structures also had sewage backup due to flooding at the District’s South Wastewater Treatment Plant. The Service Area taxable value temporarily decreased as a result of damage resulting from flooding, though increased to a taxable value above 2017 levels by 2019. See “TAX DATA—Tax Roll Information” for historical values in the Service Area and Harvey related decreases from 2017 to 2018.

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“Flood Insurance Rate Map” or “FIRM” means an official map of a community on which the Federal Emergency Management Agency (FEMA) has delineated the appropriate areas of flood hazards. The 1% chance of probable inundation, also known as the 100-year flood plain, is depicted on these maps. The "100‐year flood plain" (or 1% chance of probable inundation) as shown on the FIRM is the estimated geographical area that would be flooded by a rain storm of such intensity to statistically have a one percent chance of occurring in any given year. Generally speaking, homes must be built above the 100‐year flood plain in order to meet local regulatory requirements and to be eligible for federal flood insurance. An engineering or regulatory determination that an area is above the 100‐year flood plain is no assurance that homes built in such area will not be flooded and a number of neighborhoods in the Greater Houston Area that are above the 100-year flood plain have flooded multiple times in the past several years. The Service Area is located within the Barker Reservoir Watershed. No portion of the Service Area is located within the 100-year flood plain.

The Federal Emergency Management Agency has commissioned a study to reevaluate the “base flood elevation” (commonly referred to as the 100-year flood plain elevation) in Fort Bend County. The study has not been concluded but a draft of the study has been released. The draft report made no changes to the 100-year flood plain within the Service Area. The draft report is subject to public comment, revisions and changes. If the final study concludes that the level of the 100- year flood plain is substantially higher than current standards, land currently mapped outside the flood plain could be remapped inside the flood plain and remedial actions may be required that could have a material adverse impact on the Service Area. Remedial actions could require the removal of property from the flood plain by way of ditch or other improvements and the issuance of additional debt by the District. See “INVESTMENT CONSIDERATIONS—Recent Extreme Weather Events; Hurricane Harvey— Environmental Regulation” and “—Future Debt.”

The National Weather Service recently completed a rainfall study known as NOAA Atlas 14, Volume 11 Participation-Frequency Atlas of the United States (“Atlas 14”). Floodplain boundaries within the Service Area may be redrawn based on the Atlas 14 study based on a higher statistical rainfall amount, resulting in the application of more stringent floodplain regulations applying to a larger area and potentially leaving less developable property within the Service Area. The application of such regulations could additionally result in higher insurance rates, increased development fees, and stricter building codes for any property located within the expanded boundaries of the floodplain.

Regulation

Construction and operation of the Master District Facilities as it now exists or as it may be expanded from time to time is subject to regulatory jurisdiction of federal, state and local authorities. The TCEQ exercises continuing, supervisory authority over the District, in its capacity as the Master District and in its capacity as a provider of internal utility services. Discharge of treated sewage into Texas waters, if any, is also subject to the regulatory authority of the TCEQ and the United States Environmental Protection Agency. Construction of drainage facilities is subject to the regulatory authority of Willow Fork, the Fort Bend County Drainage District and the Harris County Flood Control District. Fort Bend County, Harris County, and the City of Houston, also exercise regulatory jurisdiction over the Master District’s Facilities.

According to the Engineer, the Master District’s facilities that have been financed with proceeds of the Outstanding Bonds, have been designed and the corresponding plans prepared in accordance with accepted engineering practices and specifications and the approval and permitting requirements of the TCEQ, the Texas Department of Health, Fort Bend County and the City of Houston, where applicable. Construction of the District’s facilities is subject to inspection by the TCEQ, the City of Houston, Harris County and Fort Bend County. Each of the aforementioned agencies exercises continuing jurisdiction over the District’s facilities.

Subsidence and Conversion to Surface Water Supply

The majority of the Service Area is within the boundaries of the Fort Bend Subsidence District (the “Subsidence District”), which regulates groundwater withdrawal. The Master District’s authority to pump groundwater is subject to an annual permit issued by the Subsidence District. The Subsidence District has adopted regulations requiring reduction of groundwater withdrawals through conversion to alternate source water (e.g., surface water) in certain areas within the Subsidence District’s jurisdiction, including the areas served by the Master District. In 2005, the Texas legislature created the North Fort Bend Water Authority (the “Authority”) to, among other things, reduce groundwater usage in, and to provide surface water to, the northern portion of Fort Bend County (including the Service Area) and a small portion of Harris County. The Authority has entered into a Water Supply Contract with the City of Houston, Texas (“Houston”) to obtain treated surface water from Houston. The Authority has developed a groundwater reduction plan (“GRP”) and obtained Subsidence District approval of its GRP. The Authority’s GRP sets forth the Authority’s plan to comply with Subsidence District regulations, construct surface water facilities, and convert users from groundwater to alternate source water (e.g., surface water). The Master District and each Participant are included within the Authority’s GRP.

The Authority, among other powers, has the power to: (i) issue debt supported by the revenues pledged for the payment of its obligations; (ii) establish fees (including fees imposed on the Master District for groundwater pumped by the Master District), user fees, rates, charges and special assessments as necessary to accomplish its purposes; and (iii) mandate water users, including the Master District, to convert from groundwater to surface water. The Authority currently charges the Master District, and other major groundwater users a fee per 1,000 gallons based on the amount of groundwater pumped, and a fee per 1,000 gallons based on the amount, if any, of surface water received from the Authority. The Authority has issued revenue bonds to fund, among other things, Authority surface water project costs. It is expected that the Authority will continue to issue a substantial amount of bonds by the year 2025 to finance the Authority’s project costs, and it is expected that the fees charged by the Authority will increase substantially over such period.

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Under the Subsidence District regulations and the GRP, the Authority is required to: (i) limit groundwater withdrawals to no more than 70% of the total annual water demand of the water users within the Authority’s GRP, beginning in the year 2014; and (ii) limit groundwater withdrawals to no more than 40% of the total annual water demand of the water users within the Authority’s GRP, beginning in the year 2025. If the Authority fails to comply with the above Subsidence District regulations, the Authority is subject to a substantial disincentive fee penalty, currently $6.50 per 1,000 gallons (“Disincentive Fees”), imposed by the Subsidence District for any groundwater withdrawn in excess of 40% of the total annual water demand in the Authority’s GRP. In the event of such Authority failure to comply, the Subsidence District may also seek to collect Disincentive Fees from the Master District. If the Master District failed to comply with surface water conversion requirements mandated by the Authority, the Authority would likely impose monetary or other penalties against the Master District.

The Master District cannot predict the amount or level of fees and charges, which may be due the Authority in the future, but anticipates the need to pass such fees through to the Participants through higher water rates. In addition, conversion to surface water could necessitate improvements to the System which could require the issuance of additional bonds by the Master District. No representation is made that the Authority: (i) will build the necessary facilities to meet the requirements of the Subsidence District for conversion to surface water, (ii) will comply with the Subsidence District’s surface water conversion requirements, or (iii) will comply with its GRP. Operating Statement The following statement sets forth in condensed form the General Operating Fund for the Master District. The information for the fiscal years ended September 30, 2015 through September 30, 2018 has been provided by BKD, LLP, the District’s auditor, and has been derived from the audited financial statements of the District. An unaudited summary for the period ended July 31, 2019 has been prepared by the Bookkeeper. Such figures are included for informational purposes only. Accounting principles customarily employed in the determination of net revenues have been observed and in all instances exclude depreciation. Reference is made to “APPENDIX B” for further and complete information.

Fiscal Year Ended

10/1/2018 to 7/31/2019 (a) 9/30/2018 9/30/2017 9/30/2016 9/30/2015 UNAUDITED Revenues: Capacity Charges$ 4,152,120 $ 4,969,776 $ 4,259,520 $ 4,267,440 $ 4,309,776 Water Sewer Charge 10,868 - - 167,833 3,840 Surface Water Conversion 4,175,266 5,999,552 5,899,692 5,343,767 4,158,013 Miscellaneous 264,666 139,912 58,536 111,679 66,241 Total Revenue$ 8,602,920 $ 11,109,240 $ 10,217,748 $ 9,890,719 $ 8,537,870

Expenditures: Professional Fees$ 257,070 $ 355,872 $ 284,132 $ 252,925 $ 323,295 Purchased or Contracted Services 401125 543,075 511,883 463,292 450,145 Regional Water Fee 4,769,107 6,200,399 5,951,099 5,477,935 4,564,658 Utility Services 684,395 842,763 783,420 920,125 782,127 Repairs and Maintenance 2,233,224 2,420,584 2,355,885 2,957,426 1,875,664 Capital Outlay 33,983 565,000 - - - Miscellaneous 226,663 313,862 265,053 257,366 232,268 Total Expenditures$ 8,605,567 $ 11,241,555 $ 10,151,472 $ 10,329,069 $ 8,228,157

NET REVENUES$ (2,647) $ (132,315) $ 66,276 $ (438,350) $ 309,713

Transfer from Capital Project Fund$ 565,000 General Operating Fund Balance (Beginning of Year)$ 2,071,492 $ 2,203,807 $ 2,137,531 $ 2,575,881 $ 2,266,168 General Operating Fund Balance (End of Year)$ 2,633,845 $ 2,071,492 $ 2,203,807 $ 2,137,531 $ 2,575,881 ______(a) Unaudited. Provided by the District’s bookkeeper.

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FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED)

Contract Revenue Bonds of the Master District

Original Principal Outstanding Series Amount Bonds 1993-2006A$ 109,740,000 $ - 2008 5,415,000 235,000 2009(a) 9,985,000 1,525,000 2010(a) 5,285,000 - 2010A 2,610,000 480,000 2011(a) 8,960,000 3,370,000 2011A 1,000,000 100,000 2012 9,650,000 2,420,000 2013(a) 7,755,000 2,245,000 2014 25,340,000 24,640,000 2014(a) 10,105,000 9,255,000 2014A 2,360,000 2,260,000 2019 (a) (b) 10,680,000 10,680,000 $ 208,885,000 $ 57,210,000 The Bonds 13,415,000 13,415,000 Total$ 222,300,000 $ 70,625,000 ______(a) Contract Revenue Refunding Bonds. (b) The Series 2019 Refunding Bonds were sold on October 22, 2019 and are expected to be issued on November 19, 2019.

Master District Debt Service Funds Available as of October 9, 2019

Debt Service Reserve Fund ...... $7,540,829 (a) Debt Service Fund ...... 12,992,060 (a) Total ...... $20,532,889

Master District Operating Funds Available as of October 9, 2019...... $1,603,681 Capital Projects Funds Available as of October 9, 2019 ...... $1,770,267

Debt Service Requirements (Includes the Bonds and the Series 2019 Refunding Bonds)

Maximum Annual Debt Service Requirement (2020) (“MAD”)...... $7,788,326 (a,b) Average Annual Debt Service Requirement (2020-2046)...... $3,381,199 (b)

(a) Pursuant to the Bond Resolution, the District maintains a Reserve Fund balance equivalent to at least MAD. The District plans to transfer approximately $900,000 from the Debt Service Fund to the Debt Service Reserve Fund at the time of delivery of the Bonds. (b) See “FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED)— Contract Revenue Debt Service Requirements.”

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Contract Revenue Debt Service Requirements The following sets forth the actual debt service on the Outstanding Bonds (see “Outstanding Contract Revenue Bonds” in this section), the Series 2019 Refunding Bonds expected to be issued on November 19, 2019 and the Bonds.

Outstanding Plus: Debt Service on the Bonds Total Year Debt Service (a) Principal Interest Total Debt Service 2019$ 5,913,556.00 (b)$ 5,913,556.00 2020 6,891,945.08 $ 500,000 $ 396,381.25 $ 896,381.25 7,788,326.33 2021 6,326,382.76 500,000 376,381.25 876,381.25 7,202,764.01 2022 6,108,079.76 500,000 356,381.25 856,381.25 6,964,461.01 2023 5,820,482.76 500,000 336,381.25 836,381.25 6,656,864.01 2024 2,270,693.76 500,000 316,381.25 816,381.25 3,087,075.01 2025 2,233,043.76 500,000 296,381.25 796,381.25 3,029,425.01 2026 2,195,518.74 500,000 276,381.25 776,381.25 2,971,899.99 2027 2,153,093.76 500,000 266,381.25 766,381.25 2,919,475.01 2028 2,105,918.74 500,000 256,381.25 756,381.25 2,862,299.99 2029 2,067,318.76 500,000 245,756.25 745,756.25 2,813,075.01 2030 2,025,968.74 495,000 234,506.25 729,506.25 2,755,474.99 2031 1,984,918.76 495,000 223,368.75 718,368.75 2,703,287.51 2032 1,944,168.76 495,000 210,993.75 705,993.75 2,650,162.51 2033 3,957,543.76 495,000 198,618.75 693,618.75 4,651,162.51 2034 3,849,618.76 495,000 185,625.00 680,625.00 4,530,243.76 2035 3,737,625.00 495,000 172,012.50 667,012.50 4,404,637.50 2036 3,622,162.50 495,000 158,400.00 653,400.00 4,275,562.50 2037 3,506,100.00 495,000 144,787.50 639,787.50 4,145,887.50 2038 3,383,100.00 495,000 131,175.00 626,175.00 4,009,275.00 2039 3,250,100.00 495,000 117,562.50 612,562.50 3,862,662.50 2040 3,127,550.00 495,000 103,950.00 598,950.00 3,726,500.00 2041 - 495,000 89,100.00 584,100.00 584,100.00 2042 - 495,000 74,250.00 569,250.00 569,250.00 2043 - 495,000 59,400.00 554,400.00 554,400.00 2044 - 495,000 44,550.00 539,550.00 539,550.00 2045 - 495,000 29,700.00 524,700.00 524,700.00 2046 - 495,000 14,850.00 509,850.00 509,850.00

Total$ 78,474,890.16 $ 13,415,000.00 $ 5,316,037.50 $ 18,731,037.50 $ 97,205,927.66

Maximum Annual Debt Service Requirement (2020) (“MAD”)...... $ 7,788,326 Average Annual Debt Service Requirement (2020-2046)...... $ 3,381,199

(a) Includes the debt service of the Series 2019 Refunding Bonds expected to be issued on November 19, 2019 and excludes the debt service on the bonds refunded by such issuance. (b) Excludes the District’s June 1, 2019, debt service payment in the amount of $1,019,914.

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Short-Term Debt

The District sold a $4,290,000 principal amount Bond Anticipation Note, Series 2019 (defined herein as the “2019 BAN”) on March 12, 2019, with a maturity date of March 10, 2020. The 2019 BAN is redeemable solely with Bond proceeds. See “USE AND DISTRIBUTION OF BOND PROCEEDS.”

Estimated Overlapping Debt The following table of entities located within the Service Area indicates the outstanding debt payable from ad valorem taxes of governmental entities within which the Service Area is located and the estimated percentages and amounts of such indebtedness attributable to property within the Service Area. Debt figures equated herein to outstanding obligations payable from ad valorem taxes are based upon data obtained from individual jurisdictions or Texas Municipal Reports compiled and published by the Municipal Advisory Council of Texas. Furthermore, certain entities listed below may have issued additional obligations since the date listed and may have plans to incur significant amounts of additional debt. Political subdivisions overlapping the District are authorized by Texas law to levy and collect ad valorem taxes for operation, maintenance and/or general revenue purposes in addition to taxes for the payment of debt service, and the tax burden for operation, maintenance and/or general revenue purposes is not included in these figures. The District has no control over the issuance of debt or tax levies of any such entities.

Outstanding Overlapping Taxing Jurisdiction Bonds As of Percent Amount Harris County 0 $ 2,042,497,125 9/30/2019 0.61%$ 12,539,985 Harris County Flood Control 0 83,075,000 9/30/2019 0.63% 521,010 Harris County Department of Education 0 6,320,000 9/30/2019 0.61% 38,792 Harris County Hospital District 57,300,000 9/30/2019 0.63% 359,281 Port of Houston Authority 0 593,754,397 9/30/2019 0.63% 3,724,225 Fort Bend County 595,399,527 9/30/2019 5.56% 33,098,929 Katy ISD 0 1,843,845,000 9/30/2019 2.44% 44,932,784 Lone Star College System 579,645,000 9/30/2019 0.47% 2,711,820 Cinco MUD 1 1,320,000 9/30/2019 100.00% 1,320,000 Cinco MUD 3 1,905,000 9/30/2019 100.00% 1,905,000 Cinco MUD 5 2,440,000 9/30/2019 100.00% 2,440,000 Cinco MUD 6 1,165,000 9/30/2019 100.00% 1,165,000 Cinco MUD 7 1,745,000 9/30/2019 100.00% 1,745,000 Cinco MUD 8 6,650,000 9/30/2019 100.00% 6,650,000 Cinco MUD 10 4,460,000 9/30/2019 100.00% 4,460,000 Cinco MUD 14 8,005,000 9/30/2019 100.00% 8,005,000 Willow Fork Drainage District 0 36,160,000 9/30/2019 100.00% 36,160,000 Total Estimated Overlapping Debt……… 0 $ 161,776,827 The Dis trict (a)…………………………… 0 70,625,000

Total Direct and Estimated Overlapping 0 $ 232,401,827 Direct and Estimated Overlapping Debt as a Percentage of: 2019 Gross Assessed Valuation of $4,111,707,571 ...... 5.65%

______(a) The Bonds, the Outstanding Bonds and the Series 2019 Refunding Bonds.

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Overlapping Taxes Property within each Participant is subject to taxation by several taxing authorities in addition to the taxes levied by each Participant. On January 1 of each year a tax lien attaches to property to secure the payment of all taxes, penalties and interest imposed on such property. The lien exists in favor of each taxing unit, including each Participant, having the power to tax the property. Each Participant’s tax lien is on a parity with tax liens of taxing authorities shown below. In addition to ad valorem taxes required to pay debt service on bonded debt of each Participant, including each Participant’s pro rata share of the Bonds and the Outstanding Bonds, and other taxing authorities, certain taxing jurisdictions, including each Participant, are also authorized by Texas law to assess, levy and collect ad valorem taxes for operation, maintenance, administrative and/or general revenue purposes. Set forth below is a summary of taxes levied for the 2019 tax year by all entities overlapping the Service Area. Portions of the Service Area are located in Harris and Fort Bend Counties. No recognition is given to local assessments for civic association dues, fire department contributions, solid waste disposal charges or any other levy of entities other than political subdivisions.

Fort Bend Harris County County Tax Rate Tax Rate per $100 of Taxable per $100 of Taxable Assessed Valuation Assessed Valuation

Harris County (including Harris County Flood Control District, Harris County Hospital District, Harris County Department of Education, and the Port of Hous ton Authority……………………………$ - $ 0.61670 Fort Bend County (including Drainage Dis trict)……………………………… 0.46000 - Katy Independent School Dis trict……………………………………………… 1.44310 1.44310 W illow Fork Drainage Dis trict…………………………………………………… 0.18500 0.18500 Total Overlapping Tax Rate……………………………………….……………$ 2.08810 $ 2.24480

Cinco MUD No. 9 (a)…………………………………………………………… - $ 0.39500 Cinco MUD No. 8 (a)…………………………………………………………… 0.62000 -

Total Tax Rate……………………………………………………………………$ 2.70810 $ 2.63980 ______(a) Represents the highest total tax rate of the Participants and includes the Contract Tax. See “APPENDIX A.”

TAX DATA Contract Tax The District, in its capacity as the Master District, has the statutory authority and the authorization of each Participant’s voters to issue Contract Revenue Bonds. Each Participant’s pro rata share of the debt service requirements on the Contract Revenue Bonds shall be determined by dividing each Participant’s gross certified appraised value by the total of the Service Area’s gross certified appraised valuation. Calculation of the Contract Payment is based upon “gross” certified assessed value and does not make allowances for any exemptions granted by the Participants; however, allowances are made for exemptions provided under State law that do not require action. See “TAXING PROCEDURES.” The Master District Contract obligates each Participant to pay its pro rata share of debt service requirements on the Contract Revenue Bonds from the proceeds of an annual unlimited Contract Tax, from revenues derived from the operation of its water distribution and wastewater collection system, or from any other legally available funds. The debt service requirement shall include principal, interest and redemption requirements on the Contract Revenue Bonds, paying agent/registrar fees, and all amounts necessary to establish and maintain funds established under the Bond Resolution or the Indenture.

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Tax Roll Information The Service Area’s gross appraised value as of January 1 of each year will be used by the Master District to establish the annual Contract Payment. See “TAXING PROCEDURES—Valuation of Property for Taxation.” The following represents the 2015 through 2018 Certified Gross Assessed Valuations and the 2019 Gross Assessed Valuation of the Service Area, including $8,051,130 of uncertified gross value in Fort Bend County and $30,725,220 of uncertified value in Harris County, which is subject to protest, review and downward revision prior to certification). Historical tax roll information concerning each Participant is included in “APPENDIX A” herein.

Tax Year MUD 2019 2018 (a) 2017 (a) 2016 2015

1$ 197,480,109 $ 204,381,625 $ 204,030,218 $ 201,253,712 $ 200,310,899 2 589,880,154 592,120,064 593,508,156 594,258,720 578,459,628 3 217,989,179 215,476,730 215,180,918 212,406,919 201,726,268 5 246,212,236 212,874,388 250,079,955 255,117,760 243,237,329 6 301,222,136 253,377,071 320,008,609 314,952,692 303,973,255 7 486,813,689 362,306,063 487,849,618 486,726,007 469,688,657 8 315,739,877 217,393,299 311,768,562 295,014,778 279,365,024 9 402,465,998 385,424,543 385,501,342 378,064,229 358,432,612 10 305,134,070 293,250,316 288,163,587 294,346,893 274,880,400 12 423,186,121 404,952,176 388,363,204 374,021,309 336,845,937 14 625,584,002 634,467,410 627,389,469 627,303,205 601,650,375

4,111,707,571 3,776,023,685 4,071,843,638 4,033,466,224 3,848,570,384

(a) See “INVESTMENT CONSIDERATIONS—Recent Extreme Weather Events; Hurricane Harvey—Environmental Regulation and —Future Debt.”

Historical Contract Tax Rates and Collections The table below represents the amount of Contract Tax levied and collected for tax years 2015 through 2019 by each Participant. The Participants pay Contract Payments to the Master District each March 1 and September 1 in equal amounts. The Contract Payment calculations for each Participant are based upon each Participant’s “gross” certified assessed value, as defined in the Master District Contract, and does not make allowance for any exemptions granted by the Participant. See “MASTER DISTRICT CONTRACT.” The total levy and collection rates for each Cinco MUD are shown in “APPENDIX A— Financial Information Regarding the Participants.”

2019 (a) 2018 (a) 2017 (a) 2016 (a) 2015 (a) Contract Contract Contract Contract Contract Tax%(b)Tax%Tax%Tax%Tax% Cinco M UD Rate Collected Rate Collected Rate Collected Rate Collected Rate Collected

1$ 0.160 0.00%$ 0.175 100.00%$ 0.170 100.00%$ 0.180 100.00%$ 0.200 100.00% 2 0.170 0.00% 0.190 100.00% 0.160 100.00% 0.090 100.00% 0.215 100.00% 3 0.160 0.00% 0.180 100.00% 0.180 100.00% 0.195 100.00% 0.190 100.00% 5 0.210 0.00% 0.200 100.00% 0.210 100.00% 0.210 100.00% 0.220 100.00% 6 0.150 0.00% 0.205 100.00% 0.170 100.00% 0.185 100.00% 0.210 100.00% 7 0.185 0.00% 0.180 100.00% 0.170 100.00% 0.195 100.00% 0.200 100.00% 8 0.160 0.00% 0.170 100.00% 0.180 100.00% 0.180 100.00% 0.200 100.00% 9 0.170 0.00% 0.175 100.00% 0.175 100.00% 0.185 100.00% 0.195 100.00% 10 0.160 0.00% 0.175 100.00% 0.170 100.00% 0.180 100.00% 0.195 100.00% 12 0.130 0.00% 0.130 100.00% 0.170 100.00% 0.170 100.00% 0.190 100.00% 14 0.170 0.00% 0.195 100.00% 0.180 100.00% 0.205 100.00% 0.220 100.00% ___ (a) Does not include the Participant’s debt service or maintenance tax rate or the overlapping tax rates of Fort Bend County, Harris County, Katy Independent School District or Willow Fork. See “TAX DATA—Overlapping Taxes.” (b) The Participants pay Contract Payments to the Master District in equal payments due each March 1 and September 1. The first 2019 Contract Payment is due March 1, 2020.

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Tax Adequacy for Debt Service The Contract Tax rate calculations set forth below are presented to indicate the tax rates per $100 assessed valuation which would be required to meet average annual and maximum annual debt service requirements if no growth in the Service Area’s tax base occurred beyond the 2019 Gross Assessed Valuation of $4,111,707,571 (includes $8,051,130 of uncertified value in Fort Bend County and $30,725,220 of uncertified value in Harris County which is subject to protest, review and downward revision prior to certification). The calculations contained in the following table merely represent the tax rates required to pay principal and interest on the Bonds, the Outstanding Bonds and the Series 2019 Refunding Bonds when due, assuming no further increase or any decrease in gross values in the Service Area, collection of ninety-five percent (95%) of taxes levied, the sale of no additional bonds by the Master District, and no other funds available for the payment of debt service. See “FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED)—Contract Revenue Debt Service Requirements.” Average Annual Debt Service Requirement (2020-2046)...... $3,381,199 $0.09 Tax Rate on 2019 Gross Assessed Valuation ...... $3,515,510 Maximum Annual Debt Service Requirement (2020) ...... $7,788,326 $0.20 Tax Rate on 2019 Gross Assessed Valuation ...... $7,812,244 Tax adequacy calculations for each of the Participants, including tax rate requirements on each Participant’s outstanding unlimited tax bonds, if any, and each Participant’s tax rate requirements to pay the pro rata share of the Contract Revenue Bonds are included as “APPENDIX A” herein. No representation or suggestion is made that the uncertified value in Fort Bend County or the preliminary value in Harris County will not be adjusted downward prior to certification, and no person should rely upon such amounts or their inclusion herein as assurance of their attainment. See “TAXING PROCEDURES.”

TAXING PROCEDURES

Authority to Levy Taxes Each Participant, including the Master District in its capacity as a Participant, is authorized to levy an annual ad valorem tax, without legal limitation as to rate or amount, on all taxable property within its boundaries in an amount sufficient to pay the principal of and interest on the outstanding bonds issued by such Participant, to make Contract Payments to the Master District, and to pay the expenses of assessing and collecting such taxes. Under Texas law, the board of directors of each Participant may also levy and collect an annual ad valorem tax for the operation and maintenance of such Participant and its water and wastewater system See “INVESTMENT CONSIDERATIONS—Future Debt.” and “TAX DATA— Contract Tax.” Property Tax Code and County-Wide Appraisal District Title I of the Texas Tax Code (the “Property Tax Code”) specifies the taxing procedures of all political subdivisions of the State of Texas, including the Participants. Provisions of the Property Tax Code are complex and are not fully summarized here. The Texas Tax Code (the "Property Tax Code") requires, among other matters, county-wide appraisal and equalization of taxable property values and establishes in each county of the State of Texas a single appraisal district with the responsibility for recording and appraising property for all taxing units within a county and a single appraisal review board with the responsibility for reviewing and equalizing the values established by the appraisal district. Portions of the Service Area lie within Harris County; however, no single Cinco MUD lies wholly within Harris County. The Harris County Appraisal District (“HCAD”) has the responsibility for appraising property in the Service Area located within Harris County and the Fort Bend County Central Appraisal District (“FBCAD”) has the responsibility for appraising property in the Service Area located within Fort Bend County. The HCAD and the FBCAD are collectively referred to as the “Appraisal Districts”. Such appraisal values are subject to review and change by the Harris County Appraisal Review Board or the Fort Bend County Appraisal Review Board, as applicable. Under certain circumstances, taxpayers and taxing units (such as the District) may appeal the orders of said appraisal review boards by filing a petition for review in State district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Absent any such appeal, the appraisal roll, as prepared by either the HCAD or the FBCAD, as applicable, and approved by the applicable appraisal review board, must be used by each taxing jurisdiction in establishing its tax roll and rate. The Participants are eligible, along with all other conservation and reclamation district within Harris County and Fort Bend County, to participate in the nomination of and vote for a member of the Board of Directors of each county's respective appraisal district.

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Property Subject to Taxation by the Participants Except for certain exemptions provided by Texas law, all real property, tangible personal property held or used for the production of income, mobile homes and certain categories of intangible personal property with a tax situs in a Participant are subject to taxation by a Participant. Principal categories of exempt property include, but are not limited to: property owned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies, and personal effects; certain goods, wares and merchandise in transit; farm products owned by the producer; certain property of charitable organizations, youth development associations, religious organizations, and qualified schools; designated historical sites; and most individually owned automobiles. In addition, a Participant may by its own action exempt residential homesteads of persons sixty-five (65) years of age or older and of certain disabled persons to the extent deemed advisable by the Board. A Participant may be required to call such an election upon petition by twenty percent (20%) of the number of qualified voters who voted in the previous election. A Participant is authorized by statute to disregard exemptions for the disabled and elderly if granting the exemption would impair a Participant’s obligation to pay tax supported debt incurred prior to adoption of the exemption by a Participant. Furthermore, a Participant must grant exemptions to disabled veterans or certain surviving dependents of disabled veterans, if requested, of between $3,000 and $12,000 of taxable valuation depending upon the disability rating of the veteran claiming the exemption, and qualifying surviving spouses of persons 65 years of age or older will be entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse. A veteran who receives a disability rating of 100% is entitled to an exemption for the full amount of the veteran’s residential homestead. Additionally, subject to certain conditions, the surviving spouse of a disabled veteran who is entitled to an exemption for the full value of the veteran’s residence homestead is also entitled to an exemption from taxation of the total appraised value of the same property to which the disabled veteran’s exemption applied. A partially disabled veteran or certain surviving spouses of partially disabled veterans are entitled to an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equal to the partially disabled veteran’s disability rating if (i) the residence homestead was donated by a charitable organization at no cost to the disabled veteran, or effective January 1, 2018, (ii) the residence was donated by a charitable organization at some cost to the disabled veteran, if such cost is less than or equal to fifty percent (50%) of the total good faith estimate of the market value of the residence as of the date the donation is made. Also, the surviving spouse of a member of the armed forced who was killed in action is, subject to certain conditions, entitled to an exemption of the total appraised value of the surviving spouse’s residence homestead, and subject to certain conditions, an exemption up to the same amount may be transferred to a subsequent residence homestead spouse. The surviving spouse of a first responder who was killed or fatally injured in the line of duty is, subject to certain conditions, also entitled to an exemption of the total appraised value of the surviving spouse’s residence homestead, and, subject to certain conditions, an exemption up to the same amount may be transferred to a subsequent residence homestead of the surviving spouse. Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each political subdivision in the State of Texas to exempt up to twenty percent (20%) of the assessed value of residential homesteads from ad valorem taxation. Qualifying surviving spouses of persons aged 65 years or older are entitled to receive a resident homestead exemption equal to the exemption received by the deceased spouse. Where ad valorem taxes have previously been pledged for the payment of debt, the governing body of a political subdivision may continue to levy and collect taxes against the exempt value of the homesteads until the debt is discharged, if the cessation of the levy would impair the obligations of the contract by which the debt was created. The adoption of a homestead exemption may be considered each year, but must be adopted before July 1. See “TAX DATA.” Freeport Goods Exemption: A "Freeport Exemption" applies to goods, wares, ores, and merchandise other than oil, gas, and petroleum products (defined as liquid and gaseous materials immediately derived from refining petroleum or natural gas), and to aircraft or repair parts used by a certified air carrier acquired in or imported into Texas which are destined to be forwarded outside of Texas and which are detained in Texas for assembling, storing, manufacturing, processing or fabricating for less than 175 days. Although certain taxing units may take official action to tax such property in transit and negate such exemption, a Participant does not have such an option. A "Goods-in-Transit" Exemption is applicable to the same categories of tangible personal property which are covered by the Freeport Exemption, if, for tax year 2011 and prior applicable years, such property is acquired in or imported into Texas for assembling, storing, manufacturing, processing, or fabricating purposes and is subsequently forwarded to another location inside or outside of Texas not later than 175 days after acquisition or importation, and the location where said property is detained during that period is not directly or indirectly owned or under the control of the property owner. For tax year 2012 and subsequent years, such Goods-in-Transit Exemption includes tangible personal property acquired in or imported into Texas for storage purposes only if such property is stored under a contract of bailment by a public warehouse operator at one or more public warehouse facilities in Texas that are not in any way owned or controlled by the owner of such property for the account of the person who acquired or imported such property. A property owner who receives the Goods-in-Transit Exemption is not eligible to receive the Freeport Exemption for the same property. Local taxing units such as a Participant may, by official action and after public hearing, tax goods-in-transit personal property. A taxing unit must exercise its option to tax goods- in-transit property before January 1 of the first tax year in which it proposes to tax the property at the time and in the manner prescribed by applicable law. The District and the other Participants have taken official action to allow taxation of all such goods-in-transit personal property for all prior and subsequent years.

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Tax Abatement: Fort Bend County (or Harris County in the case of approximately 472 acres of the Service Area located in Harris County) may designate all or part of the area within the Service Area that is within their respective jurisdiction as a reinvestment zone. The City of Houston also may designate property within its boundaries or its extraterritorial jurisdiction (“ETJ”) as a reinvestment zone. Thereafter, Fort Bend County, (or Harris County in the case of the small portion of the Service Area located in Harris County), the Participants, and the City of Houston (after annexation of a Participant(s)) at the option and discretion of each entity, may enter into tax abatement agreements with owners of property within the zone. Prior to entering into a tax abatement agreement, each entity must adopt guidelines and criteria for establishing tax abatement, which each entity will follow in granting tax abatement to owners of property. The tax abatement agreements may exempt from ad valorem taxation by each of the applicable taxing jurisdictions, including any Participant participating in the abatement agreement, for a period of up to ten (10) years, all or any part of any increase in the appraised valuation of property covered by the agreement over its appraised valuation in the year in which the agreement is executed, on the condition that the property owner make specified improvements or repairs to the property in conformity with the terms of the tax abatement. Each taxing jurisdiction has discretion to determine terms for its tax abatement agreements without regard to the terms approved by the other taxing jurisdictions. Valuation of Property for Taxation Generally, property in the Service Area must be appraised by the applicable Appraisal District at market value as of January 1 of each year. Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used by each Participant in establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based on one hundred percent (100%) of market value, as such is defined in the Property Tax Code. Nevertheless, certain land may be appraised at less than market value under the Property Tax Code. In November 1997, Texas voters approved a constitutional amendment to limit increases in the appraised value of residence homesteads to ten percent (10%) annually regardless of the market value of the property. The Property Tax Code permits land designated for agricultural use, open space or timberland to be appraised at its value based on the land’s capacity to produce agricultural or timber products rather than at its fair market value. The Property Tax Code permits under certain circumstances that residential real property inventory held by a person in the trade or business be valued at the price all such property would bring if sold as a unit to a purchaser who would continue the business. Provisions of the Property Tax Code are complex and are not fully summarized here. Landowners wishing to avail themselves of the agricultural use, open space or timberland designation or residential real property inventory designation must apply for the designation and the appraiser is required by the Property Tax Code to act on each claimant’s right to the designation individually. A claimant may waive the special valuation as to taxation by some political subdivisions while claiming it as to another. If a claimant receives the agricultural use designation and later loses it by changing the use of the property or selling it to an unqualified owner, the District can collect taxes based on the new use, including taxes for the previous three (3) years for agricultural use and taxes for the previous five (5) years for open space land and timberland. The Property Tax Code requires the Appraisal Districts to implement a plan for periodic reappraisal of property to update appraisal values. The plan must provide for appraisal of all real property in such Appraisal District at least once every three (3) years. It is not known what frequency of reappraisal will be utilized by the Appraisal Districts or whether reappraisals will be conducted on a zone or county-wide basis. The Participant, however, at its expense has the right to obtain from the Appraisal Districts a current estimate of appraised values within the Participant or an estimate of any new property or improvements within the Participant. While such current estimate of appraised values may serve to indicate the rate and extent of growth of taxable values within the Participant, it cannot be used for establishing a tax rate within the Participant until such time as the applicable Appraisal District chooses formally to include such values on its appraisal roll. Participant and Taxpayer Remedies Under certain circumstances taxpayers and taxing units (such as the Participants) may appeal the orders of the Appraisal Review Board by filing a timely petition for review in State district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Additionally, taxing units may bring suit against the Appraisal District to compel compliance with the Property Tax Code. The Property Tax Code sets forth notice and hearing procedures for certain tax rate increases by the Participants and provides for taxpayer referenda which could result in the repeal of certain tax increases. The Property Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll.

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Levy and Collection of Taxes Each Participant is responsible for the levy and collection of its taxes unless it elects to transfer such functions to another governmental entity. The rate of taxation is set by the Board of Directors of each Participant, after the legally required notice has been given to owners of property within such Participant, based upon: a) the valuation of property within such Participant as of the preceding January 1, and b) the amount required to be raised for debt service, maintenance purposes, and authorized contractual obligations. Taxes are due October 1, or when billed, whichever comes later, and become delinquent if not paid before February 1 of the year following the year in which imposed. A delinquent tax incurs a penalty of six percent (6%) of the amount of the tax for the first calendar month it is delinquent, plus one percent (1%) for each additional month or portion of a month the tax remains unpaid prior to July 1 of the year in which it becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes delinquent, the tax incurs a total penalty of twelve percent (12%) regardless of the number of months the tax has been delinquent and incurs an additional penalty for collection costs of an amount established by the Participant and a delinquent tax attorney. A delinquent tax on personal property incurs an additional penalty, in an amount established by the Participant and a delinquent tax attorney, 60 days after the date the taxes become delinquent. The delinquent tax accrues interest at a rate of one percent (1%) for each month or portion of a month it remains unpaid. The Property Tax Code makes provisions for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances which, at the option of the Participant, which may be rejected by taxing units. Each Participant’s tax collector is required to enter into an installment payment agreement with any person who is delinquent on the payment of tax on a residence homestead for payment of tax, penalties and interest, if the person requests an installment agreement and has not entered into an installment agreement with the collector in the preceding 24 months. The installment agreement must provide for payments to be made in monthly installments and must extend for a period of at least 12 months and no more than 36 months. Additionally, the owner of a residential homestead property who is (i) sixty-five (65) years of age or older, (ii) disabled, or (iii) a disabled veteran, is entitled by law to pay current taxes on a residential homestead in installments without penalty or to defer the payment of taxes during the time of ownership. In the instance of tax deferral, a tax lien remains on the property and interest continue to accrue during the period of deferral. Tax Payment Installments

Certain qualified taxpayers, including owners of residential homesteads, located within a natural disaster area and whose property has been damaged as a direct result of the disaster, are entitled to enter into a tax payment installment agreement with a taxing jurisdiction such as the District or any Participant if the tax payer pays at least one-fourth of the tax bill imposed on the property by the delinquency date. The remaining taxes may be paid without penalty or interest in three equal installments within six months of the delinquency date. Additional Penalties

Each Participant has contracted with a delinquent tax attorney to collect certain delinquent taxes. In connection with that contract, each Participant can establish an additional penalty of twenty percent (20%) of the tax to defray the costs of collection. This 20% penalty applies to taxes that either: (1) become delinquent on or after February 1 of a year, but not later than May 1 of that year, and that remain delinquent on April 1 (for personal property) and July 15 (for real property) of the year in which they become delinquent or (2) become delinquent on or after June 1, pursuant to the Texas Tax Code. Rollback of Operation and Maintenance Tax Rate Under current law, the qualified voters of each Participant have the right to petition for a rollback of such Participant’s operation and maintenance tax rate only if the total tax bill on the average residence homestead increases by more than eight percent. If a rollback election is called and passes, the rollback tax rate is the current year’s debt service and contract tax rates plus 1.08 times the previous year’s operation and maintenance tax rate. Thus, debt service and contract tax rates cannot be changed by a rollback election. During the 86th Regular Legislative Session, Senate Bill 2 ("SB 2") was passed and signed by the Governor, with an effective date of January 1, 2020, and the provisions described herein are effective beginning with the 2020 tax year. See “SELECTED FINANCIAL INFORMATION” for a description of each Participant's current total tax rate. Debt service and contract tax rates cannot be reduced by a rollback election held within any of the districts described below. SB 2 classifies districts differently based on the current operation and maintenance tax rate or on the percentage of build-out that the district has completed. Districts that have adopted an operation and maintenance tax rate for the current year that is 2.5 cents or less per $100 of taxable value are classified as "Special Taxing Units." Districts that have financed, completed, and issued bonds to pay for all improvements and facilities necessary to serve at least 95% of the projected build- out of the district are classified as "Developed Districts." Districts that do not meet either of the classifications previously discussed can be classified herein as "Developing Districts." The impact each classification has on the ability of a district to increase its maintenance and operations tax rate pursuant to SB 2 is described for each classification below. Special Taxing Units: Special Taxing Units that adopt a total tax rate that would impose more than1.08 times the amount of the total tax imposed by such district in the preceding tax year on a residence homestead appraised at the average appraised value of a residence homestead, subject to certain homestead exemptions, are required to hold an election within the district to determine whether to approve the adopted total tax rate. If the adopted total tax rate is not approved at the election, the total tax rate for a Special Taxing Unit is the current year's debt service and contract tax rate plus 1.08 times the previous year's operation and maintenance tax rate. 40

Developed Districts: Developed Districts that adopt a total tax rate that would impose more than1.035 times the amount of the total tax imposed by the district in the preceding tax year on a residence homestead appraised at the average appraised value of a residence homestead, subject to certain homestead exemptions for the preceding tax year, plus any unused increment rates, as calculated and described in Section 26.013 of the Tax Code, are required to hold an election within the district to determine whether to approve the adopted total tax rate. If the adopted total tax rate is not approved at the election, the total tax rate for a Developed District is the current year's debt service and contract tax rate plus 1.035 times the previous year's operation and maintenance tax rate plus any unused increment rates. In addition, if any part of a Developed District lies within an area declared for disaster by the Governor of Texas or President of the United States, alternative procedures and rate limitations may apply for a temporary period. If a district qualifies as both a Special Taxing Unit and a Developed District, the district will be subject to the operation and maintenance tax threshold applicable to Special Taxing Units. Developing Districts: Districts that do not meet the classification of a Special Taxing Unit or a Developed District can be classified as Developing Districts. The qualified voters of these districts, upon the Developing District's adoption of a total tax rate that would impose more than 1.08 times the amount of the total tax rate imposed by such district in the preceding tax year on a residence homestead appraised at the average appraised value of a residence homestead, subject to certain homestead exemptions, are authorized to petition for an election to reduce the operation and maintenance tax rate. If an election is called and passes, the total tax rate for Developing Districts is the current year's debt service and contract tax rate plus 1.08 times the previous year's operation and maintenance tax rate. The Participants: A determination as to each Participant’s status as a Special Taxing Unit, Developed District or Developing District will be made on an annual basis, at the time each Participant sets its tax rate, beginning with the 2020 tax rate. The District cannot give any assurances as to what the classification of any Participant will be at any point in time or whether the Participant's future tax rates will result in a total tax rate that will reclassify such Participant into a new classification and new election calculation. Participant’s Rights in the Event of Tax Delinquencies Taxes levied by each Participant are a personal obligation of the owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and each local taxing unit, including each Participant, having power to tax the property. The Participant’s tax lien is on a parity with tax liens of such other taxing units. See “TAX DATA—Overlapping Taxes.” A tax lien on real property takes priority over the claim of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien; however, whether a lien of the United States is on a parity with or takes priority over a tax lien of a district is determined by applicable federal law. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalty, and interest. At any time after taxes on property become delinquent, a district may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both, subject to the restrictions on residential homesteads described above under “Levy and Collection of Taxes”. In filing a suit to foreclose a tax lien on real property, a district must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale price, and by taxpayer redemption rights. A taxpayer may redeem commercial property within six months and all other types of property within two (2) years after the purchaser’s deed issued at the foreclosure sale is filed in the county records. See “INVESTMENT CONSIDERATIONS—General—Tax Collection Limitations and Foreclosure Remedies.”

The Effect of FIRREA on Tax Collections of the District

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) contains certain provisions which affect the time for protesting property valuations, the fixing of tax liens and the collection of penalties and interest on delinquent taxes on real property owned by the Federal Deposit Insurance Corporation (“FDIC”) when the FDIC is acting as the conservator or receiver of an insolvent financial institution. Under FIRREA, real property held by the FDIC is still subject to ad valorem taxation, but such act states (i) that no real property of the FDIC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary liens shall attach to such property, (ii) the FDIC shall not be liable for any penalties, interest, or fines, including those arising from the failure to pay any real or personal property tax when due, and (iii) notwithstanding failure of a person to challenge an appraisal in accordance with state law, such value shall be determined as of the period for which such tax is imposed. To the extent that the FDIC attempts to enforce the same, these provisions may affect the timeliness of collection of taxes on property, if any, owned by the FDIC in the District and may prevent the collection of penalties and interest on such taxes or may affect the valuation of such property.

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INVESTMENT CONSIDERATIONS General The Bonds are obligations solely of the Master District and are not obligations of the State of Texas, Fort Bend County, Harris County, the City of Houston, any of the Participants except the Master District, or any entity other than the Master District. The Bonds are payable solely from and to the extent of the Contract Payments received by the Master District from the Participants. The obligations of the Participants to make Contract Payments are several, not joint, obligations pro-rated among the Participants based upon the proportion of the gross appraised valuation of property within their respective boundaries to the total gross appraised valuation of the Service Area as described herein. No Participant is obligated to pay the Contract Payments allocated to any other Participant. The security for payment of the principal of and interest on the Bonds by the Master District, therefore, depends on the ability of each Participant to collect annual ad valorem taxes (without legal limit as to rate or amount) levied on taxable property within its boundaries sufficient to pay both debt service requirements on its direct unlimited tax bonds, if any, and to make its Contract Payments. Taxes collected by each Participant are allocated between Contract Payments which are the source of payment of the Bonds and debt service on such Participant’s direct unlimited tax bonds without priority of taxes levied for one purpose over taxes levied for any other purpose. The collection by each Participant of delinquent taxes owed to it may be a costly and lengthy process. See “Registered Owners’ Remedies” below and “THE BONDS—Source and Security of Payment.”

Recent Extreme Weather Events; Hurricane Harvey

The greater Houston area, including Fort Bend County, is subject to occasional severe weather events, including tropical storms and hurricanes. If the District were to sustain damage to its facilities requiring substantial repair or replacement, or if substantial damage were to occur to taxable property within the District as a result of such a weather event, the investment security of the Bonds could be adversely affected. The greater Houston area has experienced four storms exceeding a 0.2% probability (i.e. “500‐year flood” events) since 2015, including Hurricane Harvey, which made landfall along the Texas Gulf Coast on August 25, 2017, and brought historic levels of rainfall during the successive four days.

The Master District (as defined herein) provides water and sewer service to approximately 5,372 acres defined herein as the “Service Area.” According to Inframark Water & Infrastructure Services (the “Operator”), the operator for the Master District Facilities (as herein defined), a portion of the Master District’s wastewater system sustained significant damage from Hurricane Harvey with wastewater service restored within approximately 7 days after floodwaters receded. The Master District had no disruption of potable water service to customers in its Service Area, during or after the storm. However, approximately 2,226 homes out of approximately 10,000 homes within the Service Area experienced flooding or other material damage. A portion of the Service Area is in the Barker Reservoir pool and subject to inundation by the U.S. Army Corps of Engineers at its sole discretion. It is estimated that at least fifty percent (50%) of homes affected in the Service Area flooded during the Hurricane Harvey event as a result of the U.S. Army Corps of Engineers policies for release of water from Barker Reservoir. Some structures also had sewage backup due to flooding at the District’s South Wastewater Treatment Plant. The Service Area taxable value temporarily decreased as a result of damage resulting from flooding, though increased to a taxable value above 2017 levels by 2019. See “TAX DATA—Tax Roll Information” for historical values in the Service Area and Harvey related decreases from 2017 to 2018.

If a future weather event significantly damaged all or part of the improvements within the District, the assessed value of property within the Service Area could be substantially reduced, which could result in a decrease in tax revenues and/or necessitate an increase in the Participant’s tax rate. Further, there can be no assurance that a casualty loss to taxable property within the Service Area will be covered by insurance (or that property owners will even carry flood or other casualty insurance), that any insurance company will fulfill its obligation to provide insurance proceeds, or that insurance proceeds will be used to rebuild or repair any damaged improvements within the Service Area. Even if insurance proceeds are available and improvements are rebuilt, there could be a lengthy period in which assessed values within the Service Area could be adversely affected. See “INVESTMENT CONSIDERATIONS—Hurricane Harvey.”

Specific Flood Type Risks

Ponding (or Pluvial) Flood: Ponding, or pluvial, flooding occurs when heavy rainfall creates a flood event independent of an overflowing water body, typically in relatively flat areas. Intense rainfall can exceed the drainage capacity of a drainage system, which may result in water within the drainage system becoming trapped and diverted onto streets and nearby property until it is able to reach a natural outlet. Ponding can also occur in a flood pool upstream or behind a dam, levee or reservoir.

Riverine (or Fluvial) Flood: Riverine, or fluvial, flooding occurs when water levels rise over the top of river, bayou or channel banks due to excessive rain from tropical systems making landfall and/or persistent thunderstorms over the same area for extended periods of time. The damage from a riverine flood can be widespread. The overflow can affect smaller rivers and streams downstream, or may sheet-flow over land. Flash flooding is a type of riverine flood that is characterized by an intense, high velocity torrent of water that occurs in an existing river channel with little to no notice. Flash flooding can also occur even if no rain has fallen, for instance, after a levee, dam or reservoir has failed or experienced an uncontrolled release, or after a sudden release of water by a debris or ice jam. In addition, planned or unplanned controlled releases from a dam, levee or reservoir also may result in flooding in areas adjacent to rivers, bayous or drainage systems downstream.

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Overlapping Debt and Tax Rates The Master District anticipates taxable property values of the Service Area will maintain sufficient value to meet its debt service requirements on the Bonds and the Outstanding Bonds without increases in the Contract Tax above the 2013 rates levied by each Participant; however, the District can make no representation that the taxable property values in the Service Area will maintain a value sufficient to support the aforementioned Contract Tax or to justify continued payment of taxes by property owners. See “FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED),” “TAX DATA—Tax Adequacy for Debt Service,” and “APPENDIX A.” The Service Area property owners are responsible for the payment of ad valorem taxes levied by each Participant for payment of Contract Payments. In addition, Service Area property owners are responsible for the payment of ad valorem taxes levied by each Participant for the payment of debt service on unlimited tax bonds issued by each Participant. “APPENDIX A” herein includes information related to each Participant’s indebtedness and taxation requirements. Except for approximately 78 acres, the Service Area lies within Willow Fork, and is subject to taxation by Willow Fork. Willow Fork is authorized to issue a maximum of $76,490,000 principal amount in unlimited tax bonds for drainage purposes and $29,000,000 principal amount of unlimited tax park bonds without additional voter approval of which $18,645,000 is authorized but unissued for drainage purposes and $3,440,000 is authorized but unissued for parks. Willow Fork currently has $39,295,000 principal amount of unlimited tax bonds outstanding. The Master District, Willow Fork and each Participant may each independently issue additional debt which may change the projected and actual tax rates in the future. There can be no assurances that composite tax rates imposed by taxing units on property situated in the Participants will be competitive with the tax rates of competing projects in the Harris/Fort Bend County region. To the extent that such composite tax rates are not competitive with competing developments, the growth of property tax values in the Service Area and the investment quality or security of the Bonds could be adversely affected. In addition, property located within the Service Area is subject to taxation by various other governmental entities. See “TAX DATA—Overlapping Taxes.” Environmental Regulations Wastewater treatment, water supply, storm sewer facilities and construction activities within the District are subject to complex environmental laws and regulations at the federal, state and local levels that may require or prohibit certain activities that affect the environment, such as:  Requiring permits for construction and operation of water wells, wastewater treatment and other facilities;  Restricting the manner in which wastes are treated and released into the air, water and soils;  Restricting or regulating the use of wetlands or other properties; or  Requiring remedial action to prevent or mitigate pollution.

Sanctions against a municipal utility district or other type of special purpose district for failure to comply with environmental laws and regulations may include a variety of civil and criminal enforcement measures, including assessment of monetary penalties, imposition of remedial requirements and issuance of injunctions to ensure future compliance. Environmental laws and compliance with environmental laws and regulations can increase the cost of planning, designing, constructing and operating water production and wastewater treatment facilities. Environmental laws can also inhibit growth and development within the District. Further, changes in regulations occur frequently, and any changes that result in more stringent and costly requirements could materially impact the District.

Air Quality Issues: Air quality control measures required by the United States Environmental Protection Agency (the “EPA”) and the Texas Commission on Environmental Quality (the “TCEQ”) may impact new industrial, commercial and residential development in the Houston area. Under the Clean Air Act (“CAA”) Amendments of 1990, the eight-county Houston-Galveston-Brazoria area (“HGB Area”)—Harris, Galveston, Brazoria, Chambers, Fort Bend, Waller, Montgomery and Liberty Counties—has been designated a nonattainment area under three separate federal ozone standards: the one-hour (124 parts per billion (“ppb”)) and eight-hour (84 ppb) standards promulgated by the EPA in 1997 (the “1997 Ozone Standards”); the tighter, eight-hour ozone standard of 75 ppb promulgated by the EPA in 2008 (the “2008 Ozone Standard”), and the EPA’s most-recent promulgation of an even lower, 70 ppb eight-hour ozone standard in 2015 (the “2015 Ozone Standard”). While the State of Texas has been able to demonstrate steady progress and improvements in air quality in the HGB Area, the HGB Area remains subject to CAA nonattainment requirements.

The HGB Area is currently designated as a severe ozone nonattainment area under the 1997 Ozone Standards. While the EPA has revoked the 1997 Ozone Standards, the EPA historically has not formally redesignated nonattainment areas for a revoked standard. As a result, the HGB Area remained subject to continuing severe nonattainment area “anti-backsliding” requirements, despite the fact that HGB Area air quality has been attaining the 1997 Ozone Standards since 2014. In late 2015, the EPA approved the TCEQ’s “redesignation substitute” for the HGB Area under the revoked 1997 Ozone Standards, leaving the HGB Area subject only to the nonattainment area requirements under the 2008 Ozone Standard (and later, the 2015 Ozone Standard).

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In February 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion in South Coast Air Quality Management District v. EPA, 882 F.3d 1138 (D.C. Cir. 2018) vacating the EPA redesignation substitute rule that provided the basis for the EPA’s decision to eliminate the anti-backsliding requirements that had applied in the HGB Area under the 1997 Ozone Standard. The court has not responded to the EPA’s April 2018 request for rehearing of the case. To address the uncertainty created by the South Coast court’s ruling, the TCEQ has developed a formal request that the HGB Area be redesignated to attainment under the 1997 Ozone Standards. The TCEQ Commissioners approved publication of a proposed HGB Area redesignation request under the 1997 Ozone Standards on September 5, 2018.

The HGB Area is currently designated as a “moderate” nonattainment area under the 2008 Ozone Standard, with an attainment deadline of July 20, 2018. If the EPA ultimately determines that the HGB Area has failed to meet the attainment deadline based on the relevant data, the area is subject to reclassification to a nonattainment classification that provides for more stringent controls on emissions from the industrial sector. In addition, the EPA may impose a moratorium on the awarding of federal highway construction grants and other federal grants for certain public works construction projects if it finds that an area fails to demonstrate progress in reducing ozone levels.

The HGB Area is currently designated as a “marginal” nonattainment area under the 2015 Ozone Standard, with an attainment deadline of August 3, 2021. For purposes of the 2015 Ozone Standard, the HGB Area consists of only six counties: Brazoria, Chambers, Fort Bend, Galveston, Harris, and Montgomery Counties.

In order to demonstrate progress toward attainment of the EPA’s ozone standards, the TCEQ has established a state implementation plan (“SIP”) for the HGB Area setting emission control requirements, some of which regulate the inspection and use of automobiles. These types of measures could impact how people travel, what distances people are willing to travel, where people choose to live and work, and what jobs are available in the HGB Area. These SIP requirements can negatively impact business due to the additional permitting/regulatory constraints that accompany this designation and because of the community stigma associated with a nonattainment designation. It is possible that additional controls will be necessary to allow the HGB Area to reach attainment with the ozone standards by the EPA’s attainment deadlines. These additional controls could have a negative impact on the HGB Area’s economic growth and development.

Water Supply & Discharge Issues: Water supply and discharge regulations that municipal utility districts, including the District, may be required to comply with involve: (1) groundwater well permitting and surface water appropriation; (2) public water supply systems; (3) wastewater discharges from treatment facilities; (4) storm water discharges; and (5) wetlands dredge and fill activities. Each of these is addressed below:

Certain governmental entities regulate groundwater usage in the HGB Area. A municipal utility district or other type of special purpose district that (i) is located within the boundaries of such an entity that regulates groundwater usage, and (ii) relies on local groundwater as a source of water supply, may be subject to requirements and restrictions on the drilling of water wells and/or the production of groundwater that could affect both the engineering and economic feasibility of district water supply projects.

Pursuant to the federal Safe Drinking Water Act (“SDWA”) and the EPA’s National Primary Drinking Water Regulations (“NPDWRs”), which are implemented by the TCEQ’s Water Supply Division, a municipal utility district’s provision of water for human consumption is subject to extensive regulation as a public water system. Municipal utility districts must generally provide treated water that meets the primary and secondary drinking water quality standards adopted by the TCEQ, the applicable disinfectant residual and inactivation standards, and the other regulatory action levels established under the agency’s rules. The EPA has established NPDWRs for more than ninety (90) contaminants and has identified and listed other contaminants which may require national drinking water regulation in the future.

Texas Pollutant Discharge Elimination System (“TPDES”) permits set limits on the type and quantity of discharge, in accordance with state and federal laws and regulations. The TCEQ reissued the TPDES Construction General Permit (TXR150000), with an effective date of March 5, 2018, which is a general permit authorizing the discharge of stormwater runoff associated with small and large construction sites and certain nonstormwater discharges into surface water in the state. It has a 5-year permit term, and is then subject to renewal. Moreover, the Clean Water Act (“CWA”) and Texas Water Code require municipal wastewater treatment plants to meet secondary treatment effluent limitations and more stringent water quality-based limitations and requirements to comply with the Texas water quality standards. Any water quality-based limitations and requirements with which a municipal utility district must comply may have an impact on the municipal utility district’s ability to obtain and maintain compliance with TPDES permits.

The District is subject to the TCEQ’s General Permit for Phase II (Small) Municipal Separate Storm Sewer Systems (the “MS4 Permit”), which was issued by the TCEQ on January 24, 2019. The MS4 Permit authorizes the discharge of stormwater to surface water in the state from small municipal separate storm sewer systems. The District has applied for coverage under the MS4 Permit and is awaiting final approval from the TCEQ. In order to maintain compliance with the MS4 Permit, the District continues to develop, implement, and maintain the required plans, as well as to install or implement best management practices to minimize or eliminate unauthorized pollutants that may otherwise be found in stormwater runoff. Costs associated with these compliance activities could be substantial in the future.

Operations of utility districts, including the District, are also potentially subject to requirements and restrictions under the CWA regarding the use and alteration of wetland areas that are within the “waters of the United States.” The District must obtain a permit from the United States Army Corps of Engineers (“USACE”) if operations of the District require that wetlands be filled, dredged, or otherwise altered.

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In 2015, the EPA and USACE promulgated a rule known as the Clean Water Rule (“CWR”) aimed at redefining “waters of the United States” over which the EPA and USACE have jurisdiction under the CWA. The CWR significantly expanded the scope of the federal government’s CWA jurisdiction over intrastate water bodies and wetlands. The CWR was challenged in numerous jurisdictions, including the Southern District of Texas, causing significant uncertainty regarding the ultimate scope of “waters of the United States” and the extent of EPA and USACE jurisdiction.

On September 12, 2019, the EPA and USACE finalized a rule repealing the CWR, thus reinstating the regulatory text that existed prior to the adoption of the CWR. This repeal will officially become final on December 23, 2019.

On December 11, 2018, the EPA and USACE released a proposed replacement definition of “waters of the United States.” The proposed definition outlines six categories of waters that would be considered “waters of the United States,” including traditional navigable waters, tributaries to those waters, certain ditches, certain lakes and ponds, impoundments of jurisdictional waters, and wetlands adjacent to jurisdictional waters. The proposed rule also details what are not “waters of the United States,” such as features that only contain water during or in response to rainfall (e.g., ephemeral features); groundwater; many ditches, including most roadside or farm ditches; prior converted cropland; stormwater control features; and waste treatment systems. The agencies took comments on the proposal for 60 days after publication in the Federal Register, which occurred on February 14, 2019, but the proposed rule has not been finalized.

Due to the pending rulemaking activity, there remains uncertainty regarding the ultimate scope of “waters of the United States” and the extent of EPA and USACE jurisdiction. Depending on the final outcome of such proceedings, operations of municipal utility districts, including the District, could potentially be subject to additional restrictions and requirements, including additional permitting requirements. Ongoing Litigation

The District joined Fort Bend County and the Fort Bend County Drainage District (collectively, the “Plaintiffs”) in filing a federal lawsuit May 25, 2018 against the U.S. Army Corps of Engineers (the “Corps”) stemming from its failure to follow federal law and its own regulations for operation of the Barker Reservoir leading up to and during Hurricane Harvey (the “Lawsuit”). In the Lawsuit, Plaintiffs allege that, although the Corps designed the Barker Reservoir to protect the City of Houston by detaining floodwaters, it failed to comply with the Constitution and mandatory regulations requiring it to acquire sufficient land to store the amount of water the reservoirs were designed to detain. Plaintiffs also allege that the Barker Reservoir’s design and modifications, combined with the Corps’ standard operating procedures laid out in its Water Control Manual, made it inevitable that the limits of the Corps’ property would be exceeded, thereby flooding land for which the Corps had no property rights upstream of the Barker Reservoir, if the Barker Reservoir reached near full capacity. Plaintiffs are not seeking monetary damages, and instead seek declaratory and permanent injunctive relief from the court to compel the Corps to operate the Barker Reservoir constitutionally and pursuant to Corps regulations. The District can make no representations or predictions concerning the effect this litigation may have on the District’s financial condition, revenues, or operations. There is currently no trial date scheduled for the Lawsuit. FEMA Mitigation

The District is currently working with FEMA to construct retaining walls surrounding critical equipment at the wastewater treatment plant susceptible to treatment from floodwater, and has raised electrical panels in an effort to protect them from floodwaters. Tax Collections Limitations and Foreclosure Remedies The District’s ability to make debt service payments may be adversely affected by each Participant’s inability to collect ad valorem taxes. Under Texas law, the levy of ad valorem taxes by each Participant constitutes a lien in favor of the Participant on a parity with the liens of all other local taxing authorities on the property against which taxes are levied, and such lien may be enforced by judicial foreclosure. Each Participant’s ability to collect ad valorem taxes through such foreclosure may be impaired by (a) cumbersome, time-consuming and expensive collection procedures, (b) a bankruptcy court’s stay of tax collection procedures against a taxpayer, or (c) market conditions affecting the marketability of taxable property within the Participant and limiting the proceeds from a foreclosure sale of such property. Moreover, the proceeds of any sale of property within the Participant available to pay debt service on the Bonds may be limited by the existence of other tax liens on the property (see “TAX DATA—Overlapping Taxes”), by the current aggregate tax rate being levied against the property, and by other factors (including the taxpayers’ right to redeem property within two years of foreclosure for residential and agricultural use property and six months for other property). Finally, any bankruptcy court with jurisdiction over bankruptcy proceedings initiated by or against a taxpayer within a Participant pursuant to the Federal Bankruptcy Code could stay any attempt by the Participant to collect delinquent ad valorem taxes assessed against such taxpayer. In addition to the automatic stay against collection of delinquent taxes afforded a taxpayer during the pendency of a bankruptcy, a bankruptcy could affect payment of taxes in two other ways: first, a debtor’s confirmation plan may allow a debtor to make installment payments on delinquent taxes for up to six years; and, second, a debtor may challenge, and a bankruptcy court may reduce, the amount of any taxes assessed against the debtor, including taxes that have already been paid.

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Registered Owners’ Remedies Remedies available to Registered Owners of Bonds in the event of a default by the Master District in one or more of its obligations under the Bond Resolution are limited and generally must be exercised by the Trustee. See “THE INDENTURE OF TRUST—Remedies—Limitation on Action by Registered Owners.” Although state law and the Bond Resolution provide that the Registered Owners may obtain a writ of mandamus requiring performance of such obligations, such remedy must be exercised upon each default and may prove time-consuming, costly and difficult to enforce. The Bond Resolutions does not provide for acceleration of maturity of the Bonds, or any other additional remedy in the event of a default by the Master District and consequently, the remedy of mandamus may have to be relied upon from year-to-year. The Bonds are not secured by an interest in the Master District Facilities or any other property of the Master District. No judgment against the Master District is enforceable by execution of a levy against the Master District’s public purpose property. Further, the Registered Owners themselves cannot foreclose on property within the Master District or the Service Area or sell property within the Master District or the Service Area in order to pay the principal of and interest on the Bonds. Statutory language authorizing local governments such as the Master District to sue and be sued does not waive the local government’s sovereign immunity from suits for money damages, so that in the absence of other waivers of such immunity by the Texas Legislature, a default by the Master District in its covenants in the Bond Resolutions may not be reduced to a judgment for money damages. See “Bankruptcy Limitation to Registered Owners’ Rights” below. Bankruptcy Limitation to Registered Owners’ Rights The enforceability of the rights and remedies of Registered Owners may be limited by laws relating to bankruptcy, reorganization or other similar laws of general application affecting the rights of creditors of political subdivisions such as the Participants, including the Master District. Texas law requires municipal utility districts such as the Participants to obtain the approval of the TCEQ as a condition to seeking relief under the Federal Bankruptcy Code. Notwithstanding noncompliance by a district with Texas law requirements, the District could file a voluntary bankruptcy petition under Chapter 9, thereby invoking the protection of the automatic stay until the bankruptcy court, after a hearing, dismisses the petition. A federal bankruptcy court is a court of equity and federal bankruptcy judges have considerable discretion in the conduct of bankruptcy proceedings and in making the decision of whether to grant the petitioning District relief from its creditors. While such a decision might be appealable, the concomitant delay and loss of remedies to the Registered Owner could potentially and adversely impair the value of the Registered Owner’s claim. If a petitioning district were allowed to proceed voluntarily under Chapter 9 of the Federal Bankruptcy Code, it could file a plan for an adjustment of its debts. If such a plan were confirmed by the bankruptcy court, it could, among other things, affect Registered Owners by reducing or eliminating the amount of indebtedness, deferring or rearranging the debt service schedule, reducing or eliminating the interest rate, modifying or abrogating collateral or security arrangements, substituting (in whole or in part) other securities, and otherwise compromising and modifying the rights and remedies of the Registered Owners’ claims against a district. A district may not be forced into bankruptcy involuntarily. Future Debt Pursuant to the Master District Contract, as amended, the Master District may sell contract revenue bonds in an amount necessary to provide the facilities intended to be provided by the Master District and to refund outstanding debt with such amount not to exceed the limits imposed under the Master District Contract’s First and Second Amendments. See “MASTER DISTRICT CONTRACT”). Any future contract revenue bonds will be on a parity with the Bonds. Future issues of bonds are intended to be sold at the earliest practicable date consistent with the maintenance of a reasonable tax rate in the Service Area (assuming projected increases in the value of taxable property made at the time of issuance of bonds are accurate). The Master District does not employ any formula with respect to appraised valuations, tax collections or otherwise to limit the amount of parity bonds which it may issue. The issuance of additional bonds is subject to approval by the TCEQ pursuant to its rules regarding issuance and feasibility of bonds. See “Maximum Impact on District Tax Rate” above and “THE BONDS—Issuance of Additional Debt.” The District has the right to issue obligations other than the Bonds, including unlimited tax bonds for the purpose of financing internal water, wastewater and storm drainage facilities within its boundaries, tax anticipation notes and bond anticipation notes, and to borrow for any valid corporate purpose. As a Participant, not as the Master District, the voters of the District have authorized the issuance of $15,200,000 principal amount of unlimited tax bonds and $9,120,000 principal amount of unlimited tax refunding bonds, of which $5,895,000 principal amount has been issued and $1,975,000 principal amount is collectively outstanding. Marketability of the Bonds The District has no understanding with the Underwriters regarding the reoffering yields or prices of the Bonds and has no control over trading of the Bonds in the secondary market. Moreover, there is no assurance that a secondary market will be made in the Bonds. If there is a secondary market, the difference between the bid and asked price may be greater than the difference between the bid and asked price of bonds of comparable maturity and quality issued by more traditional issuers as such bonds are more generally bought, sold or traded in the secondary market.

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Continuing Compliance with Certain Covenants Failure of the District to comply with certain covenants contained in the Bond Resolution on a continuing basis prior to the maturity of the Bonds could result in interest on the Bonds becoming taxable retroactive to the date of original issuance. See “TAX MATTERS—Risk Factors Related to the Purchase of Municipal Bond Insurance.” Risk Factors Related to the Purchase of Municipal Bond Insurance

The Underwriter has entered into an agreement with Assured Guaranty Municipal Corp. (“AGM” or the “Insurer”) for the purchase of a municipal bond insurance policy (the “Policy”). At the time of entering into the agreement, the Insurer was rated “AA” (stable outlook) by S&P. See “MUNICIPAL BOND INSURANCE.”

The long-term ratings on the Bonds are dependent in part on the financial strength of the bond insurer (the “Insurer”) and its claim paying ability. The Insurer’s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Insurer and of the ratings on the Bonds insured by the Insurer will not be subject to downgrade and such event could adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. See description of “MUNICIPAL BOND RATING” and “MUNICIPAL BOND INSURANCE.”

The obligations of the Insurer are contractual obligations and in an event of default by the Insurer, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies.

Neither the District nor the Underwriter has made independent investigation into the claims paying ability of the Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Insurer is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the District to pay principal and interest on the Bonds and the claims paying ability of the Insurer, particularly over the life of the investment. See “MUNICIPAL BOND RATING” and "MUNICIPAL BOND INSURANCE” for further information provided by the Insurer and the Policy, which includes further instructions for obtaining current financial information concerning the Insurer. Changes in Tax Legislation

Certain tax legislation, whether currently proposed or proposed in the future, may directly or indirectly reduce or eliminate the benefit of the exclusion of interest on the Bonds from gross income for federal income tax purposes. Any proposed legislation, whether or not enacted, may also affect the value and liquidity of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect to any proposed, pending or future legislation.

MUNICIPAL BOND RATING It is expected that S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC, (“S&P”) will assign its municipal bond rating of “AA” (stable outlook) to this issue of Bonds with the understanding that upon delivery of the Bonds, a municipal bond insurance policy insuring the timely payment of the principal of and interest on the Bonds will be issued by Assured Guaranty Municipal Corp. S&P has also assigned an underlying rating on “A+” to the Bonds. An explanation of the ratings may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that they will not be revised or withdrawn entirely by S&P, if in its judgment, circumstances so warrant. Any such revisions or withdrawal of the rating may have an adverse effect on the market price of the Bonds.

MUNICIPAL BOND INSURANCE Bond Insurance Policy

Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as APPENDIX B to this OFFICIAL STATEMENT. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

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AGM’s financial strength is rated “AA” (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On November 7, 2019, S&P announced it had affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On December 21, 2018, KBRA announced it had affirmed AGM’s insurance financial strength rating of “AA+” (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Capitalization of AGM At September 30, 2019: • The policyholders’ surplus of AGM was approximately $2,473 million. • The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. (“MAC”) (as described below) were approximately $1,100 million. Such amount includes 100% of AGM’s contingency reserve and 60.7% of MAC’s contingency reserve. • The net unearned premium reserves and net deferred ceding commission income of AGM and its subsidiaries (as described below) were approximately $1,829 million. Such amount includes (i) 100% of the net unearned premium reserve and deferred ceding commission income of AGM, (ii) the net unearned premium reserves and net deferred ceding commissions of AGM’s wholly owned subsidiary Assured Guaranty (Europe) plc (“AGE”), and (iii) 60.7% of the net unearned premium reserve of MAC. The policyholders’ surplus of AGM and the contingency reserves, net unearned premium reserves and deferred ceding commission income of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves and net deferred ceding commissions of AGE were determined in accordance with accounting principles generally accepted in the United States of America. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (filed by AGL with the SEC on March 1, 2019); and (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 (filed by AGL with the SEC on May 10, 2019); (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 (filed by AGL with the SEC on August 8, 2019); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 (filed by AGL with the SEC on November 8, 2019).

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All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this OFFICIAL STATEMENT and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption “MUNICIPAL BOND INSURANCE—Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this OFFICIAL STATEMENT or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “MUNICIPAL BOND INSURANCE.”

LEGAL MATTERS

Legal Proceedings

Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the Attorney General of Texas to the effect that the Bonds are valid and legally binding obligations of the District under the Constitution and laws of the State of Texas and are secured by the Indenture which pledges to the Trustee the Pledged Revenues, as defined in the Indenture and, based upon their examination of a transcript of certified proceedings relating to the issuance and sale of the Bonds, the approving legal opinion of Allen Boone Humphries Robinson LLP, Bond Counsel, to a like effect and to the effect that, under existing law, interest on the Bonds is excludable from gross income for federal income tax purposes and interest on the Bonds is not subject to the alternative minimum tax on individuals.

Bond Counsel has reviewed the information appearing in this OFFICIAL STATEMENT under “THE BONDS,” “THE INDENTURE OF TRUST,” “MASTER DISTRICT CONTRACT,” “TAXING PROCEDURES,” “LEGAL MATTERS,” “TAX MATTERS” and “CONTINUING DISCLOSURE OF INFORMATION” solely to determine whether such information fairly summarizes matters of law and the provisions of the documents referred to therein. Bond Counsel has not, however, independently verified any of the factual information contained in this OFFICIAL STATEMENT nor has it conducted an investigation of the affairs of the District for the purpose of passing upon the accuracy or completeness of this OFFICIAL STATEMENT. No person is entitled to rely upon Bond Counsel’s limited participation as an assumption of responsibility for or an expression of opinion of any kind with regard to the accuracy or completeness of any information contained herein.

Allen Boone Humphries Robinson LLP also serves as general counsel to the District on matters other than the issuance of bonds. The legal fees paid to Bond Counsel for services rendered in connection with the issuance of the Bonds are based on a percentage of the Bonds actually issued, sold and delivered and, therefore, such fees are contingent upon the sale and delivery of the Bonds.

The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. No Material Adverse Change

The obligations of the Underwriter to take and pay for the Bonds, and of the District to deliver the Bonds, are subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there shall have been no material adverse change in the condition (financial or otherwise) of the District from that set forth or contemplated in the PRELIMINARY OFFICIAL STATEMENT.

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No-Litigation Certificate

The District will furnish the Underwriter a certificate, executed by both the President and Secretary of the Board, and dated as of the date of delivery of the Bonds, to the effect that there is not pending, and to their knowledge, there is not threatened, any litigation affecting the validity of the Bonds, or the levy and/or collection of taxes for the payment thereof, or the organization or boundaries of the District, or the title of the officers thereof to their respective offices, and that no additional bonds or other indebtedness have been issued since the date of the statement of indebtedness or nonencumbrance certificate submitted to the Attorney General of Texas in connection with approval of the Bonds.

TAX MATTERS

In the opinion of Allen Boone Humphries Robinson LLP, Bond Counsel, under existing law, interest on the Bonds is excludable from gross income for federal income tax purposes and interest on the Bonds is not subject to the alternative minimum tax on individuals.

The Internal Revenue Code of 1986, as amended (the “Code”) imposes a number of requirements that must be satisfied for interest on state or local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of proceeds and the source of repayment, limitations on the investment of proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of proceeds be paid periodically to the United States and a requirement that the issuer file an information report with the Internal Revenue Service (the “Service”). The District has covenanted in the Bond Resolution that it will comply with these requirements.

Bond Counsel’s opinion will assume continuing compliance with the covenants of the Bond Resolution pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and, in addition, will rely on representations by the District, the District’s Financial Advisor and the Underwriter with respect to matters solely within the knowledge of the District, the District’s Financial Advisor and the Underwriter, respectively, which Bond Counsel has not independently verified. If the District should fail to comply with the covenants in the Bond Resolution or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds could become taxable from the date of delivery of the Bonds, regardless of the date on which the event causing such taxability occurs.

Under the Code, taxpayers are required to report on their returns the amount of tax-exempt interest, such as interest on the Bonds, received or accrued during the year. Payments of interest on tax-exempt obligations such as the Bonds are in many cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any owner who is not an “exempt recipient” and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.

Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Bonds.

Prospective purchasers of the Bonds should be aware that the ownership of tax exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise qualifying for the earned income credit. In addition, certain foreign corporations doing business in the United States may be subject to the “branch profits tax” on their effectively-connected earnings and profits, including tax exempt interest such as interest on the Bonds. These categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences.

Bond Counsel’s opinions are based on existing law, which is subject to change. Such opinions are further based on Bond Counsel’s knowledge of facts as of the date hereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel’s attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, Bond Counsel’s opinions are not a guarantee of result and are not binding on the Service; rather, such opinions represent Bond Counsel’s legal judgment based upon its review of existing law and in reliance upon the representations and covenants referenced above that it deems relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the District as the taxpayer and the owners of the Bonds may not have a right to participate in such audit. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit regardless of the ultimate outcome of the audit.

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Tax Accounting Treatment of Original Issue Discount Bonds

The issue price of certain of the Bonds (the “Original Issue Discount Bonds”) is less than the stated redemption price at maturity. In such case, under existing law, and based upon the assumptions hereinafter stated (a) the difference between the stated amount payable at the maturity of each Original Issue Discount Bond and (ii) the issue price of such Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond at the initial public offering price in the initial public offering of the Bonds; and (b) such initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continues to be owned by such owner.

In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Bond was held by such initial owner) is includable in gross income. (Because original issue discount is treated as interest for federal income tax purposes, the discussion regarding interest on the Bonds under the caption “TAX MATTERS” generally applies, except as otherwise provided below, to original issue discount on an Original Issue Discount Bond held by an owner who purchased such Bond at the initial offering price in the initial public offering of the Bonds, and should be considered in connection with the discussion in this portion of the Official Statement.)

The foregoing is based on the assumptions that (a) the Underwriter has purchased the Bonds for contemporaneous sale to the general public and not for investment purposes, and (b) all of the Original Issue Discount Bonds have been offered, and a substantial amount of each maturity thereof has been sold, to the general public in arm's-length transactions for a cash price (and with no other consideration being included) equal to the initial offering prices thereof stated on the cover page of this Official Statement, and (c) the respective initial offering prices of the Original Issue Discount Bonds to the general public are equal to the fair market value thereof. Neither the District nor Bond Counsel warrants that the Original Issue Discount Bonds will be offered and sold in accordance with such assumptions.

Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Bond for purposes of determining the amount of gain or loss recognized by such owner upon redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price plus the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond.

The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership and redemption, sale or other disposition of such Bonds.

Not Qualified Tax-Exempt Obligations

The Bonds have not been designated as “qualified tax-exempt obligations” within the meaning of Section 265(b) of the Internal Revenue Code of 1986.

CONTINUING DISCLOSURE OF INFORMATION In the Bond Resolution, the District has the following agreement for the benefit of the holders and Beneficial Owners of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified events, to the Municipal Securities Rulemaking Board (“MSRB”). The MSRB has established the Electronic Municipal Market Access (“EMMA”) system. Annual Reports The District will provide certain updated financial information and operating data to the MSRB annually. The information to be updated with respect to the District includes all quantitative financial information and operating data of the general type included in this OFFICIAL STATEMENT under the headings “SELECTED FINANCIAL INFORMATION (UNAUDITED);” “THE DISTRICT AND SERVICE AREA;” “THE SYSTEM—Master District Facilities—Operating Statement;” “FINANCIAL INFORMATION CONCERNING THE MASTER DISTRICT AND THE PARTICIPANTS (UNAUDITED);” “TAX DATA;” and “APPENDICES A and B” (Certain Financial Information Regarding the Participants and the Independent Auditor’s Report and Financial Statements of the District). The District will update and provide this information within six months after the end of each of its fiscal years ending in or after 2019. The District will provide the updated information to the MSRB through EMMA.

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The District may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12 (“Rule”). The updated information will include audited financial statements if it commissions an audit and the audit is completed by the required time. If the audit of such financial statements is not complete within such period, then the District shall provide unaudited financial statements for the applicable fiscal year to the MSRB within such six month period, and audited financial statements when the audit report on such statements becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in the Bond Resolution, or such other accounting principles as the District may be required to employ from time to time pursuant to state law or regulation. The District’s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless it changes its fiscal year. If the District changes its fiscal year, it will notify the MSRB of the change. Event Notices The District will provide timely notices of certain events to the MSRB, but in no event will such notices be provided to the MSRB in excess of ten business days after the occurrence of an event. The District will provide notice of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of Beneficial Owners of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the District or other obligated person; (13) consummation of a merger, consolidation, or acquisition involving the District or other obligated person or the sale of all or substantially all of the assets of the District or other obligated person within the meaning of the Rule, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the District or other obligated person within the meaning of the Rule, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the District or other obligated person, any of which affect Beneficial Owners of the Bonds, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the District or other obligated person, any of which reflect financial difficulties. The terms “obligated person” and “financial obligation” when used in this paragraph shall have the meanings ascribed to them under SEC Rule 15c2-12 (the “Rule”). The term “material” when used in this paragraph shall have the meaning ascribed to it under federal securities laws. Neither the Bonds nor the Bond Resolution makes any provision for debt service reserves or liquidity enhancement. In addition, the District will provide timely notice of any failure by the District to provide financial information, operating data, or financial statements in accordance with its agreement described above under “Annual Reports.” Availability of Information from MSRB The District has agreed to provide the foregoing updated information only to the MSRB. The MSRB makes the information available to the public without charge through an internet portal at www.emma.msrb.org. Limitations and Amendments The District has agreed to update information and to provide notices of material events only as described above. The District has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects; nor has the District agreed to update any information that is provided, except as described above. The District makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The District disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders or Beneficial Owners of Bonds may seek a writ of mandamus to compel the District to comply with its agreement. The District may amend its continuing disclosure agreement from time to time to adapt to the changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the District, if but only if the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering made hereby in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the Outstanding Bonds consent to the amendment or any person unaffiliated with the District (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and Beneficial Owners of the Bonds. The District may amend or repeal the agreement in the Bond Resolutions if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid or unenforceable, but only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing the Bonds in the initial offering. If the District so amends the agreement, it has agreed to include with any financial information or operating data next provided in accordance with its agreement described above under “Annual Reports” an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. 52

Compliance with Prior Undertakings During the last five years, the District has complied in all material respects with its previous continue disclosure agreements, with the following exception: On November 1, 2010, the District issued its $5,285,000 Contract Revenue Refunding Bonds, Series 2010; on November 1, 2010, the District issued its $2,610,000 Contract Revenue Bonds, Series 2010A; on September 1, 2011, the District issued its $1,000,000 Contract Revenue Bonds, Series 2011A; on November 1, 2011, the District issued its $2,610,000 Contract Revenue Bonds, Series 2011; on January 1, 2012, the District issued its $9,650,000 Contract Revenue Bonds, Series 2012, on December 1, 2013; the District issued its $7,755,000 Contract Revenue Refunding Bonds, Series 2013; on September 1, 2014, the District issued its $25,340,000 Contract Revenue Bonds, Series 2014; and on September 1, 2014, the District issued its $2,360,000 Contract Revenue Bonds, Series 2014A (the “Prior Bonds”). The offering documents for the Prior Bonds stated that the District would provide certain financial information and operating data to the MSRB annually. Due to an administrative oversight, the District inadvertently did not file updates regarding the subsection “Estimated Overlapping Taxes,” which contains information related to third parties and not information of the District. This subsection was included in the headings of “Tax Data” or “Financial Information Concerning the Master District and the Participants (unaudited),” and these sections were obligated to be updated per the relevant Prior Bonds’ Continuing Disclosure of Information provisions. The District supplemented its Annual Report filings to include updates to the “Estimated Overlapping Taxes.”

PREPARATION OF OFFICIAL STATEMENT Sources and Compilation of Information The financial data and other information contained in this OFFICIAL STATEMENT has been obtained primarily from the District’s records, the Engineer, the Tax Assessor/Collector, the Appraisal District and information from other sources. All of these sources are believed to be reliable, but no guarantee is made by the District as to the accuracy or completeness of the information derived from such sources, and its inclusion herein is not to be construed as a representation on the part of the District to such effect except as specified below under “Certification of Official Statement.” Furthermore, there is no guarantee that any of the assumptions or estimates contained herein will be realized. The summaries of the agreements, reports, statutes, resolutions, engineering and other related information set forth in this OFFICIAL STATEMENT are included herein subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions, and reference is made to such documents for further information. Financial Advisor Masterson Advisors LLC is employed as the Financial Advisor to the District to render certain professional services, including advising the District on a plan of financing and preparing the OFFICIAL STATEMENT. In its capacity as Financial Advisor, Masterson Advisors LLC Company has compiled and edited this OFFICIAL STATEMENT. The Financial Advisor has reviewed the information in this OFFICIAL STATEMENT in accordance with, and as a part of, its responsibilities to the District and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. Consultants In approving this OFFICIAL STATEMENT the District has relied upon the following consultants. Each consultant has agreed to the use of information provided by such firms. Engineer: The information contained in this OFFICIAL STATEMENT relating to engineering and to the description of the Master District’s water and wastewater system and, certain information included in the sections entitled “THE DISTRICT AND SERVICE AREA—Description and Location—Status of Development,” and “THE SYSTEM” has been provided by BGE, Inc., Consulting Engineers, and has been included herein in reliance upon the authority of said firm as experts in the field of civil engineering. Appraisal District: The information contained in this OFFICIAL STATEMENT relating to the historical certified taxable appraised valuations has been provided by the Fort Bend Central Appraisal District and the Harris County Appraisal District has been included herein in reliance upon the authority of such entity as experts in assessing the values of property in Fort Bend County, Harris County, including the District.

Tax Assessor/Collector: The information contained in this OFFICIAL STATEMENT relating to the breakdown of the Service Area’s historical assessed value and certain other historical data concerning tax rates and tax collections has been provided by Wheeler & Associates, Inc., B&A Municipal Tax Service LLC and the Fort Bend Central Appraisal District and is included herein in reliance upon as an expert in assessing property values and collecting taxes. Independent Auditor: The financial statements of the District as of September 30, 2018, and for the year then ended, included in this offering document have been audited by BKD, LLP, independent auditors, as stated in their report appearing herein. See “APPENDIX B.” In addition, certain supplemental information included herein under “THE SYSTEM— Operating Statement” has been provided by BKD, LLP.

53

Bookkeeper: The information related to the “unaudited” summary of the District’s General Operating Fund as it appears in “THE SYSTEM—Operating Statement” has been provided by F. Matuska, Inc., and is included herein reliance upon the authority of such firm as experts in tracking and managing the various funds of municipal utility districts. Updating the Official Statement If subsequent to the date of the OFFICIAL STATEMENT, the District learns, through the ordinary course of business and without undertaking any investigation or examination for such purposes, or is notified by the Underwriter, of any adverse event which causes the OFFICIAL STATEMENT to be materially misleading, and unless the Underwriter elects to terminate its obligation to purchase the Bonds, the District will promptly prepare and supply to the Underwriter an appropriate amendment or supplement to the OFFICIAL STATEMENT satisfactory to the Underwriter; provided, however, that the obligation of the District to the Underwriter to so amend or supplement the OFFICIAL STATEMENT will terminate when the District delivers the Bonds to the Underwriter, unless the Underwriter notifies the District on or before such date that less than all of the Bonds have been sold to ultimate customers, in which case the District’s obligations hereunder will extend for an additional period of time as required by law (but not more than 90 days after the date the District delivers the Bonds). Certification of Official Statement The District, acting through its Board in its official capacity, hereby certifies, as of the date hereof, that the information, statements, and descriptions or any addenda, supplement and amendment thereto pertaining to the District and its affairs contained herein, to the best of its knowledge and belief, contain no untrue statement of a material fact and do not omit to state any material fact necessary to make the statements herein, in the light of the circumstances under which they are made, not misleading. With respect to information included in this OFFICIAL STATEMENT other than that relating to the District, the District has no reason to believe that such information contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein, in the light of the circumstances under which they are made, not misleading; however, the Board has made no independent investigation as to the accuracy or completeness of the information derived from sources other than the District. In rendering such certificate, the official executing this certificate may state that he has relied in part on his examination of records of the District relating to matters within his own area of responsibility, and his discussions with, or certificates or correspondence signed by, certain other officials, employees, consultants and representatives of the District.

MISCELLANEOUS All estimates, statements and assumptions in this OFFICIAL STATEMENT and the APPENDICES hereto have been made on the basis of the best information available and are believed to be reliable and accurate. Any statements in this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as representations of fact, and no representation is made that any such statements will be realized. This OFFICIAL STATEMENT was approved by the Board of Directors of Cinco Municipal Utility District No. 1, as of the date shown on the cover page.

G. Tim Lawrence President, Board of Directors ATTEST: Sharon Bauer Secretary, Board of Directors

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AERIAL PHOTOGRAPH (As of May 2019)

PHOTOGRAPHS OF THE DISTRICT (As of May 2019)

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APPENDIX A

Certain Financial Information Regarding the Participants

Selected information concerning the Participants is included in this Appendix in addition to certain general information concerning the Participants and their obligation under the Master District Contract contained in the body of the Official Statement. See “THE PARTICIPANTS” and “THE MASTER DISTRICT CONTRACT” therein. Each Participant is severally liable for its pledged payments in an amount equal to its pro rata share of debt service requirements on the Contract Revenue Bonds, including the Bonds. No Participant is liable for more than its share of such debt service. Consequently, the ability of the Master District to make timely payment of principal of and interest on the Contract Revenue Bonds, including the Bonds, would be impaired if any Participant became unable to make its pledged payments in full when due, unless the year-end balance of the Debt Service Fund and Debt Reserve Fund of the Master District exceeded the amount of such Participant’s deficiency.

Debt and Tax Calculations

The information included herein relating to the Participants makes reference to the principal amount of each Participant’s pro rata share of debt service on the Bonds and the Remaining Outstanding Bonds, each Participant’s outstanding unlimited tax bonds, and certain maximum tax rate calculations. In each case, this information has been computed as follows:

Contract Revenue Bond Debt Service: The principal amount of each Participant’s Master District Contract Revenue Bonds debt service has been calculated for purposes of analysis by allocating the principal amount of the Contract Revenue Bonds, including the Bonds, among the Participants in proportion to their gross assessed valuation, as defined in the Master District Contract. The gross assessed valuations are based on the 2019 Gross Assessed Valuation of each Participant, as defined in the Master District Contract and the related 2019 Gross Assessed Valuation of the Service Area of $4,111,707,571 (including $8,051,130 of uncertified gross value in Fort Bend County and $30,725,220 of uncertified value in Harris County, which is subject to downward revision prior to certification), as more full detailed in the OFFICIAL STATEMENT. The Participants’ share of annual debt service requirements on the Contract Revenue Bonds, including the Bonds, will be determined annually by reference to their relative Taxable Assessed Valuations as of January 1 established by the Fort Bend Central Appraisal District and the Harris County Appraisal District.

Tax Rate Calculations: Tax rate calculations assume that each Participant’s assessed valuation does not change from its 2019 Gross Assessed Valuation, that each Participant collects ninety-five percent (95%) taxes it levies, that each Participant issues no additional bonds, and that the Master District does not issue any additional contract revenue bonds. Average annual debt service requirements for each Participant are calculated from 2020 through the final year of maturity for the unlimited tax bonds issued by each Participant. Average annual debt service requirements for the Master District are calculated from 2020 through 2046 and assume that each Participant’s pro rata share, as defined in the Master District Contract, of the debt service on Contract Revenue Bonds, including the Bonds, does not change.

CINCO MUNICIPAL UTILITY DISTRICT NO. 1 (In its Capacity as a Participant)

Voter Authorized Unlimited Tax Bonds ...... $15,200,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.25 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 1,975,000

2019 Gross Assessed Valuation...... $197,480,109 (a) 2019 Taxable Assessed Valuation ...... $196,876,665 (a)

Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 1.00%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 4.80%

Contract Payment Funds Available as of September 2019 ...... $33,694 Debt Service Funds Available as of September 2019 ...... $58,530

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $162,395 Direct Debt (2020-2030) ...... 219,055 Total ...... $381,450 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $374,063 Direct Debt (2020) ...... 241,963 Total ...... $616,026

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2030) 0.12 Total $0.21

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2020) 0.13 Total $0.33

Status of Development as of September 2019:

Acreage ...... 246 Total Active Single-Family Connections ...... 312 Total Developed Lots ...... 312

______(a) Includes $290,660 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Taxable Assessed Valuation of $196,586,005 (excluding $290,660 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Jamil Learning LP$ 2,348,942 1.19% Individual 1,695,790 0.86% Individual 1,492,130 0.76% Individual 1,444,330 0.73% Individual 1,419,710 0.72% Individual 1,404,610 0.71% Individual 1,501,060 0.76% Individual 1,379,170 0.70% Individual 1,378,380 0.70% Individual 1,370,380 0.70% Total$ 15,434,502 7.85%

Tax Rate Distribution:

2019 2018 2017 2016 2015

Debt Service Tax$ 0.130 $ 0.125 $ 0.125 $ 0.125 $ 0.125 Contract Tax 0.160 0.175 0.170 0.180 0.200 Maintenance Tax 0.155 0.128 0.135 0.135 0.115 Total District Tax Rate$ 0.445 $ 0.428 $ 0.430 $ 0.440 $ 0.440

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 9/30/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 185,681,413 $ 0.4800 $ 891,271 $ 891,271 100.00% 2015 201,680,461 0.4400 887,394 887,394 100.00% 2016 203,115,938 0.4400 893,710 893,710 100.00% 2017 203,421,614 0.4300 874,713 868,765 99.32% 2018 203,738,181 0.4278 871,592 862,876 99.00% 2019 196,876,665 0.4450 876,101 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes due for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 2

Voter Authorized Unlimited Tax Bonds ...... $17,900,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.25 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 0

2019 Gross Assessed Valuation ...... $589,880,154 (a) 2019 Taxable Assessed Valuation ...... $581,256,054 (a)

Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.00%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 14.35%

Contract Payment Funds Available as of September 2019 ...... $ 306,782

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $ 485,079

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $1,117,341

Tax Rate Based Upon 2019 Taxable Valuation

Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20

Status of Development as of September 2019:

Acreage ...... 767 Total Active Single-Family Connections ...... 1,328 Total Developed Lots ...... 1,328

______(a) Includes $745,870 of uncertified value, which is subject to review and downward revision prior to certification.

Principal Taxpayers

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total assessed value of the Participant. This information is based upon the 2019 Certified Taxable Assessed Valuation of $580,510,184 (excluding $745,870 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Villagio Investment Holdings$ 22,718,060 3.91% RRE Merrywood Holdings 21,647,730 3.73% Zenda Mason Place US 5,351,920 0.92% SZR Cinco Ranch LLC 5,018,040 0.86% Bellfort Enterprises 4,152,430 0.72% CF Cinco Ranch Arcis LLC 2,760,605 0.48% Shamrock Adventure XXX 2,058,550 0.35% Petereit's Mason Center 1,771,760 0.31% Amegy Bank NA 1,627,768 0.28% FA Houston Investment 1,449,650 0.25% Total$ 68,556,513 11.81%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ - $ - $ - $ - $ 0.130 Contract Tax 0.170 0.190 0.160 0.090 0.215 Maintenance Tax 0.180 0.120 0.120 0.250 0.105 Total District Tax Rate$ 0.350 $ 0.310 $ 0.280 $ 0.340 $ 0.450

Historical Tax Collections

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 425,350,493 $ 0.4700 $ 1,999,147 $ 1,998,148 99.95% 2015 547,179,489 0.4500 2,462,308 2,459,599 99.89% 2016 591,878,530 0.3400 2,012,387 2,010,576 99.91% 2017 583,382,716 0.2800 1,633,472 1,631,185 99.86% 2018 583,774,394 0.3100 1,809,701 1,804,452 99.71% 2019 581,256,054 0.3500 2,034,396 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes due for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 3

Voter Authorized Unlimited Tax Bonds ...... $12,100,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.25 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 1,905,000

2019 Gross Assessed Valuation ...... $217,989,179 2019 Taxable Assessed Valuation ...... $214,659,822 Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.89%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 5.30%

Contract Payment Funds Available as of September 2019 ...... $ 66,952 Debt Service Funds Available as of September 2019 ...... $ 45,256

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $179,260 Direct Debt (2020-2028) ...... 260,449 Total ...... $439,709 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $412,911 Direct Debt (2027) ...... 267,588 Total ...... $680,499

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2028) 0.13 Total $0.22

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2027) 0.22 Total $0.42

Status of Development as of September 2019:

Acreage ...... 363 Total Active Single-Family Connections ...... 509 Total Developed Lots ...... 509

______(a) Includes $750,320 of uncertified gross value and $720,320 of uncertified taxable value in Fort Bend County and $434,588 of uncertified value in Harris County, which is subject to review and downward revision prior to certification.

Principal Taxpayers

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Certified Taxable Assessed Valuation of $213,504,914.

2019 Certified Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Fund Downs at Cinco Ranch$ 30,189,210 14.14% Amreit C-Ranch LP 14,988,446 7.02% Great Southwest Equestrian Center 7,497,811 3.51% Kroger Texas LP 2,924,350 1.37% Vang tite Properties I LLC 962,900 0.45% Willow Fork Golf LLC 617,995 0.29% Centerpoint Energy 609,780 0.29% Individual 520,750 0.24% Individual 485,770 0.23% Total$ 58,797,012 27.54%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.1250 $ 0.1250 $ 0.1250 $ 0.1250 $ 0.130 Contract Tax 0.160 0.180 0.180 0.195 0.190 Maintenance Tax 0.060 0.050 0.050 0.050 0.080 Total District Tax Rate$ 0.345 $ 0.355 $ 0.355 $ 0.370 $ 0.400

Historical Tax Collections

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 185,693,396 $ 0.4200 $ 779,912 $ 778,196 99.78% 2015 199,230,706 0.4000 796,923 793,735 99.60% 2016 209,724,385 0.3700 775,980 773,963 99.74% 2017 211,798,478 0.3550 751,885 748,351 99.53% 2018 212,056,598 0.3550 752,801 745,423 99.02% 2019 214,659,822 0.3450 740,576 (c) (c)

______(a) As certified by the Appraisal Districts less any exemptions granted. (b) Represents actual tax levy, including any adjustments by the Appraisal Districts, as of the date hereof.

CINCO MUNICIPAL UTILITY DISTRICT NO. 5

Voter Authorized Unlimited Tax Bonds ...... $10,000,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $1.00 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 2,440,000

2019 Gross Assessed Valuation ...... $246,213,124 (a) 2019 Taxable Assessed Valuation ...... $213,018,444 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 1.15%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 5.99%

Debt Service Funds Available as of September 2019 (Including Contract Funds) ...... $471,275

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $202,469 Direct Debt (2020-2028) ...... 328,275 Total ...... $530,744 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $466,371 Direct Debt (2027) ...... 329,800 Total ...... $796,171

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020) 0.17 Total $0.26

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2027) 0.17 Total $0.37

Status of Development as of September 2019:

Acreage ...... 433 Total Active Single-Family Connections ...... 535 Total Developed Lots ...... 535

______(a) Includes $423,160 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Certified Taxable Assessed Valuation of $212,595,284 (excluding $423,160 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) MBS-Ashley House Ltd.$ 23,233,300 10.93% Willow Fork Golf LLC 3,381,737 1.59% UOE Investment LLC 3,242,560 1.53% BPPS Cinco East Property 3,066,988 1.44% Comcast of Houston LLC 2,111,350 0.99% Branch Banking & Trust 1,728,040 0.81% Arun & Kay Investments 1,540,000 0.72% Bank of America NA 1,502,336 0.71% Archland Property II LP 1,220,000 0.57% Individual 974,860 0.46% Total$ 42,001,171 19.76%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.150 $ 0.190 $ 0.160 $ 0.160 $ 0.160 Contract Tax 0.210 0.200 0.210 0.210 0.220 Maintenance Tax 0.080 0.100 - - - Total District Tax Rate$ 0.440 $ 0.490 $ 0.370 $ 0.370 $ 0.380

Historical Tax Collections

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 185,293,529 $ 0.4150 $ 768,968 $ 768,276 99.91% 2015 208,439,359 0.3800 792,070 791,357 99.91% 2016 215,725,641 0.3700 798,185 797,387 99.90% 2017 212,759,249 0.3700 787,209 785,792 99.82% 2018 182,038,476 0.4900 891,989 891,007 99.89% 2019 213,018,444 0.4400 937,281 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes due for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 6

Voter Authorized Unlimited Tax Bonds ...... $12,400,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.25 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 1,165,000

2019 Gross Assessed Valuation ...... $301,222,136 (a) 2019 Taxable Assessed Valuation ...... $295,534,336 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.39%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 7.33%

Contract Payment Funds Available as of September 2019 ...... $ 68,518 Debt Service Funds Available as of September 2019 ...... $287,507

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $247,705 Direct Debt (2020-2024) ...... 258,804 Total ...... $506,509 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $570,570 Direct Debt (2020) ...... 254,988 Total ...... $825,558

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2024) 0.10 Total $0.19

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds $0.20 Direct Debt (2020) 0.10 Total $0.30

Status of Development as of September 2019:

Acreage ...... 379 Total Active Single-Family Connections ...... 735 Total Developed Lots ...... 735

______(a) Includes $2,371,260 of uncertified gross taxable value in Fort Bend County and $20,312,470 of uncertified value in Harris County, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2018 Certified Taxable Assessed Valuation of $272,850,906 (excluding $22,83,730 of uncertified value).

2019 Taxable Certified Assessed Assessed Taxpayer Value ($) Valuation (%) Cinco 268 LLC$ 26,000,000 9.53% SH 760 770 LLC 11,074,670 4.06% Hass Holdings LLC 3,929,657 1.44% Centerpoint Energy 3,076,950 1.13% Divine Realty Ltd 2,692,858 0.99% Plaza Park I Ltd. 2,147,862 0.79% Miles Facilities Partnership 1,927,442 0.71% Pines KTX Property 1,884,926 0.69% Mariposa Plaza LLC 1,825,160 0.67% SH1 Cinco Ranch LLC 1,766,300 0.65% Total$ 56,325,825 20.64%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.095 $ 0.105 $ 0.100 $ 0.090 $ 0.090 Contract Tax 0.150 0.205 0.170 0.185 0.210 Maintenance Tax 0.085 0.075 0.060 0.055 0.055 Total District Tax Rate$ 0.330 $ 0.385 $ 0.330 $ 0.330 $ 0.355

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 270,297,726 $ 0.3950 $ 1,067,676 $ 1,067,142 99.95% 2015 296,455,929 0.3550 1,052,419 1,051,787 99.94% 2016 308,743,115 0.3300 1,018,852 1,017,732 99.89% 2017 309,567,695 0.3300 1,021,573 1,018,407 99.69% 2018 247,211,767 0.3850 951,765 944,722 99.26% 2019 295,534,336 0.3300 975,263 (c) (c)

______(a) As certified by the Appraisal Districts less any exemptions granted. (b) Represents actual tax levy, including any adjustments by the Appraisal Districts, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 7

Voter Authorized Unlimited Tax Bonds ...... $39,800,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $1.00 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 1,745,000

2019 Gross Assessed Valuation ...... $486,813,689 (a) 2019 Taxable Assessed Valuation ...... $471,429,452 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.37%

2018 Preliminary Gross Assessed Valuation as a Percentage of: 2019 Preliminary Gross Assessed Valuation of Service Area ...... 11.84%

Contract Payment Funds Available as of September 2019 ...... $ 15,958 Debt Service Funds Available as of September 2019 ...... $153,660

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $400,324 Direct Debt (2020-2022) ...... 525,073 Total ...... $925,397 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $922,114 Direct Debt (2020) ...... 698,316 Total ...... $1,620,430

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2022) 0.12 Total $0.21

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2020) 0.16 Total $0.36

Status of Development as of September 2019:

Acreage ...... 632 Total Active Single-Family Connections ...... 1,220 Total Developed Lots ...... 1,220

______(a) Includes $634,868 of uncertified taxable value and $641,170 of uncertified gross value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Taxable Assessed Valuation of $470,794,584 (excluding $634,868 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Cinco Master LP$ 29,771,360 6.32% QL Investment LLC 2,767,027 0.59% 5131 S. Fry Road LLC 2,468,951 0.52% Fry & Mason Rd Office Building 1,938,910 0.41% Nature Pet Inc. 1,654,551 0.35% Regions Bank 1,464,570 0.31% Elkins Industries Ltd. 1,312,290 0.28% Centerpoint Energy 1,120,660 0.24% Individual 916,310 0.19% Individual 870,340 0.18% $ 44,284,969 9.41%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.150 $ 0.200 $ 0.145 $ 0.145 $ 0.145 Contract Tax 0.185 0.180 0.170 0.195 0.200 Maintenance Tax 0.060 0.100 0.105 0.100 0.120 Total District Tax Rate$ 0.395 $ 0.480 $ 0.420 $ 0.440 $ 0.465

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 419,792,513 $ 0.4800 $ 2,015,004 $ 2,015,004 100.00% 2015 462,197,816 0.4650 2,149,220 2,148,575 99.97% 2016 474,775,739 0.4400 2,089,013 2,088,804 99.99% 2017 424,277,883 0.4200 1,781,967 1,779,116 99.84% 2018 349,321,480 0.4800 1,676,743 1,646,226 98.18% 2019 471,429,562 0.4000 1,885,718 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 8

Voter Authorized Unlimited Tax Bonds ...... $16,500,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.50 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 6,650,000

2019 Gross Assessed Valuation ...... $315,739,877 (a) 2019 Taxable Assessed Valuation ...... $312,759,878 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 2.13%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 7.68%

Contract Payment Funds Available as of September 2019 ...... $ 51,479 Debt Service Funds Available as of September 2019 ...... $546,824

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $ 259,644 Direct Debt (2020-2030) ...... 755,720 Total ...... $ 1,015,364 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $ 598,069 Direct Debt (2031) ...... 792,825 Total ...... $ 1,390,894

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2030) 0.26 Total $0.35

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2031) 0.27 Total $0.47

Status of Development as of September 2019:

Acreage ...... 442 Total Active Single-Family Connections ...... 1,002 Total Developed Lots ...... 1,002

______(a) Includes $578,060 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total assessed value of the Participant. This information is based upon the 2019 Taxable Assessed Valuation of $312,181,818 (excluding $578,060 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) CWS Grand Lakes SAF$ 24,038,820 7.70% Watersonte Apartments LLC 21,825,000 6.99% CH Realty VII-WD 4,749,849 1.52% Cummins Ellen Lloyd 3,061,070 0.98% Cummins Family 1992 Trust 3,061,070 0.98% LAACO Ltd. 2,908,490 0.93% Miles Facilities PTRSP LP 1,756,860 0.56% McMason Partners LP 1,769,420 0.57% NTNH LLC 1,679,440 0.54% Centerpoint Energy 1,069,360 0.34% Total$ 65,919,379 21.12%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.220 $ 0.350 $ 0.240 $ 0.250 $ 0.280 Contract Tax 0.160 0.170 0.180 0.180 0.200 Maintenance Tax 0.240 0.440 0.160 0.160 0.160 Total District Tax Rate$ 0.620 $ 0.960 $ 0.580 $ 0.590 $ 0.640

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from each Participant’s Tax Assessor/Collector.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 249,663,041 $ 0.7100 $ 1,772,608 $ 1,771,012 99.91% 2015 278,328,439 0.6400 1,781,302 1,779,343 99.89% 2016 294,649,377 0.5900 1,738,431 1,736,693 99.90% 2017 308,464,870 0.5800 1,789,096 1,786,055 99.83% 2018 214,343,298 0.9600 2,057,696 2,024,361 98.38% 2019 312,759,878 0.6200 1,939,111 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 9

Voter Authorized Unlimited Tax Bonds ...... $20,800,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $0.25 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 0

2019 Gross Assessed Valuation ...... $402,465,998 (a) 2019 Taxable Assessed Valuation ...... $392,850,610 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.00%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 9.79%

Contract Payment Funds Available as of September 2019 ...... $ 12,574

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $ 330,962 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $ 762,344

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20

Status of Development as of September 2019:

Acreage ...... 486 Total Active Single-Family Connections ...... 1,261 Total Developed Lots ...... 1,261

______(a) Includes $416,600 of uncertified gross and taxable value in Fort Bend County and approximately $9,938,162 of uncertified value in Harris County, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Certified Taxable Assessed Valuation of $382,495,848 (excluding $10,354,762 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Sophies Highland LLC$ 4,123,462 1.08% Peek Road LOCI Grove USA LLC 2,252,043 0.59% Terra Vest Tx Properties Corp. 1,336,866 0.35% Centerpoint Energy 1,011,070 0.26% Schueppert Stenning 717,040 0.19% Individual 413,902 0.11% Individual 436,193 0.11% Individual 394,029 0.10% Individual 387,151 0.10% Individual 386,451 0.10% Total$ 11,458,207 3.00%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ - $ - $ - $ - $ - Contract Tax 0.170 0.175 0.175 0.185 0.195 Maintenance Tax 0.225 0.220 0.220 0.220 0.235 Total District Tax Rate$ 0.395 $ 0.395 $ 0.395 $ 0.405 $ 0.430

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from the District’s Tax Assessor/Collector. Reference is made to such statements and records for further and complete information. See “Tax Roll Information” below.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 320,793,703 $ 0.5300 $ 1,700,207 $ 1,698,763 99.92% 2015 351,316,511 0.4300 1,510,661 1,509,435 99.92% 2016 370,209,269 0.4050 1,498,958 1,497,700 99.92% 2017 376,351,701 0.3950 1,485,301 1,483,030 99.85% 2018 379,046,354 0.3950 1,497,547 1,490,817 99.55% 2019 392,850,610 0.3950 1,551,760 (c) (c)

______(a) As certified by the Appraisal Districts less any exemptions granted. (b) Represents actual tax levy, including any adjustments by the Appraisal Districts, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 10

Voter Authorized Unlimited Tax Bonds ...... $37,500,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $1.50 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 4,460,000

2019 Gross Assessed Valuation ...... $305,134,070 (a) 2019 Taxable Assessed Valuation ...... $303,825,730 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 1.47%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 7.42%

Contract Payment Funds Available as of September 2019 ...... $ 21,541 Debt Service Funds Available as of September 2019 ...... $310,733

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2044) ...... $250,922 Direct Debt (2020-2030) ...... 496,260 Total ...... $747,182 Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $577,980 Direct Debt (2030) ...... 517,500 Total ...... $1,095,480

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt 0.18 Total $0.27

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds $0.20 Direct Debt 0.18 Total $0.38

Status of Development as of September 2019:

Acreage ...... 581 Total Active Single-Family Connections ...... 846 Total Developed Lots ...... 846

______(a) Includes $680,340 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Taxable Assessed Valuation of $303,145,390 (excluding $680,340 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) La Reserve at Cinco Ranch I LLC$ 6,800,340 2.24% Stafford Properties Development Co. 3,011,150 0.99% Parkway Reserve B LLC 2,057,940 0.68% La Reserve at Cinco ranch II LLC 1,785,120 0.59% JSDI LLC 1,741,200 0.57% The James H & Shello MO Kishimura Trust 1,377,610 0.45% Parkway Reserve C LLC 1,362,980 0.45% Halle Properties LLC 1,319,150 0.44% Parkway Reserve D LLC 891,150 0.29% OP SPE PHX1 LLC 670,110 0.22% Total$ 21,016,750 6.93%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.165 $ 0.165 $ 0.165 $ 0.165 $ 0.175 Contract Tax 0.160 0.175 0.170 0.180 0.195 Maintenance Tax 0.205 0.165 0.160 0.150 0.160 Total District Tax Rate$ 0.530 $ 0.505 $ 0.495 $ 0.495 $ 0.530

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from the District’s Tax Assessor/Collector. Reference is made to such statements and records for further and complete information. See “Tax Roll Information” below.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 249,660,162 $ 0.5800 $ 1,448,029 $ 1,446,871 99.92% 2015 275,441,039 0.5300 1,459,838 1,458,378 99.90% 2016 288,192,560 0.4950 1,426,553 1,424,841 99.88% 2017 286,876,456 0.4950 1,420,038 1,418,334 99.88% 2018 291,916,976 0.5050 1,474,181 1,462,387 99.20%

2019 303,825,730 0.5300 1,610,276 (c) (c)

______(a) Net valuation represents final gross assessed value as certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 12

Voter Authorized Unlimited Tax Bonds ...... $20,800,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $1.50 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 0

2019 Gross Assessed Valuation ...... $423,186,121 (a) 2019 Taxable Assessed Valuation ...... $408,955,133 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 0.00%

2018 Gross Assessed Valuation as a Percentage of: 2018 Gross Assessed Valuation of Service Area ...... 10.29%

Contract Payment Funds Available as of September 2019 ...... $ 466

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2044) ...... $ 348,001

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $ 801,592

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20

Status of Development as of September 2019:

Acreage ...... 348 Total Active Single-Family Connections ...... 202 Total Developed Lots ...... 202

______(a) Includes $1,240,910 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participant. This information is based upon the 2019 Taxable Assessed Valuation of $407,714,223 (excluding $1,240,910 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) PR II Lacenterra LP$ 79,187,893 19.42% CPI/FB Lacenterra Owner LP 34,956,070 8.57% Sawtelle Cinco Ranch LLC 27,623,000 6.78% ARIIC SOKTYTX01 LLC 21,900,000 5.37% LTF Real Estate Company Inc. 16,108,729 3.95% Target Corporation 15,307,250 3.75% Cinco Ranch Station LLC 15,141,001 3.71% PR II La Centerra 2 LP 11,500,181 2.82% Verada Associates LP 9,150,310 2.24% Village Center Plaza LLC 6,783,728 1.66% Total$ 237,658,162 58.29%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ - $ - $ - $ - $ - Contract Tax 0.130 0.130 0.170 0.170 0.190 Maintenance Tax 0.120 0.120 0.080 0.080 0.080 Total District Tax Rate$ 0.250 $ 0.250 $ 0.250 $ 0.250 $ 0.270

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from the District’s Tax Assessor/Collector. Reference is made to such statements and records for further and complete information. See “Tax Roll Information” below.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 291,088,491 $ 0.3000 $ 873,265 $ 872,916 99.96% 2015 323,810,516 0.2700 874,288 873,764 99.94% 2016 362,334,772 0.2500 905,837 903,301 99.72% 2017 374,228,841 0.2500 935,572 934,543 99.89% 2018 390,399,050 0.2500 975,998 961,553 98.52% 2019 408,955,133 0.2500 1,022,388 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

CINCO MUNICIPAL UTILITY DISTRICT NO. 14

Voter Authorized Unlimited Tax Bonds ...... $51,300,000 Debt Service Tax Limitation ...... Unlimited Maintenance Tax Limitation ...... $1.00 Contract Tax Limitation ...... Unlimited Gross Outstanding Direct Debt ...... $ 8,005,000

2019 Gross Assessed Valuation ...... $625,584,002 (a) 2019 Taxable Assessed Valuation ...... $570,852,194 (a) Outstanding Debt as a Percentage of: 2019 Taxable Assessed Valuation ...... 1.40%

2019 Gross Assessed Valuation as a Percentage of: 2019 Gross Assessed Valuation of Service Area ...... 15.21%

Contract Payment Funds Available as of September 2019 ...... $ 38,460 Debt Service Funds Available as of September 2019 ...... $328,779

Average Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020-2046) ...... $ 514,439 Direct Debt (2020-2030) ...... $ 860,281 Total ...... $1,374,720

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) ...... $1,184,971 Direct Debt (2020) ...... $1,011,138 Total ...... $2,196,109

Tax Rate Based Upon 2019 Taxable Valuation Tax Rates, Including Contract Tax, Required to Pay Pro Rata Share of Debt Service on Contract Revenue Bonds and Direct Debt, at a 95% Collection Rate:

Average Annual Debt Service:

Pro Rata Share of Contract Revenue Bonds (2020-2046) $0.09 Direct Debt (2020-2030) 0.16 Total $0.25

Maximum Annual Debt Service: Pro Rata Share of Contract Revenue Bonds (2020) $0.20 Direct Debt (2020) 0.19 Total $0.39

Status of Development as of September 2019:

Acreage ...... 695 Total Active Single-Family Connections ...... 2,060 Total Developed Lots ...... 2,060

______(a) Includes $1,153,690 of uncertified gross and taxable value, which is subject to review and downward revision prior to certification.

Principal Taxpayers:

The following table lists the principal taxpayer(s), such properties taxable assessed value and the taxable assessed value as a percentage of the total taxable assessed value of the Participants. This information is based upon the 2019 Taxable Assessed Valuation of $569,698,504 (excluding $1,153,690 of uncertified value).

2019 Taxable Assessed Assessed Taxpayer Value ($) Valuation (%) Centerpoint Energy$ 1,525,870 0.27% Comcast of Houston LLC 1,282,440 0.23% Vibrant Rental Management 648,400 0.11% Individual 589,570 0.10% Individual 550,220 0.10% Individual 549,200 0.10% Individual 545,510 0.10% Individual 544,820 0.10% Individual 54,360 0.01% Individual 541,390 0.10% Total$ 6,831,780 1.20%

Tax Rate Distribution:

2019 2018 2017 2016 2015 Debt Service Tax$ 0.175 $ 0.175 $ 0.180 $ 0.180 $ 0.185 Contract Tax 0.170 0.195 0.180 0.205 0.220 Maintenance Tax 0.180 0.120 0.130 0.115 0.115 Total District Tax Rate$ 0.525 $ 0.490 $ 0.490 $ 0.500 $ 0.520

Historical Tax Collections:

The following statement of tax collections sets forth in condensed form a portion of the historical tax experience of the District. Such table has been prepared for inclusion herein, based upon information obtained from the District’s Tax Assessor/Collector. Reference is made to such statements and records for further and complete information. See “Tax Roll Information” below.

Certified Taxable Collections as of Tax Assessed Tax Total 8/31/2019(b) Year Valu at io n (a) Rate Tax Levy Amount Percent 2014$ 494,181,101 $ 0.5350 $ 2,643,869 $ 2,642,283 99.94% 2015 553,947,486 0.5200 2,880,527 2,878,799 99.94% 2016 578,419,338 0.5000 2,892,097 2,890,072 99.93% 2017 572,828,715 0.4900 2,806,861 2,803,773 99.89% 2018 579,135,633 0.4900 2,837,765 2,819,035 99.34% 2019 570,852,194 0.5250 2,996,974 (c) (c)

______(a) As certified by FBCAD less any exemptions granted. (b) Represents actual tax levy, including any adjustments by FBCAD, as of the date hereof. (c) In the process of collection. Taxes for the 2019 tax year are due January 31, 2020.

APPENDIX B

Independent Auditor’s Report and Financial Statements of the District for the year ended September 30, 2018

Cinco Municipal Utility District No. 1 Fort Bend County, Texas Independent Auditor's Report and Financial Statements September 30, 2018

CPAs & Advisors

Cinco Municipal Utility District No. 1 September 30, 2018

Contents

Independent Auditor's Report ...... 1

Management's Discussion and Analysis ...... 3

Basic Financial Statements Statement of Net Position ...... 10 Statement of Activities ...... 11 Balance Sheet – Governmental Funds ...... 12 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ...... 13 Statement of Net Position – Proprietary Fund ...... 14 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Fund ...... 15 Statement of Cash Flows – Proprietary Fund ...... 16 Notes to Financial Statements ...... 17

Required Supplementary Information Budgetary Comparison Schedule – General Fund ...... 36 Notes to Required Supplementary Information ...... 37

Other Information Other Schedules Included Within This Report ...... 38 Schedule of Services and Rates ...... 39 Schedule of General Fund Expenditures ...... 40 Schedule of Temporary Investments ...... 41 Analysis of Taxes Levied and Receivable ...... 42 Schedule of Long-term Debt Service Requirements by Years, Governmental Activities ...... 44 Changes in Long-term Bonded Debt, Governmental Activities ...... 47 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities ...... 48 Changes in Long-term Bonded Debt, Business-type Activities...... 60 Comparative Schedule of Revenues and Expenditures – General Fund and Debt Service Fund – Five Years ...... 62 Board Members, Key Personnel and Consultants ...... 64

Independent Auditor's Report

Board of Directors Cinco Municipal Utility District No. 1 Fort Bend County, Texas

We have audited the accompanying financial statements of the governmental activities, business-type activities and each major fund of Cinco Municipal Utility District No. 1 (the District), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Board of Directors Cinco Municipal Utility District No. 1 Page 2

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities and each major fund of the District as of September 30, 2018, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison schedule listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The other information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Houston, Texas February 11, 2019

Cinco Municipal Utility District No. 1 Management's Discussion and Analysis September 30, 2018

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to financial statements. This report also contains supplementary information required by the Governmental Accounting Standards Board and other information required by the District's state oversight agency, the Texas Commission on Environmental Quality (the Commission).

Government-wide Financial Statements

The focus of government-wide financial statements is on the overall financial position and activities of the District. The District's government-wide financial statements include the statement of net position and statement of activities, which are prepared using accounting principles that are similar to commercial enterprises. The purpose of the statement of net position is to attempt to report all of the assets, liabilities, and deferred inflows and outflows of resources of the District. The District reports all of its assets when it acquires or begins to maintain the assets and reports all of its liabilities when they are incurred.

The difference between the District's total assets, liabilities, and deferred inflows and outflows of resources is labeled as net position and this difference is similar to the total stockholders' equity presented by a commercial enterprise.

The purpose of the statement of activities is to present the revenues and expenses of the District. Again, the items presented on the statement of activities are measured in a manner similar to the approach used by a commercial enterprise in that revenues are recognized when earned or established criteria are satisfied and expenses are reported when incurred by the District. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues are reported even when they may not be collected for several months or years after the end of the accounting period and expenses are recorded even though they may not have used cash during the current year.

Although the statement of activities looks different from a commercial enterprise's statement of income, the financial statement is different only in format, not substance. Whereas the bottom line in a commercial enterprise is its net income, the District reports an amount described as change in net position, essentially the same thing.

Fund Financial Statements

Unlike government-wide financial statements, the focus of fund financial statements is directed to specific activities of the District rather than the District as a whole. Except for the general fund, a specific fund is established to satisfy managerial control over resources or to satisfy finance-related legal requirements established by external parties or governmental statutes or regulations.

3 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

Governmental Funds

Governmental-fund financial statements consist of a balance sheet and a statement of revenues, expenditures and changes in fund balances and are prepared on an accounting basis that is significantly different from that used to prepare the government-wide financial statements.

In general, these financial statements have a short-term emphasis and, for the most part, measure and account for cash and other assets that can easily be converted into cash. For example, amounts reported on the balance sheet include items such as cash and receivables collectible within a very short period of time, but do not include capital assets such as land and water, sewer and drainage systems. Fund liabilities include amounts that are to be paid within a very short period after the end of the fiscal year. The difference between a fund's assets, liabilities, and deferred inflows and outflows of resources is labeled the fund balance and generally indicates the amount that can be used to finance the next fiscal year's activities. Likewise, the operating statement for governmental funds reports only those revenues and expenditures that were collected in cash or paid with cash, respectively, during the current period or very shortly after the end of the fiscal year.

Because the focus of the government-wide and fund financial statements is different, there are significant differences between the totals presented in these financial statements. For this reason, there is an analysis in the notes to financial statements that describes the adjustments to fund balances to arrive at net position presented in the governmental activities column on the statement of net position. Also, there is an analysis in the notes to financial statements that reconciles the total change in fund balances for all governmental funds to the change in net position, as reported in the governmental activities column in the statement of activities.

Proprietary Funds

Proprietary funds, in general, charge customers for the services that are provided. These funds use a long-term financial accounting approach, full accrual basis and provide additional information in the statement of cash flows. The proprietary fund statements provide the same information as the business-type activities portion of the government-wide financial statements, only in more detail.

Notes to Financial Statements

The notes to financial statements provide additional information that is essential to a full understanding of the data found in the government-wide and fund financial statements.

Financial Analysis of the District as a Whole

The District's overall financial position and activities for the past two years are summarized as follows, based on the information included in the government-wide financial statements.

4 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

2018 Summary of Net Position Governmental Business-type Activities Activities Total

Current and other assets $ 1,754,649 $ 27,892,916 $ 29,647,565 Capital assets 2,060,494 56,315,145 58,375,639 Total assets 3,815,143 84,208,061 88,023,204 Deferred outflows of resources 24,458 661,648 686,106 Total assets and deferred outflows of resources $ 3,839,601 $ 84,869,709 $ 88,709,310 Long-term liabilities $ 2,028,441 $ 57,079,475 $ 59,107,916 Other liabilities 200,680 8,405,889 8,606,569 Total liabilities 2,229,121 65,485,364 67,714,485 Net position: Net investment in capital assets (108,489) (3,855,255) (3,963,744) Restricted 126,034 21,168,108 21,294,142 Unrestricted 1,592,935 2,071,492 3,664,427 Total net position $ 1,610,480 $ 19,384,345 $ 20,994,825

2017 Summary of Net Position Governmental Business-type Activities Activities Total

Current and other assets $ 1,597,482 $ 34,558,899 $ 36,156,381 Capital assets 2,128,500 51,981,152 54,109,652 Total assets 3,725,982 86,540,051 90,266,033 Deferred outflows of resources 26,288 796,425 822,713 Total assets and deferred outflows of resources $ 3,752,270 $ 87,336,476 $ 91,088,746 Long-term liabilities $ 2,197,782 $ 62,114,155 $ 64,311,937 Other liabilities 200,949 7,704,527 7,905,476 Total liabilities 2,398,731 69,818,682 72,217,413 Net position: Net investment in capital assets (207,994) (5,868,744) (6,076,738) Restricted 134,660 21,182,731 21,317,391 Unrestricted 1,426,873 2,203,807 3,630,680 Total net position $ 1,353,539 $ 17,517,794 $ 18,871,333

5 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

The total net position of the District's governmental activities increased by $256,941, or about 19 percent. The majority of the increase in net position is related to property taxes and charges for services revenues in excess of service operations and interest expenses.

The total net position of the District's business-type activities increased by $1,866,551. The majority of the increase in net position is related to charges for regional services revenues exceeding regional service operations expenses and interest on the District's contract revenue bonded indebtedness.

Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

2018 Summary of Changes in Net Position

Governmental Business-type Activities Activities Total

Program revenues: Charges for services $ 509,190 $ 17,913,717 $ 18,422,907

General revenues: Property taxes 872,738 - 872,738 Other revenues and transfers 32,579 385,386 417,965

Total revenues and transfers 1,414,507 18,299,103 19,713,610

Expenses: Service operations 666,306 11,495,613 12,161,919 Depreciation 68,006 2,891,220 2,959,226 Debt service and contractual payments 423,254 2,045,719 2,468,973

Total expenses 1,157,566 16,432,552 17,590,118

Change in net position 256,941 1,866,551 2,123,492

Net position, beginning of year 1,353,539 17,517,794 18,871,333

Net position, end of year $ 1,610,480 $ 19,384,345 $ 20,994,825

6 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

2017 Summary of Changes in Net Position

Governmental Business-type Activities Activities Total

Program revenues: Charges for services $ 495,209 $ 17,606,576 $ 18,101,785

General revenues: Property taxes 893,544 - 893,544 Other revenues and transfers 22,048 142,192 164,240

Total revenues and transfers 1,410,801 17,748,768 19,159,569

Expenses: Service operations 675,536 11,313,407 11,988,943 Depreciation 68,005 2,927,663 2,995,668 Debt service and contractual payments 459,209 2,275,600 2,734,809

Total expenses 1,202,750 16,516,670 17,719,420

Change in net position 208,051 1,232,098 1,440,149

Net position, beginning of year 1,145,488 16,285,696 17,431,184

Net position, end of year $ 1,353,539 $ 17,517,794 $ 18,871,333

Financial Analysis of the District's Funds

Governmental Activities

The general fund's fund balance increased by $164,654. This increase was primarily related to property taxes and service revenues in excess of service operations expenditures.

The debt service fund's fund balance decreased by $11,750 because property tax revenues generated were less than bond principal and interest, contractual obligation requirements and contracted services expenditures.

Business-type Activities

The enterprise fund's net position increased by $1,866,551 due to charges for regional services revenues exceeding regional service operations expenses and interest on the District's contract revenue bonds.

7 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

General Fund Budgetary Highlights

There were several differences between the final budgetary amounts and actual amounts. The major differences between budget and actual were due to professional fees, repairs and maintenance, and other expenditures being lower than anticipated. The fund balance as of September 30, 2018, was expected to be $1,179,210 and the actual end-of-year fund balance was $1,591,094.

Capital Assets and Related Debt

Capital Assets

Capital assets held by the District at the end of the current and previous fiscal years are summarized below:

Capital Assets (Net of Accumulated Depreciation)

2018 2017 Governmental Activities Land and improvements $ 15,407 $ 15,407 Water facilities 373,948 386,073 Wastewater facilities 845,413 873,245 Drainage facilities 825,726 853,775

Total capital assets $ 2,060,494 $ 2,128,500

Business-type Activities Land and improvements $ 274,150 $ 274,150 Construction in progress 11,614,595 7,371,672 Water facilities 19,932,328 18,312,890 Wastewater facilities 24,053,528 25,565,104 Drainage facilities 440,544 457,336

Total capital assets $ 56,315,145 $ 51,981,152

Current year significant additions to capital assets are as follows:

Business-type Activities

Construction in progress for Jasper well No. 1, reverse osmosis system facility and microfiltration arsenic treatment $ 7,210,024 East water treatment plant proposed reverse osmosis system operations and maintenance building 15,189

Total additions to business-type activities capital assets $ 7,225,213

8 Cinco Municipal Utility District No. 1 Management's Discussion and Analysis (Continued) September 30, 2018

Debt

The changes in the debt position of the District during the fiscal year ended September 30, 2018, are summarized as follows:

Governmental Business-type Activities Activities Total

Long-term debt payable, beginning of year $ 2,362,782 $ 67,074,155 $ 69,436,937 Decreases in long-term debt (169,341) (5,039,680) (5,209,021)

Long-term debt payable, end of year $ 2,193,441 $ 62,034,475 $ 64,227,916

At September 30, 2018, the District had $11,335,000 of internal district unlimited tax bonds authorized, but unissued, for the purposes of acquiring, constructing and improving the water, sanitary sewer and drainage systems within the District.

The District's bonds carry an underlying rating of "A" from Standard & Poor's (S&P). The Series 2007 and 2009 refunding bonds carry a "AA" rating from S&P by virtue of bond insurance issued by Assured Guaranty Corp. The Series 2008, 2010 refunding, 2010A, 2011 refunding, 2012 refunding and 2012 bonds carry a "AA" rating from S&P by virtue of bond insurance issued by Assured Guaranty Municipal Corp. The Series 2013 refunding, 2014 and 2014A bonds carry a "AA" rating from S&P by virtue of bond insurance issued by Build America Mutual Assurance Co.

Other Relevant Factors

Relationship to the City of Houston

Under existing Texas law, since the District lies wholly within the extraterritorial jurisdiction of the City of Houston (the City), the District must conform to the City ordinance consenting to the creation of the District. In addition, the District may be annexed by the City without the District's consent, subject to compliance with existing state law procedural requirements. If the District is annexed, the City must assume the District's assets and obligations (including the bonded indebtedness) and abolish the District within 90 days.

9 Cinco Municipal Utility District No. 1 Statement of Net Position September 30, 2018

Primary Government Governmental Business-type Activities Activities Total Assets

Current Assets Cash and cash equivalents $ 80,795 $ 1,890,293 $ 1,971,088 Certificates of deposit 239,441 - 239,441 Short-term investments 1,437,930 - 1,437,930 Receivables: Property taxes 5,865 - 5,865 Accrued interest 1,520 - 1,520 Service accounts receivable 64,237 - 64,237 Other receivables - 11,725 11,725 Internal balances (75,139) 75,139 - Prepaid expenditures - 16,000 16,000 Due from others - 1,360,923 1,360,923

Total current assets 1,754,649 3,354,080 5,108,729

Noncurrent Assets Restricted assets, cash and cash equivalents - 24,538,836 24,538,836 Capital assets, net: Land and improvements 15,407 274,150 289,557 Construction in progress - 11,614,595 11,614,595 Infrastructure 2,045,087 44,426,400 46,471,487

Total noncurrent assets 2,060,494 80,853,981 82,914,475

Total assets 3,815,143 84,208,061 88,023,204

Deferred Outflows of Resources

Deferred amounts on debt refundings 24,458 661,648 686,106

Total assets and deferred outflows of resources $ 3,839,601 $ 84,869,709 $ 88,709,310

See Notes to Financial Statements

Primary Government Governmental Business-type Activities Activities Total Liabilities and Net Position

Current Liabilities Accounts payable $ 26,732 $ 2,718,112 $ 2,744,844 Accrued interest payable 6,423 732,777 739,200 Long-term liabilities, current portion 165,000 4,955,000 5,120,000

Total current liabilities 198,155 8,405,889 8,604,044

Noncurrent Liabilities Customer deposits 2,525 - 2,525 Long-term liabilities, net 2,028,441 57,079,475 59,107,916

Total noncurrent liabilities 2,030,966 57,079,475 59,110,441

Total liabilities 2,229,121 65,485,364 67,714,485

Net Position Net investment in capital assets (108,489) (3,855,255) (3,963,744) Restricted: Debt service 126,034 19,755,784 19,881,818 Capital projects - 1,412,324 1,412,324 Unrestricted 1,592,935 2,071,492 3,664,427

Total net position 1,610,480 19,384,345 20,994,825

Total liabilities and net position $ 3,839,601 $ 84,869,709 $ 88,709,310

10 Cinco Municipal Utility District No. 1 Statement of Activities Year Ended September 30, 2018

Net Revenue (Expense) and Changes in Net Position Program Revenue Primary Government Charges for Business- Charges for Regional Governmental type Expenses Services Services Activities Activities Total Government/Programs Primary Government Governmental activities: Service operations $ 666,306 $ 509,190 $ - $ (157,116) $ - $ (157,116) Depreciation 68,006 - - (68,006) - (68,006) Interest expense on long-term liabilities 79,247 - - (79,247) - (79,247) Contractual obligation 344,007 - - (344,007) - (344,007)

Total governmental activities 1,157,566 509,190 0 (648,376) 0 (648,376)

Business-type activities: Regional service operations 11,495,613 - 17,913,717 - 6,418,104 6,418,104 Depreciation 2,891,220 - - - (2,891,220) (2,891,220) Interest expense on long-term liabilities 2,045,719 - - - (2,045,719) (2,045,719)

Total business-type activities 16,432,552 0 17,913,717 0 1,481,165 1,481,165

Total primary government $ 17,590,118 $ 509,190 $ 17,913,717 (648,376) 1,481,165 832,789

General Revenues and Transfers Property taxes 872,738 - 872,738 Investment income 28,120 311,848 339,968 Other 4,459 73,538 77,997

Total general revenues and transfers 905,317 385,386 1,290,703

Changes in Net Position 256,941 1,866,551 2,123,492

Net Position, Beginning of Year 1,353,539 17,517,794 18,871,333

Net Position, End of Year $ 1,610,480 $ 19,384,345 $ 20,994,825

See Notes to Financial Statements 11 Cinco Municipal Utility District No. 1 Balance Sheet – Governmental Funds September 30, 2018

Debt Total General Service Governmental Fund Fund Funds Assets

Cash and cash equivalents $ 54,788 $ 26,007 $ 80,795 Certificates of deposit 239,441 - 239,441 Short-term investments 1,323,489 114,441 1,437,930 Receivables: Property taxes 1,841 4,024 5,865 Accrued interest 1,520 - 1,520 Service accounts receivable 64,237 - 64,237 Interfund receivable 11,991 - 11,991 Internal balances (75,139) - (75,139)

Total assets $ 1,622,168 $ 144,472 $ 1,766,640

Liabilities, Deferred Inflows of Resources and Fund Balances

Liabilities Accounts payable $ 26,708 $ 24 $ 26,732 Customer deposits 2,525 - 2,525 Interfund payable - 11,991 11,991

Total liabilities 29,233 12,015 41,248

Deferred Inflows of Resources Deferred property tax revenues 1,841 4,024 5,865

Fund Balances Restricted for unlimited tax bonds - 128,433 128,433 Assigned to future expenditures 245,050 - 245,050 Unassigned 1,346,044 - 1,346,044

Total fund balances 1,591,094 128,433 1,719,527

Total liabilities, deferred inflows of resources and fund balances $ 1,622,168 $ 144,472 $ 1,766,640

See Notes to Financial Statements 12 Cinco Municipal Utility District No. 1 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds Year Ended September 30, 2018

Debt Total General Service Governmental Fund Fund Funds Revenues Property taxes $ 273,219 $ 595,075 $ 868,294 Water service 100,471 - 100,471 Sewer service 108,992 - 108,992 Surface water conversion 299,727 - 299,727 Penalty and interest 2,859 1,892 4,751 Investment income 22,391 5,729 28,120

Total revenues 807,659 602,696 1,410,355

Expenditures Service operations: Purchased services 127,344 - 127,344 Regional water fee 295,542 - 295,542 Professional fees 65,182 1,109 66,291 Contracted services 24,225 15,592 39,817 Solid waste 65,139 - 65,139 Repairs and maintenance 16,495 - 16,495 Other expenditures 49,078 6,600 55,678 Debt service: Principal retirement - 165,000 165,000 Interest and fees - 82,138 82,138 Contractual obligation - 344,007 344,007

Total expenditures 643,005 614,446 1,257,451

Excess (Deficiency) of Revenues Over Expenditures 164,654 (11,750) 152,904

Fund Balances, Beginning of Year 1,426,440 140,183 1,566,623

Fund Balances, End of Year $ 1,591,094 $ 128,433 $ 1,719,527

See Notes to Financial Statements 13 Cinco Municipal Utility District No. 1 Statement of Net Position – Proprietary Fund September 30, 2018

Business-type Activities - Enterprise Fund Assets

Current Assets Cash and cash equivalents $ 1,890,293 Internal balances 75,139 Prepaid expenses 16,000 Due from other districts 1,360,923 Other receivables 11,725

Total current assets 3,354,080

Noncurrent Assets Restricted assets, cash and cash equivalents 24,538,836 Capital assets, net of accumulated depreciation 56,315,145

Total noncurrent assets 80,853,981

Total assets 84,208,061

Deferred Outflows of Resources

Deferred amounts on debt refundings 661,648

Total assets and deferred outflows of resources $ 84,869,709

See Notes to Financial Statements

Business-type Activities - Enterprise Fund Liabilities and Net Position

Current Liabilities Accounts payable $ 2,718,112 Accrued interest payable 732,777 Long-term liabilities, current portion 4,955,000

Total current liabilities 8,405,889

Noncurrent Liabilities Long-term liabilities, net of unamortized premium and discount 57,079,475

Total liabilities 65,485,364

Net Position Net investment in capital assets (3,855,255) Restricted for: Debt service 19,755,784 Capital projects 1,412,324 Unrestricted 2,071,492

Total net position 19,384,345

Total liabilities and net position $ 84,869,709

14 Cinco Municipal Utility District No. 1 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Fund Year Ended September 30, 2018

Business-type Activities - Enterprise Fund Operating Revenues Charges for services $ 17,913,717

Operating Expenses Surface water conversion 6,200,399 Professional fees 388,294 Contracted services 543,075 Utilities 842,763 Repairs and maintenance 3,191,184 Depreciation 2,891,220 Other expenditures 317,922

Total operating expenses 14,374,857

Operating Income 3,538,860

Nonoperating Income (Expense) Investment income 311,848 Other income 73,538 Bond interest and fiscal agent charges (2,045,719) Debt issuance costs (11,976)

Total nonoperating expense (1,672,309)

Change in Net Position 1,866,551

Net Position, Beginning of Year 17,517,794

Net Position, End of Year $ 19,384,345

See Notes to Financial Statements 15 Cinco Municipal Utility District No. 1 Statement of Cash Flows – Proprietary Fund Year Ended September 30, 2018

Business-type Activities - Enterprise Fund Operating Activities Receipts from contract tax $ 6,904,714 Receipts from service operations 10,977,532 Other receipts 27,537 Payments for service operations (10,626,948)

Net cash provided by operating activities 7,282,835

Capital and Related Financing Activities Principal payments on contract revenue bonds (4,960,000) Interest and agent fees paid on contract revenue bonds (2,294,692) Costs of issuance of contract revenue bonds (11,976) Purchase of capital assets (6,971,439)

Net cash used in capital and related financing activities (14,238,107)

Investing Activity Interest and other income 385,386

Net cash provided by investing activity 385,386

Net Decrease in Cash and Cash Equivalents (6,569,886)

Cash and Cash Equivalents, Beginning of Year 32,999,015

Cash and Cash Equivalents, End of Year $ 26,429,129

Cash and Cash Equivalents of Proprietary Fund, as Presented on the Statement of Net Position - Proprietary Fund Cash and cash equivalents $ 1,890,293 Restricted cash and cash equivalents 24,538,836

$ 26,429,129

Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income $ 3,538,860 Adjustment to reconcile operating income to net cash provided by operating activities: Depreciation expense 2,891,220 Change in assets and liabilities: Receivables, net (3,934) Prepaid expenses and other assets 100,031 Accounts payable and accrued liabilities 756,658

Net cash provided by operating activities $ 7,282,835

See Notes to Financial Statements 16 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Cinco Municipal Utility District No. 1 (the District) was created by a Special Act of the Texas Legislature on May 24, 1985, in accordance with the Texas Water Code, Chapter 54. The District operates in accordance with Chapters 49 and 54 of the Texas Water Code and is subject to the continuing supervision of the Texas Commission on Environmental Quality (the Commission). The principal functions of the District are to finance, construct, own and operate waterworks, wastewater and drainage facilities and to provide such facilities and services to the customers of the District.

The District is governed by a Board of Directors (the Board) consisting of five individuals who are residents or owners of property within the District and are elected by voters within the District. The Board sets the policies of the District. The accounting and reporting policies of the District conform to accounting principles generally accepted in the United States of America for state and local governments, as defined by the Governmental Accounting Standards Board. The following is a summary of the significant accounting and reporting policies of the District:

Reporting Entity

The accompanying government-wide financial statements present the financial statements of the District. There are no component units that are legally separate entities for which the District is considered to be financially accountable. Accountability is defined as the District's substantive appointment of the voting majority of the component unit's governing board. Furthermore, to be financially accountable, the District must be able to impose its will upon the component unit or there must be a possibility that the component unit may provide specific financial benefits to, or impose specific financial burdens on, the District.

Government-wide Financial Statements

The statement of net position and the statement of activities display information about the District as a whole. The statements distinguish between governmental and business-type activities. Governmental activities are generally financed through intergovernmental revenues and reimbursements from participants. Business-type activities are financed by fees charged to external parties for goods or services.

In the government-wide statement of net position, both the governmental and business-type activities columns are presented on a full accrual, economic resource basis, which recognizes all long-term assets and receivables, as well as long-term debt and obligations.

The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each function of the District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include

17 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

charges paid by the recipients of goods or services offered by the programs that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, such as investment earnings, are presented as general revenues.

Fund Financial Statements

Fund financial statements of the District are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self-balancing accounts that constitutes its assets, liabilities, fund equity, revenues and expenditures/expenses. Funds are organized into two categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the District or if it meets certain other criteria.

Governmental Funds

The District presents the following major governmental funds:

General Fund – The general fund is the primary operating fund of the District which accounts for all financial resources not accounted for in another fund. Revenues are derived primarily from property taxes, charges for services and interest income.

Debt Service Fund – The debt service fund is used to account for financial resources that are restricted, committed or assigned to expenditures for principal and interest related costs, as well as the financial resources being accumulated for future debt service.

Fund Balances – Governmental Funds

The fund balances for the District's governmental funds can be displayed in up to five components:

Nonspendable – Amounts that are not in a spendable form or are required to be maintained intact.

Restricted – Amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may be changed or lifted only with the consent of resource providers.

Committed – Amounts that can be used only for the specific purposes determined by resolution of the Board. Commitments may be changed or lifted only by issuance of a resolution by the District's Board.

Assigned – Amounts intended to be used by the District for specific purposes as determined by management. In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.

18 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Unassigned – The residual classification for the general fund and includes all amounts not contained in the other classifications.

The District considers restricted amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. The District applies committed amounts first, followed by assigned amounts, and then unassigned amounts when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.

Proprietary Fund

The enterprise fund accounts for the operations of the regional facilities. These facilities provide water supply and delivery, wastewater collection, treatment and disposal facilities to participants.

Measurement Focus

Measurement focus is a term used to describe which transactions are recorded within the various financial statements.

In the government-wide statement of net position and the statement of activities, both governmental and business-type activities are presented using the economic resources measurement focus as defined in item (b) below:

In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate:

(a) All governmental funds utilize a current financial resources measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statement presents sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period.

(b) The proprietary funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position, financial position and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position.

Basis of Accounting

All governmental funds use the modified accrual basis of accounting. Under this basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period.

19 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

All primary sources of the District's revenue are susceptible to accrual. Examples of revenue accrued are taxes, fees for services, charges to participants based on cost-reimbursement contracts and earnings from investments.

Deferred inflows of resources are recorded when the potential revenue does not meet both the measurable and available criteria for recognition in the current period. Deferred inflows of resources also arise when resources are received before earned.

Expenditures and liabilities are recognized when the related fund obligations are incurred as a result of receipt of goods and services.

All proprietary funds use the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized at the time liabilities are incurred.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the District's enterprise funds and internal service funds are charges to customers for sales and services along with penalties and fees. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Deferred Outflows and Inflows of Resources

A deferred outflow of resources is a consumption of net position that is applicable to a future reporting period and a deferred inflow of resources is an acquisition of net position that is applicable to a future reporting period.

Interfund Transactions

Transfers from one fund to another fund are reported as interfund receivables and payables if there is intent to repay the amount and if there is the ability to repay the advance on a timely basis. Operating transfers represent legally authorized transfers from the fund receiving resources to the fund through which the resources are to be expended.

Pension Costs

The District does not participate in a pension plan and, therefore, has no pension costs.

20 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and deferred inflows and outflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The District considers all liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2018, cash equivalents consisted primarily of certificates of deposit and money market accounts with brokers.

Investments and Investment Income

Investments in certificates of deposit, mutual funds, U.S. Government and agency securities, and certain pooled funds, which have a remaining maturity of one year or less at the date of purchase, are recorded at amortized cost. All other investments are carried at fair value. Fair value is determined using quoted market values.

Investment income includes dividends and interest income and the net change for the year in the fair value of investments carried at fair value. Investment income is credited to the fund in which the investment is recorded.

Property Taxes

An appraisal district annually prepares appraisal records listing all property within the District and the appraised value of each parcel or item as of January 1. Additionally, on January 1, a tax lien attaches to property to secure the payment of all taxes, penalty and interest ultimately imposed for the year on the property. After the District receives its certified appraisal roll from the appraisal district, the rate of taxation is set by the Board of the District based upon the aggregate appraisal value. Taxes are due and payable October 1 or when billed, whichever is later, and become delinquent after January 31 of the following year.

In the governmental funds, property taxes are initially recorded as receivables and deferred inflows of resources at the time the tax levy is billed. Revenues recognized during the fiscal year ended September 30, 2018, include collections during the current period or within 60 days of year-end related to the 2017 and prior years' tax levies.

21 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

In the government-wide statement of net position, property taxes are considered earned in the budget year for which they are levied. For the District's fiscal year ended September 30, 2018, the 2017 tax levy is considered earned during the current fiscal year. In addition to property taxes levied, any delinquent taxes are recorded net of amounts considered uncollectible.

Capital Assets

The accounting treatment of property, plant and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.

Capital assets of proprietary funds are reported in both the government-wide and fund financial statements. All other capital assets of the governmental unit are general capital assets. They are not reported as assets in governmental funds but are reported in the governmental activities column in the government-wide statement of net position.

Capital assets are recorded at historical cost and depreciated over their estimated useful lives unless they are inexhaustible, such as land. Depreciation expense is reported in the government-wide statement of activities and the proprietary fund statement of revenues, expenses and changes in net position.

Capital assets are depreciated using the straight-line method over their estimated useful lives as follows:

Years

Water production and distribution facilities 10-45 Wastewater collection and treatment facilities 10-45 Drainage facilities 10-45

Deferred Amount on Debt Refundings

In the government-wide financial statements, the difference between the reacquisition price and the net carrying amount of the old debt in a debt refunding is deferred and amortized to interest expense using the effective interest rate method over the remaining life of the old debt or the life of the new debt, whichever is shorter. Such amounts are classified as deferred outflows or inflows of resources.

Debt Issuance Costs

Debt issuance costs, other than prepaid insurance, do not meet the definition of an asset or deferred outflows of resources since the costs are not applicable to a future period and, therefore, are recognized as an expense/expenditure in the period incurred.

22 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Long-term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Premiums and discounts on bonds are recognized as a component of long-term liabilities and amortized over the life of the related debt using the effective interest rate method. Bonds payable are reported net of the applicable bond premium or discount.

In the fund financial statements, governmental fund types recognize premiums and discounts on bonds during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Net Position/Fund Balances

Fund balances and net position are reported as restricted when constraints placed on them are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or are imposed by law through constitutional provisions or enabling legislation.

When both restricted and unrestricted resources are available for use, generally, it is the District's policy to use restricted resources first.

Reconciliation of Government-wide and Fund Financial Statements

Amounts reported for net position of governmental activities in the statement of net position and fund balances in the governmental funds balance sheet are different because:

Capital assets used in governmental activities are not financial resources and are not reported in the funds. $ 2,060,494 Property tax revenue recognition and the related reduction of deferred inflows of resources are subject to availability of funds in the fund financial statements. 5,865 Deferred amounts on debt refundings for governmental activities are not financial resources and are not reported in the funds. 24,458 Accrued interest on long-term liabilities is not payable with current financial resources and is not reported in the funds. (6,423) Long-term debt obligations are not due and payable in the current period and are not reported in the funds. (2,193,441) Adjustment to fund balances to arrive at net position. $ (109,047)

23 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Amounts reported for change in net position of governmental activities in the statement of activities are different from change in fund balances in the governmental funds statement of revenues, expenditures and changes in fund balances because:

Change in fund balances. $ 152,904 Governmental funds report capital outlays as expenditures. However, for government-wide financial statements, the cost of capitalized assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of depreciation expense in the current year. (68,006) Governmental funds report principal payments on debt as expenditures. For the statement of activities these transactions do not have any effect on net position. 165,000 Revenues that do not provide current financial resources are not reported as revenues for the funds, but are reported as revenues in the statement of activities. 4,152 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 2,891 Change in net position of governmental activities. $ 256,941

Note 2: Deposits, Investments and Investment Income

Deposits

Custodial credit risk is the risk that, in the event of a bank failure, a government's deposits may not be returned to it. The District's deposit policy for custodial credit risk requires compliance with the provisions of state law.

State law requires collateralization of all deposits with federal depository insurance; a surety bond; bonds and other obligations of the U.S. Treasury, U.S. agencies or instrumentalities of the State of Texas; or certain collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States.

At September 30, 2018, none of the District's bank balances were exposed to custodial credit risk.

24 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Investments

The District may legally invest in obligations of the United States or its agencies and instrumentalities, direct obligations of Texas or its agencies or instrumentalities, collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, other obligations guaranteed as to principal and interest by the State of Texas or the United States or their agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States, obligations of states, agencies and counties and other political subdivisions with an investment rating not less than "A," insured or collateralized certificates of deposit, and certain bankers' acceptances, repurchase agreements, mutual funds, commercial paper, guaranteed investment contracts and investment pools.

The District's investment policy may be more restrictive than the Public Funds Investment Act.

The District invests in TexPool, an external investment pool that is not registered with the Securities and Exchange Commission. The State Comptroller of Public Accounts of the State of Texas has oversight of TexPool. The District also invests in TexSTAR, an external investment pool that is not registered with the Securities and Exchange Commission. A Board of Directors, made up of participants and representatives of the administrator and investment manager, has oversight of TexSTAR. The District's investments may be redeemed at any time.

At September 30, 2018, the District had the following investments and maturities:

Maturities in Years Amortized Less Than More Than Type Cost 1 1-5 6-10 10

TexPool $ 6,641,582 $ 6,641,582 $ - $ - $ - TexSTAR 46,309 46,309 - - - Government money market funds 20,479,130 20,479,130 - - -

Totals $ 27,167,021 $ 27,167,021 $ 0 $ 0 $ 0

Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the District's investment policy does not allow investments in certain mortgage-backed securities, collateralized mortgage obligations with a final maturity date in excess of 10 years and interest rate indexed collateralized mortgage obligations. The external investment pools are presented as investments with a maturity of less than one year because they are redeemable in full immediately.

25 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Credit Risk. Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. At September 30, 2018, the District's investments in TexPool and TexSTAR were rated "AAAm" by Standard & Poor's and the investments in government money market funds were rated "AAA" by Standard & Poor's.

Concentration of Credit Risk. The District places no limit on the amount that may be invested in any one issuer. At September 30, 2018, the District's investment in government money market funds constituted 75 percent of its total investments. Summary of Carrying Values

The carrying values of deposits and investments shown previously are included in the balance sheet at September 30, 2018, as follows:

Carrying value: Deposits $ 1,020,274 Investments 27,167,021

Total $ 28,187,295

Included in the following captions:

Governmental activities: Cash and cash equivalents $ 80,795 Certificates of deposit 239,441 Short-term investments 1,437,930

1,758,166

Statement of business-type activities: Cash and cash equivalents 1,890,293 Cash and cash equivalents, restricted 24,538,836

26,429,129

$ 28,187,295

Investment Income

Investment income of $28,120 in governmental activities and $311,848 in business-type activities for the year ended September 30, 2018, consisted of interest income.

26 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Note 3: Capital Assets

A summary of changes in capital assets for the year ended September 30, 2018, is presented as follows:

Balances, Balances, Beginning Reclassifi- End Governmental Activities of Year Additions cations of Year

Capital assets, non-depreciable: Land and improvements $ 15,407 $ 0 $ 0 $ 15,407

Capital assets, depreciable: Water production and distribution facilities 545,627 - - 545,627 Wastewater collection and treatment facilities 1,252,373 - - 1,252,373 Drainage facilities 1,262,232 - - 1,262,232

Total capital assets, depreciable 3,060,232 0 0 3,060,232

Less accumulated depreciation: Water production and distribution facilities (159,554) (12,125) - (171,679) Wastewater collection and treatment facilities (379,128) (27,832) - (406,960) Drainage facilities (408,457) (28,049) - (436,506)

Total accumulated depreciation (947,139) (68,006) 0 (1,015,145)

Total governmental activities, net $ 2,128,500 $ (68,006) $ 0 $ 2,060,494

Balances, Balances, Beginning Reclassifi- End Business-type Activities of Year Additions cations of Year

Capital assets, non-depreciable: Land and improvements $ 274,150 $ - $ - $ 274,150 Construction in progress 7,371,672 7,210,024 (2,967,101) 11,614,595

Total capital assets, non-depreciable 7,645,822 7,210,024 (2,967,101) 11,888,745

Capital assets, depreciable: Water production and distribution facilities 36,700,977 14,126 2,967,101 39,682,204 Wastewater collection and treatment facilities 48,184,044 1,063 - 48,185,107 Drainage facilities 755,603 - - 755,603

Total capital assets, depreciable 85,640,624 15,189 2,967,101 88,622,914

27 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Balances, Balances, Beginning Reclassifi- End Business-type Activities (Continued) of Year Additions cations of Year

Less accumulated depreciation: Water production and distribution facilities $ (18,388,087) $ (1,361,789) $ - $ (19,749,876) Wastewater collection and treatment facilities (22,618,940) (1,512,639) - (24,131,579) Drainage facilities (298,267) (16,792) - (315,059)

Total accumulated depreciation (41,305,294) (2,891,220) 0 (44,196,514)

Total business-type activities, net $ 51,981,152 $ 4,333,993 $ 0 $ 56,315,145

The District capitalizes interest costs as a component of construction in progress, based on the weighted-average rates paid for long-term borrowing. Total interest incurred was:

Interest costs capitalized $ 253,774 Interest costs charged to expense 2,124,966 Total interest incurred $ 2,378,740

Note 4: Long-term Liabilities

Changes in long-term liabilities for the year ended September 30, 2018, were as follows:

Balances, Balances, Amounts Beginning End Due in Governmental Activities of Year Decreases of Year One Year Bonds payable: General obligation bonds $ 2,305,000 $ 165,000 $ 2,140,000 $ 165,000 Add premiums on bonds 85,568 5,957 79,611 - Less discounts on bonds 27,786 1,616 26,170 - Total governmental activities long-term liabilities $ 2,362,782 $ 169,341 $ 2,193,441 $ 165,000

Balances, Balances, Amounts Beginning End Due in Business-type Activities of Year Decreases of Year One Year Bonds payable: Contract revenue bonds $ 67,725,000 $ 4,960,000 $ 62,765,000 $ 4,955,000 Add premiums on bonds 409,885 114,165 295,720 - Less discounts on bonds 1,060,730 34,485 1,026,245 - Total business-type activities $ 67,074,155 $ 5,039,680 $ 62,034,475 $ 4,955,000 long-term liabilities

28 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Governmental Activities

General Obligation Bonds

Refunding Series 2007 Series 2012

Amounts outstanding, September 30, 2018 $715,000 $1,425,000

Interest rates 3.85% to 4.75% 2.00% to 3.50%

Maturity dates, serially September 1, September 1, beginning/ending 2019/2030 2019/2029

Interest payment dates March 1/ September 1 March 1/ September 1

Callable dates* September 1, 2015 September 1, 2019

Business-type Activities

Contract Revenue Bonds

Refunding Series 2008 Series 2009

Amounts outstanding, September 30, 2018 $3,525,000 $2,610,000

Interest rates 3.50% to 4.20% 4.00%

Maturity dates, serially December 1, December 1, beginning/ending 2018/2032 2018/2020

Interest payment dates December 1/ June 1 December 1/ June 1

Callable dates* December 1, 2017 December 1, 2017

Refunding Series 2010 Series 2010A

Amounts outstanding, September 30, 2018 $820,000 $1,770,000

Interest rates 2.00% to 4.00% 2.500% to 4.125%

Maturity dates, serially December 1, December 1, beginning/ending 2018 2018/2032

Interest payment dates December 1/ June 1 December 1/ June 1

Callable dates* N/A December 1, 2018

*Or any date thereafter; callable at par plus accrued interest to the date of redemption.

29 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Refunding Series 2011 Series 2011A

Amounts outstanding, September 30, 2018 $6,245,000 $700,000 Interest rates 2.00% to 4.00% 3.000% to 4.625% Maturity dates, serially December 1, December 1, beginning/ending 2018/2023 2018/2032 Interest payment dates December 1/ June 1 December 1/ June 1 Callable dates* December 1, 2019 December 1, 2019

Refunding Series 2012 Series 2013

Amounts outstanding, September 30, 2018 $7,225,000 $3,085,000 Interest rates 3.00% to 3.75% 2.00% to 3.50% Maturity dates, serially December 1, December 1, beginning/ending 2018/2032 2018/2023 Interest payment dates December 1/ June 1 December 1/ June 1 Callable dates* December 1, 2019 December 1, 2020

Series 2014 Series 2014A

Amounts outstanding, September 30, 2018 $24,815,000 $2,285,000 Interest rates 3.50% to 4.00% 2.75% to 5.00% Maturity dates, serially December 1, December 1, beginning/ending 2018/2040 2018/2040 Interest payment dates December 1/ June 1 December 1/ June 1 Callable dates* December 1, 2022 December 1, 2022

Refunding Series 2014

Amount outstanding, September 30, 2018 $9,685,000 Interest rate 2.49% Maturity dates, serially December 1, beginning/ending 2018/2023 Interest payment dates December 1/ June 1 Callable date* N/A

*Or any date thereafter; callable at par plus accrued interest to the date of redemption.

30 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Annual Debt Service Requirements

The following schedules show the annual debt service requirements to pay principal and interest on general obligation and contract revenue bonds outstanding at September 30, 2018.

Governmental Activities

General Obligation Bonds

Year Principal Interest Total

2019 $ 165,000 $ 77,077 $ 242,077 2020 170,000 71,963 241,963 2021 175,000 66,692 241,692 2022 175,000 61,298 236,298 2023 180,000 54,752 234,752 2024-2028 1,005,000 167,083 1,172,083 2029-2030 270,000 12,819 282,819

Total $ 2,140,000 $ 511,684 $ 2,651,684

Business-type Activities

Contract Revenue Bonds

Year Principal Interest Total

2019 $ 4,955,000 $ 2,835,098 $ 7,790,098 2020 5,110,000 1,958,466 7,068,466 2021 5,095,000 1,803,681 6,898,681 2022 4,710,000 1,660,763 6,370,763 2023 4,625,000 1,521,299 6,146,299 2024-2028 8,795,000 6,290,335 15,085,335 2029 -2033 5,375,000 5,234,370 10,609,370 2034-2038 15,075,000 3,310,828 18,385,828 2039-2041 9,025,000 551,700 9,576,700

Total $ 62,765,000 $ 25,166,540 $ 87,931,540

Principal and interest on the contract revenue bonds are payable from and secured by an unconditional obligation to make certain payments by the participating districts in the applicable service area pursuant to the contracts described in Note 6. The participants have each agreed to pay a pro rata share of the debt service of the bonds based on the certified assessed valuation of each participant as a percentage of the total assessed valuation of all participating districts.

31 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Under the terms of the contracts, the District shall calculate and bill on or before September 1 of each year, or as soon thereafter as practical, the amount of contract tax payments due from each participant for the following year. The contract tax payments are payable by the participants semiannually, on April 1 and October 1 of each year, for the June 1 and December 1 debt service requirements. A summary of the participants and their initial assessed valuations and contract tax payments for the year ended September 30, 2018, is shown below:

Initial Assessed Contract Tax Valuations Payments

The District $ 204,068,393 $ 344,007 Cinco Municipal Utility District No. 2 (District No. 2) 593,432,036 1,007,486 Cinco Municipal Utility District No. 3 (District No. 3) 214,918,975 340,658 Cinco Municipal Utility District No. 5 (District No. 5) 249,752,641 433,460 Cinco Municipal Utility District No. 6 (District No. 6) 317,364,653 524,841 Cinco Municipal Utility District No. 7 (District No. 7) 487,764,550 806,177 Cinco Municipal Utility District No. 8 (District No. 8) 311,618,523 540,955 Cinco Municipal Utility District No. 9 (District No. 9) 379,120,139 640,186 Cinco Municipal Utility District No. 10 (District No. 10) 288,039,412 476,809 Cinco Municipal Utility District No. 12 (District No. 12) 388,199,486 722,658 Cinco Municipal Utility District No. 14 (District No. 14) 627,318,140 1,067,477

$ 4,061,596,948 $ 6,904,714

During the current year, each participant levied a contract tax to meet their obligations.

Internal District bonds voted $ 15,200,000 Internal District bonds sold 3,865,000 Refunding bonds voted 9,120,000 Refunding bond authorization used 35,000 Contract revenue bonds authorized Amount necessary to provide facilities Contract revenue bonds sold 123,020,000 Contract revenue refunding bonds sold 75,185,000

Note 5: Significant Bond Resolution and Commission Requirements

A. The Bond Resolutions require that the District levy and collect an ad valorem debt service tax sufficient to pay interest and principal on bonds when due. During the year ended September 30, 2018, the District levied an ad valorem debt service tax at the rate of $0.1250 per $100 of

32 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

assessed valuation, which resulted in a tax levy of $254,302 on the taxable valuation of $203,441,614 for the 2017 tax year. The interest and principal requirements paid from the tax revenues were $246,638.

B. The Commission required the District to escrow $4,807,000 from the proceeds of its Series 2014 bonds. During a prior year, $3,300,000 was released and during the current year, $1,507,000 was released from the Series 2014 bonds, leaving no remaining balance in escrow.

C. The Contract Revenue Bond Resolutions state that so long as any of the bonds or coupons remain outstanding, the District covenants that it will at all times keep insured such parts of the system as are customarily insured by municipal corporations and political subdivisions in Texas operating like properties in similar locations under the same circumstances with a responsible insurance company or companies against risk, accidents, or casualties against which and to the extent insurance is customarily carried by such municipal corporations and political subdivisions; provided, however, that at any time while any contractor engaged in construction work shall be fully responsible therefore, the District shall not be required to carry such insurance. At September 30, 2018, the District had real and personal property and boiler and machinery coverage in the amount of $56,487,938 each, general liability insurance with an aggregate limit of $10,000,000 and pollution liability coverage of $2,000,000.

D. The Contract Revenue Bond Resolutions created a debt service reserve requirement equal to $7,790,098. The amount of $7,408,457 was funded with proceeds from the sale of bonds and accumulated interest earnings. The remaining balance will be funded from interest earnings.

Note 6: Financing and Operating of Regional Facilities

The District entered into regional contracts whereby the District agreed to provide or cause to be provided the regional water supply and delivery facilities and the regional waste collection, treatment and disposal facilities necessary to serve the participating districts. The contracts are presented as follows.

District Date of Agreement

District No. 2 February 20, 1990 District No. 3 February 1, 1990 District No. 5 February 8, 1990 District No. 6 February 15, 1990 District No. 7 August 19, 1990 District No. 8 August 30, 1990 District No. 9 February 21, 1990 District No. 10 August 19, 1993 District No. 12 August 19, 1993 District No. 14 August 19, 1993

33 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Under the terms of the regional contracts, the District charges the participants a monthly operational fee calculated by multiplying the unit cost per connection by the number of equivalent single-family residential connections reserved to each district. This monthly charge is currently $24 per equivalent connection. The District also bills participants for the North Fort Bend Water Authority (the Authority) pumpage fees, based on monthly usage, at the current rate, plus a 3 percent surcharge. Transactions for the year ended September 30, 2018, are summarized below.

Receivable Receivable Balance, Balance, Beginning Cash End of Year Billings Collections of Year

The District $ 72,137 $ 422,887 $ 419,885 $ 75,139 District No. 2 461,671 1,549,004 1,786,747 223,928 District No. 3 49,269 647,868 626,941 70,196 District No. 5 85,709 645,113 640,668 90,154 District No. 6 39,603 722,663 631,316 130,950 District No. 7 76,883 1,290,694 1,265,201 102,376 District No. 8 24,515 711,068 698,864 36,719 District No. 9 62,379 1,120,794 1,033,052 150,121 District No. 10 95,326 1,096,513 1,052,113 139,726 District No. 12 91,850 1,013,480 993,591 111,739 District No. 14 381,922 1,749,244 1,826,152 305,014

$ 1,441,264 $ 10,969,328 $ 10,974,530 $ 1,436,062

The District is to maintain an operation and maintenance reserve equivalent to three months of budgeted operation and maintenance expenses.

In addition, the District is authorized to issue contract revenue bonds sufficient to complete acquisition and construction of the facilities as needed to serve all districts in the service area. Each participating district is obligated to pay its pro rata share of the debt service requirements on the District's contract revenue bonds (see Note 4).

Note 7: Maintenance Taxes

At an election held August 25, 1993, voters authorized a maintenance tax not to exceed $0.95 per $100 valuation on all property within the District subject to taxation. During the year ended September 30, 2018, the District levied an ad valorem maintenance tax at the rate of $0.1350 per $100 of assessed valuation, which resulted in a tax levy of $274,645 on the taxable valuation of $203,441,614 for the 2017 tax year. The maintenance tax is being used by the general fund to pay expenditures of operating the District.

34 Cinco Municipal Utility District No. 1 Notes to Financial Statements September 30, 2018

Note 8: Contract Taxes

At an election held January 20, 1990, voters authorized a contract tax on all property within the District subject to taxation. During the year ended September 30, 2018, the District levied an ad valorem contract tax at the rate of $0.1700 per $100 of assessed valuation, which resulted in a tax levy of $345,850 on the taxable valuation of $203,441,614 for 2017 tax year. This contract tax is used to pay for its pro rata share of principal and interest on the District's contract revenue bonds as described in Note 4.

Note 9: Regional Water Authority

The District is within the boundaries of the Authority, which was created by the Texas Legislature. The Authority was created to provide a regional entity to acquire surface water and build the necessary facilities to convert from groundwater to surface water in order to meet conversion requirements mandated by the Fort Bend Subsidence District, which regulates groundwater withdrawal. As of September 30, 2018, the Authority was billing the District $3.35 per 1,000 gallons of water pumped from its wells. This amount is subject to future increases.

Note 10: Risk Management

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the District participates along with other entities in the Texas Municipal Leagues' Intergovernmental Risk Pool (the Pool). The Pool purchases commercial insurance at group rates for participants in the Pool. The District has no additional risk or responsibility to the Pool, outside of payment of insurance premiums. The District has not significantly reduced insurance coverage or had settlements which exceeded coverage amounts in the past three fiscal years.

35

Required Supplementary Information

Cinco Municipal Utility District No. 1 Budgetary Comparison Schedule – General Fund Year Ended September 30, 2018

Variance Original Favorable Budget Actual (Unfavorable) Revenues Property taxes $ 269,680 $ 273,219 $ 3,539 Water service 91,000 100,471 9,471 Sewer service 114,000 108,992 (5,008) Surface water conversion 293,740 299,727 5,987 Penalty and interest 2,400 2,859 459 Investment income 8,000 22,391 14,391

Total revenues 778,820 807,659 28,839

Expenditures Service operations: Purchased services 127,340 127,344 (4) Regional water fee 293,740 295,542 (1,802) Professional fees 99,500 65,182 34,318 Contracted services 27,000 24,225 2,775 Solid waste 65,600 65,139 461 Repairs and maintenance 337,200 16,495 320,705 Other expenditures 75,670 49,078 26,592

Total expenditures 1,026,050 643,005 383,045

Excess (Deficiency) of Revenues Over Expenditures (247,230) 164,654 411,884

Fund Balance, Beginning of Year 1,426,440 1,426,440 -

Fund Balance, End of Year $ 1,179,210 $ 1,591,094 $ 411,884

36 Cinco Municipal Utility District No. 1 Notes to Required Supplementary Information September 30, 2018

Budgets and Budgetary Accounting

An annual operating budget is prepared for the general fund by the District's consultants. The budget reflects resources expected to be received during the year and expenditures expected to be incurred. The Board of Directors is required to adopt the budget prior to the start of its fiscal year. The budget is not a spending limitation (a legally restricted appropriation). The original budget of the general fund was not amended during fiscal 2018.

The District prepares its annual operating budget on a basis consistent with accounting principles generally accepted in the United States of America. The Budgetary Comparison Schedule - General Fund presents the original and revised budget amounts, if revised, compared to the actual amounts of revenues and expenditures for the current year.

37

Other Information

Cinco Municipal Utility District No. 1 Other Schedules Included Within This Report September 30, 2018

(Schedules included are checked or explanatory notes provided for omitted schedules.)

[X] Notes Required by the Water District Accounting Manual See "Notes to Financial Statements," Pages 17–35

[X] Schedule of Services and Rates

[X] Schedule of General Fund Expenditures

[X] Schedule of Temporary Investments

[X] Analysis of Taxes Levied and Receivable

[X] Schedule of Long-term Debt Service Requirements by Years, Governmental Activities

[X] Changes in Long-term Bonded Debt, Governmental Activities

[X] Schedule of Long-term Debt Service Requirements by Years, Business-type Activities

[X] Changes in Long-term Bonded Debt, Business-type Activities

[X] Comparative Schedule of Revenues and Expenditures – General Fund and Debt Service Fund – Five Years

[X] Board Members, Key Personnel and Consultants

38 Cinco Municipal Utility District No. 1 Schedule of Services and Rates Year Ended September 30, 2018

1. Services provided by the District:

X Retail Water Wholesale Water X Drainage X Retail Wastewater Wholesale Wastewater Irrigation Parks/Recreation Fire Protection Security X Solid Waste/Garbage Flood Control Roads X Participates in joint venture, regional system and/or wastewater service (other than emergency interconnect) Other

2. Retail service providers

a. Retail rates for a 5/8" meter (or equivalent): Flat Rate Per 1,000 Minimum Minimum Rate Gallons Over Charge Usage Y/N Minimum Usage Levels

Water: $ 22.80 10,000 N $ 1.050 10,001 to 30,000 $ 1.750 30,001 to 40,000 $ 3.000 40,001 to No Limit

Wastewater: $ 0.00 1,000 N $ 1.450 1,001 to No Limit

Regional water fee: $ 3.518 1 N $ 3.518 1 to No Limit

Does the District employ winter averaging for wastewater usage? Yes X No

Total charges per 10,000 gallons usage (including fees): Water $ 57.98 Wastewater $ 14.50

b. Water and wastewater retail connections: Total Active ESFC Active Meter Size Connections Connections Factor ESFC*

Unmetered - - x1.0 - ≤ 3/4" 107 107 x1.0 107 1" 220 220 x2.5 550 1 1/2" 16 16 x5.0 80 2" 5 5 x8.0 40 3" - - x15.0 - 4" - - x25.0 - 6" 1 1 x50.0 50 8" - - x80.0 - 10" 1 1 x115.0 115 Total water 350 350 942 Total wastewater 315 315 x1.0 315

3. Total water consumption (in thousands) during the fiscal year: Gallons pumped into the system: 85,993 Gallons billed to customers: 85,993 Water accountability ratio (gallons billed/gallons pumped): 100.00%

*"ESFC" means equivalent single-family connections

39 Cinco Municipal Utility District No. 1 Schedule of General Fund Expenditures Year Ended September 30, 2018

Personnel (including benefits) $ - Professional Fees Auditing $ 9,800 Legal 43,695 Engineering 11,687 Financial advisor - 65,182 Purchased Services for Resale Bulk water and wastewater service purchases 127,344 Regional Water Fee 295,542 Contracted Services Bookkeeping 11,880 General manager - Appraisal district - Tax collector - Security - Other contracted services 12,345 24,225 Utilities - Repairs and Maintenance 16,495 Administrative Expenditures Directors' fees 10,350 Office supplies 8,080 Insurance 7,065 Other administrative expenditures 23,583 49,078 Capital Outlay Capitalized assets - Expenditures not capitalized - - Tap Connection Expenditures - Solid Waste Disposal 65,139 Fire Fighting - Parks and Recreation - Other Expenditures -

Total expenditures $ 643,005

40 Cinco Municipal Utility District No. 1 Schedule of Temporary Investments September 30, 2018

Accrued Interest Maturity Face Interest Rate Date Amount Receivable Governmental Activities General Fund Certificate of Deposit No. 66000438 2.05% 06/09/19 $ 239,441 $ 1,520 TexPool 2.12% Demand 300,955 - TexPool 2.12% Demand 1,022,534 -

1,562,930 1,520

Debt Service Fund TexPool 2.12% Demand 61,730 - TexPool 2.12% Demand 52,711 -

114,441 0

Business-type Activities Proprietary Fund TexPool 2.12% Demand 1,190,255 - TexSTAR 2.00% Demand 46,309 - TexPool 2.12% Demand 4,013,397 - Fidelity Money Market Fund 1.81% Demand 13,070,673 - Fidelity Money Market Fund 1.81% Demand 7,408,457 -

25,729,091 0

Totals $ 27,406,462 $ 1,520

41 Cinco Municipal Utility District No. 1 Analysis of Taxes Levied and Receivable Year Ended September 30, 2018

Debt Maintenance Contract Service Taxes Taxes Taxes

Receivable, Beginning of Year $ 433 $ 584 $ 404 Additions and corrections to prior years' taxes (18) (1,150) (891)

Adjusted receivable, beginning of year 415 (566) (487)

2017 Original Tax Levy 268,412 338,000 248,530 Additions and corrections 6,233 7,850 5,772

Adjusted tax levy 274,645 345,850 254,302

Total to be accounted for 275,060 345,284 253,815

Tax collections: Current year (272,804) (343,531) (252,597) Prior years (415) 566 487

Receivable, end of year $ 1,841 $ 2,319 $ 1,705

Receivable, by Years 2017 $ 1,841 $ 2,319 $ 1,705

42 Cinco Municipal Utility District No. 1 Analysis of Taxes Levied and Receivable (Continued) Year Ended September 30, 2018

2017 2016 2015 2014 Property Valuations Land $ 33,300,740 $ 33,106,207 $ 33,106,207 $ 33,108,327 Improvements 170,827,519 170,194,304 179,345,626 155,131,826 Personal property 570,643 572,710 548,890 1,545,483 Exemptions (1,257,288) (726,443) (11,153,456) (3,854,373)

Total property valuations $ 203,441,614 $ 203,146,778 $ 201,847,267 $ 185,931,263

Tax Rates per $100 Valuation Debt service tax rates $ 0.1250 $ 0.1250 $ 0.1250 $ 0.1350 Contract tax rates 0.1700 0.1800 0.2000 0.2300 Maintenance tax rates* 0.1350 0.1350 0.1150 0.1150

Total tax rates per $100 valuation $ 0.4300 $ 0.4400 $ 0.4400 $ 0.4800

Tax Levy $ 874,797 $ 893,719 $ 887,588 $ 892,470

Percent of Taxes Collected to Taxes Levied** 99% 100% 100% 100%

*Maximum tax rate approved by voters: $0.95 on August 25, 1993 **Calculated as taxes collected for a tax year divided by taxes levied for that tax year.

43 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Governmental Activities September 30, 2018

Series 2007

Due During Principal Interest Due Fiscal Years Due March 1, Ending September 30 September 1 September 1 Total

2019 $ 60,000 $ 30,502 $ 90,502 2020 60,000 28,013 88,013 2021 60,000 25,492 85,492 2022 60,000 22,973 82,973 2023 60,000 20,452 80,452 2024 60,000 17,903 77,903 2025 60,000 15,352 75,352 2026 60,000 12,773 72,773 2027 60,000 10,192 70,192 2028 60,000 7,613 67,613 2029 60,000 5,002 65,002 2030 55,000 2,392 57,392

Totals $ 715,000 $ 198,659 $ 913,659

44 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Governmental Activities (Continued) September 30, 2018

Refunding Series 2012

Due During Principal Interest Due Fiscal Years Due March 1, Ending September 30 September 1 September 1 Total

2019 $ 105,000 $ 46,575 $ 151,575 2020 110,000 43,950 153,950 2021 115,000 41,200 156,200 2022 115,000 38,325 153,325 2023 120,000 34,300 154,300 2024 130,000 30,100 160,100 2025 135,000 25,550 160,550 2026 140,000 20,825 160,825 2027 145,000 15,925 160,925 2028 155,000 10,850 165,850 2029 155,000 5,425 160,425

Totals $ 1,425,000 $ 313,025 $ 1,738,025

45 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Governmental Activities (Continued) September 30, 2018

Annual Requirements For All Series

Due During Total Total Total Fiscal Years Principal Interest Principal and Ending September 30 Due Due Interest Due

2019 $ 165,000 $ 77,077 $ 242,077 2020 170,000 71,963 241,963 2021 175,000 66,692 241,692 2022 175,000 61,298 236,298 2023 180,000 54,752 234,752 2024 190,000 48,003 238,003 2025 195,000 40,902 235,902 2026 200,000 33,598 233,598 2027 205,000 26,117 231,117 2028 215,000 18,463 233,463 2029 215,000 10,427 225,427 2030 55,000 2,392 57,392

Totals $ 2,140,000 $ 511,684 $ 2,651,684

46 Cinco Municipal Utility District No. 1 Changes in Long-term Bonded Debt, Governmental Activities Year Ended September 30, 2018

Bond Issues

Refunding Series 2007 Series 2012 Totals

Interest rates 3.85% to 4.75% 2.00% to 3.50%

Dates interest payable March 1/ March 1/ September 1 September 1

Maturity dates September 1, September 1, 2019/2030 2019/2029

Bonds outstanding, beginning of current year $ 775,000 $ 1,530,000 $ 2,305,000

Retirements, principal 60,000 105,000 165,000

Bonds outstanding, end of current year $ 715,000 $ 1,425,000 $ 2,140,000

Interest paid during current year $ 32,963 $ 48,675 $ 81,638

Paying agent's name and address:

Series 2007 - The Bank of New York Mellon Trust Company, N.A., Dallas, Texas Series 2012 - The Bank of New York Mellon Trust Company, N.A., Dallas, Texas

Bond authority: Contract Contract Revenue Refunding Revenue Refunding Tax Bonds Bonds Bonds Bonds

Amount authorized by voters $ 15,200,000 $ 9,120,000 Unlimited Unlimited Amount issued $ 3,865,000 $ 35,000 $ 123,020,000 $ 75,185,000 Remaining to be issued $ 11,335,000 $ 9,085,000 $ - $ -

Debt service fund cash and temporary investment balances as of September 30, 2018: $ 140,448

Average annual debt service payment (principal and interest) for remaining term of all debt: $ 220,974

47 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities September 30, 2018

Series 2008

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 235,000 $ 136,241 $ 371,241 2020 235,000 127,429 362,429 2021 235,000 118,616 353,616 2022 235,000 109,804 344,804 2023 235,000 100,991 335,991 2024 235,000 91,885 326,885 2025 235,000 82,485 317,485 2026 235,000 73,085 308,085 2027 235,000 63,567 298,567 2028 235,000 53,933 288,933 2029 235,000 44,298 279,298 2030 235,000 34,545 269,545 2031 235,000 24,675 259,675 2032 235,000 14,805 249,805 2033 235,000 4,935 239,935

Totals $ 3,525,000 $ 1,081,294 $ 4,606,294

48 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Refunding Series 2009

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 1,085,000 $ 82,700 $ 1,167,700 2020 1,210,000 36,800 1,246,800 2021 315,000 6,300 321,300

Totals $ 2,610,000 $ 125,800 $ 2,735,800

49 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Refunding Series 2010

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 820,000 $ 16,400 $ 836,400

50 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Series 2010A

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 120,000 $ 61,787 $ 181,787 2020 120,000 58,488 178,488 2021 120,000 54,887 174,887 2022 120,000 51,137 171,137 2023 120,000 47,238 167,238 2024 120,000 43,187 163,187 2025 120,000 38,988 158,988 2026 120,000 34,637 154,637 2027 120,000 30,138 150,138 2028 115,000 25,587 140,587 2029 115,000 20,988 135,988 2030 115,000 16,387 131,387 2031 115,000 11,788 126,788 2032 115,000 7,116 122,116 2033 115,000 2,372 117,372

Totals $ 1,770,000 $ 504,725 $ 2,274,725

51 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Refunding Series 2011

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 690,000 $ 201,281 $ 891,281 2020 1,145,000 175,481 1,320,481 2021 1,125,000 140,728 1,265,728 2022 1,100,000 105,275 1,205,275 2023 1,085,000 65,700 1,150,700 2024 1,100,000 22,000 1,122,000

Totals $ 6,245,000 $ 710,465 $ 6,955,465

52 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Series 2011A

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 50,000 $ 28,645 $ 78,645 2020 50,000 26,995 76,995 2021 50,000 25,183 75,183 2022 50,000 23,270 73,270 2023 50,000 21,295 71,295 2024 45,000 19,395 64,395 2025 45,000 17,573 62,573 2026 45,000 15,609 60,609 2027 45,000 13,528 58,528 2028 45,000 11,447 56,447 2029 45,000 9,366 54,366 2030 45,000 7,284 52,284 2031 45,000 5,203 50,203 2032 45,000 3,122 48,122 2033 45,000 1,041 46,041

Totals $ 700,000 $ 228,956 $ 928,956

53 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Series 2012

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 485,000 $ 231,195 $ 716,195 2020 485,000 216,645 701,645 2021 485,000 202,095 687,095 2022 485,000 187,545 672,545 2023 485,000 172,995 657,995 2024 480,000 158,520 638,520 2025 480,000 143,820 623,820 2026 480,000 128,520 608,520 2027 480,000 112,620 592,620 2028 480,000 96,360 576,360 2029 480,000 79,800 559,800 2030 480,000 62,700 542,700 2031 480,000 45,000 525,000 2032 480,000 27,000 507,000 2033 480,000 9,000 489,000

Totals $ 7,225,000 $ 1,873,815 $ 9,098,815

54 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Refunding Series 2013

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 840,000 $ 796,378 $ 1,636,378 2020 480,000 63,138 543,138 2021 480,000 49,937 529,937 2022 300,000 38,238 338,238 2023 295,000 28,943 323,943 2024 690,000 12,075 702,075

Totals $ 3,085,000 $ 988,709 $ 4,073,709

55 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Series 2014

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 175,000 $ 938,256 $ 1,113,256 2020 175,000 932,131 1,107,131 2021 175,000 926,006 1,101,006 2022 175,000 919,881 1,094,881 2023 175,000 913,756 1,088,756 2024 175,000 907,631 1,082,631 2025 175,000 901,506 1,076,506 2026 175,000 895,381 1,070,381 2027 175,000 889,256 1,064,256 2028 175,000 883,131 1,058,131 2029 175,000 877,006 1,052,006 2030 175,000 870,881 1,045,881 2031 175,000 864,756 1,039,756 2032 175,000 858,631 1,033,631 2033 175,000 852,506 1,027,506 2034 2,775,000 800,881 3,575,881 2035 2,775,000 702,022 3,477,022 2036 2,775,000 599,694 3,374,694 2037 2,775,000 495,631 3,270,631 2038 2,775,000 388,100 3,163,100 2039 2,775,000 277,100 3,052,100 2040 2,770,000 166,200 2,936,200 2041 2,770,000 55,400 2,825,400

Totals $ 24,815,000 $ 16,915,743 $ 41,730,743

56 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Series 2014A

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 25,000 $ 106,413 $ 131,413 2020 25,000 105,663 130,663 2021 25,000 104,944 129,944 2022 25,000 104,225 129,225 2023 25,000 103,463 128,463 2024 25,000 102,663 127,663 2025 25,000 101,813 126,813 2026 25,000 100,925 125,925 2027 25,000 100,000 125,000 2028 25,000 99,025 124,025 2029 25,000 97,988 122,988 2030 25,000 96,913 121,913 2031 25,000 95,838 120,838 2032 25,000 94,763 119,763 2033 25,000 93,663 118,663 2034 240,000 87,700 327,700 2035 240,000 76,600 316,600 2036 240,000 65,200 305,200 2037 240,000 53,500 293,500 2038 240,000 41,500 281,500 2039 240,000 29,500 269,500 2040 235,000 17,625 252,625 2041 235,000 5,875 240,875

Totals $ 2,285,000 $ 1,885,799 $ 4,170,799

57 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Refunding Series 2014

Due During Principal Interest Due Fiscal Years Due December 1, Ending September 30 December 1 June 1 Total

2019 $ 430,000 $ 235,802 $ 665,802 2020 1,185,000 215,696 1,400,696 2021 2,085,000 174,985 2,259,985 2022 2,220,000 121,388 2,341,388 2023 2,155,000 66,918 2,221,918 2024 1,610,000 20,045 1,630,045

Totals $ 9,685,000 $ 834,834 $ 10,519,834

58 Cinco Municipal Utility District No. 1 Schedule of Long-term Debt Service Requirements by Years, Business-type Activities (Continued) September 30, 2018

Annual Requirements For All Series

Due During Total Total Total Fiscal Years Principal Interest Principal and Ending September 30 Due Due Interest Due

2019 $ 4,955,000 $ 2,835,098 $ 7,790,098 2020 5,110,000 1,958,466 7,068,466 2021 5,095,000 1,803,681 6,898,681 2022 4,710,000 1,660,763 6,370,763 2023 4,625,000 1,521,299 6,146,299 2024 4,480,000 1,377,401 5,857,401 2025 1,080,000 1,286,185 2,366,185 2026 1,080,000 1,248,157 2,328,157 2027 1,080,000 1,209,109 2,289,109 2028 1,075,000 1,169,483 2,244,483 2029 1,075,000 1,129,446 2,204,446 2030 1,075,000 1,088,710 2,163,710 2031 1,075,000 1,047,260 2,122,260 2032 1,075,000 1,005,437 2,080,437 2033 1,075,000 963,517 2,038,517 2034 3,015,000 888,581 3,903,581 2035 3,015,000 778,622 3,793,622 2036 3,015,000 664,894 3,679,894 2037 3,015,000 549,131 3,564,131 2038 3,015,000 429,600 3,444,600 2039 3,015,000 306,600 3,321,600 2040 3,005,000 183,825 3,188,825 2041 3,005,000 61,275 3,066,275

Totals $ 62,765,000 $ 25,166,540 $ 87,931,540

59 Cinco Municipal Utility District No. 1 Changes in Long-term Bonded Debt, Business-type Activities Year Ended September 30, 2018

Bond Refunding Refunding Series 2008 Series 2009 Series 2010

Interest rates 3.50% to 4.20% 4.00% 2.00% to 4.00%

Dates interest payable December 1/ December 1/ December 1/ June 1 June 1 June 1

Maturity dates December 1, December 1, December 1, 2018/2032 2018/2020 2018

Bonds outstanding, beginning of current year $ 3,760,000 $ 3,660,000 $ 1,600,000

Retirements, principal 235,000 1,050,000 780,000

Bonds outstanding, end of current year $ 3,525,000 $ 2,610,000 $ 820,000

Interest paid during current year $ 145,054 $ 125,400 $ 48,400

Paying agent's name and address:

Series 2008 - The Bank of New York Mellon Trust Company, N.A., Dallas, Texas Series 2009 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2010 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2010A - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2011 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2011A - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2012 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2013 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2014 - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2014A - The Bank of New York Mellon Trust Company, N.A., Houston, Texas Series 2014R - The Bank of New York Mellon Trust Company, N.A., Houston, Texas

Bond authority: Contract Contract Revenue Refunding Revenue Refunding Tax Bonds Bonds Bonds Bonds

Amount authorized by voters $ 15,200,000 $ 9,120,000 Unlimited Unlimited Amount issued $ 3,865,000 $ 35,000 $ 123,020,000 $ 75,185,000 Remaining to be issued $ 11,335,000 $ 9,085,000 $ - $ -

Debt service fund cash and temporary investment balances as of September 30, 2018: $ 20,479,130

Average annual debt service payment (principal and interest) for remaining term of all debt: $ 3,823,110

Issues Refunding Refunding Series 2010A Series 2011 Series 2011A Series 2012 Series 2013 Series 2014

2.500% to 4.125% 2.00% to 4.00% 3.000% to 4.625% 3.00% to 3.75% 2.00% to 3.50% 3.50% to 4.00%

December 1/ December 1/ December 1/ December 1/ December 1/ December 1/ June 1 June 1 June 1 June 1 June 1 June 1

December 1, December 1, December 1, December 1, December 1, December 1, 2018/2032 2018/2023 2018/2032 2018/2032 2018/2023 2018/2040

$ 1,890,000 $ 6,950,000 $ 750,000 $ 7,710,000 $ 4,280,000 $ 24,990,000

120,000 705,000 50,000 485,000 1,195,000 175,000 $ 1,770,000 $ 6,245,000 $ 700,000 $ 7,225,000 $ 3,085,000 $ 24,815,000

$ 64,638 $ 217,837 $ 30,170 $ 245,745 $ 102,088 $ 944,381

60 Cinco Municipal Utility District No. 1 Changes in Long-term Bonded Debt, Business-type Activities (Continued) Year Ended September 30, 2018

Bond Issues (Continued) Refunding Series 2014A Series 2014 Totals

Interest rates 2.75% to 5.00% 2.49%

Dates interest payable December 1/ December 1/ June 1 June 1

Maturity dates December 1, December 1, 2018/2040 2018/2023

Bonds outstanding, beginning of current year $ 2,310,000 $ 9,825,000 $ 67,725,000

Retirements, principal 25,000 140,000 4,960,000

Bonds outstanding, end of current year $ 2,285,000 $ 9,685,000 $ 62,765,000

Interest paid during current year $ 107,163 $ 242,900 $ 2,273,776

61

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Cinco Municipal Utility District No. 1 Comparative Schedule of Revenues and Expenditures – General Fund Five Years Ended September 30,

Amounts

2018 2017 2016 2015 2014 General Fund

Revenues Property taxes $ 273,219 $ 273,757 $ 232,132 $ 213,820 $ 218,540 Water service 100,471 102,571 102,471 92,596 105,564 Sewer service 108,992 113,830 109,985 96,127 101,020 Surface water conversion 299,727 276,058 234,356 180,765 190,512 Penalty and interest 2,859 2,580 3,491 4,177 5,822 Tap connection and inspection fees - 2,750 - - - Investment income 22,391 11,559 3,208 1,657 491 Other income - 1,109 - - -

Total revenues 807,659 784,214 685,643 589,142 621,949

Expenditures Service operations: Purchased services 127,344 109,152 109,152 109,968 118,944 Regional water fee 295,542 291,615 239,111 186,610 196,613 Professional fees 65,182 69,505 77,416 70,972 79,469 Contracted services 24,225 26,629 23,985 22,942 24,349 Solid waste 65,139 63,561 62,720 61,689 60,430 Repairs and maintenance 16,495 32,226 86,614 56,828 102,172 Other expenditures 49,078 59,177 46,164 44,351 38,673 Tap connections - 2,500 - - -

Total expenditures 643,005 654,365 645,162 553,360 620,650

Excess of Revenues Over Expenditures 164,654 129,849 40,481 35,782 1,299

Fund Balance, Beginning of Year 1,426,440 1,296,591 1,256,110 1,220,328 1,219,029

Fund Balance, End of Year $ 1,591,094 $ 1,426,440 $ 1,296,591 $ 1,256,110 $ 1,220,328

Total Active Retail Water Connections 350 350 350 354 350

Total Active Retail Wastewater Connections 315 315 314 315 315

Percent of Fund Total Revenues

2018 2017 2016 2015 2014

33.8 % 34.9 % 33.9 % 36.3 % 35.1 % 12.4 13.1 15.0 15.7 17.0 13.5 14.5 16.0 16.3 16.3 37.1 35.2 34.2 30.7 30.6 0.4 0.3 0.5 0.7 0.9 - 0.4 - - - 2.8 1.5 0.4 0.3 0.1 - 0.1 - - -

100.0 100.0 100.0 100.0 100.0

15.8 13.9 15.9 18.7 19.1 36.6 37.2 34.9 31.7 31.6 8.1 8.9 11.3 12.1 12.8 3.0 3.4 3.5 3.9 3.9 8.1 8.1 9.2 10.5 9.7 2.0 4.1 12.6 9.6 16.4 6.1 7.6 6.7 7.5 6.2 - 0.3 - - -

79.7 83.5 94.1 94.0 99.7

20.3 % 16.5 % 5.9 % 6.0 % 0.3 %

62 Cinco Municipal Utility District No. 1 Comparative Schedule of Revenues and Expenditures – Debt Service Fund Five Years Ended September 30,

Amounts

2018 2017 2016 2015 2014 Debt Service Fund

Revenues Property taxes $ 595,075 $ 618,366 $ 655,456 $ 678,650 $ 655,614 Penalty and interest 1,892 3,756 2,981 1,919 3,399 Investment income 5,729 2,752 1,278 223 132

Total revenues 602,696 624,874 659,715 680,792 659,145

Expenditures Current: Professional fees 1,109 1,757 2,617 2,101 2,119 Contracted services 15,592 14,150 10,035 13,415 12,567 Other expenditures 6,600 5,264 4,806 6,825 4,396 Debt service: Principal retirement 165,000 160,000 165,000 155,000 155,000 Interest and fees 82,138 86,568 91,068 95,368 99,608 Contractual obligation 344,007 375,464 389,938 427,099 373,847

Total expenditures 614,446 643,203 663,464 699,808 647,537

Excess (Deficiency) of Revenues Over Expenditures (11,750) (18,329) (3,749) (19,016) 11,608

Fund Balance, Beginning of Year 140,183 158,512 162,261 181,277 169,669

Fund Balance, End of Year $ 128,433 $ 140,183 $ 158,512 $ 162,261 $ 181,277

Percent of Fund Total Revenues

2018 2017 2016 2015 2014

98.7 % 99.0 % 99.4 % 99.7 % 99.5 % 0.3 0.6 0.4 0.3 0.5 1.0 0.4 0.2 0.0 0.0

100.0 100.0 100.0 100.0 100.0

0.2 0.3 0.4 0.3 0.3 2.6 2.3 1.5 2.0 1.9 1.1 0.8 0.7 1.0 0.7

27.4 25.6 25.0 22.8 23.5 13.6 13.9 13.8 14.0 15.1 57.1 60.1 59.1 62.7 56.7

102.0 103.0 100.5 102.8 98.2

(2.0) % (3.0) % (0.5) % (2.8) % 1.8 %

63 Cinco Municipal Utility District No. 1 Board Members, Key Personnel and Consultants Year Ended September 30, 2018

Complete District mailing address: Cinco Municipal Utility District No. 1 c/o Allen Boone Humphries Robinson LLP 3200 Southwest Freeway, Suite 2600 Houston, Texas 77027 District business telephone number: 713.860.6400

Submission date of the most recent District Registration Form (TWC Sections 36.054 and 49.054): January 10, 2018

Limit on fees of office that a director may receive during a fiscal year: $ 7,200

Term of Office Elected & Expense Title at Board Members Expires Fees* Reimbursements Year-end

Elected 05/16- G. Tim Lawrence 05/20 $ 6,000 $ 2,715 President

Elected 05/16- Vice Jim Cusack 05/20 7,200 4,311 President

Elected 05/18- Sharon Bauer 05/22 2,700 621 Secretary

Elected Assistant 05/18- Vice Kermit Palmer 05/22 3,300 2,772 President

Appointed 11/17- Assistant Mike Price 05/20 3,000 658 Secretary

Elected 05/16- Nancy Jacks 10/17 600 731 Deceased

*Fees are the amounts actually paid to a director during the District's fiscal year.

64 Cinco Municipal Utility District No. 1 Board Members, Key Personnel and Consultants (Continued) Year Ended September 30, 2018

Fees and Expense Consultants Date Hired Reimbursements Title

AECOM Technical Services, Inc. 08/27/85 $ 0 Engineer

Allen Boone Humphries Robinson LLP 07/28/03 159,738 General Counsel

BGE, Inc. 10/02/12 410,285 Engineer

BKD, LLP 08/18/88 27,400 Auditor

FMatuska, Inc. 08/01/06 35,632 Bookkeeper

Legislative Fort Bend Central Appraisal District Action 7,642 Appraiser

Former Financial Hilltop Securities Inc. 10/10/91 0 Advisor

Inframark, LLC 11/19/87 3,189,498 Operator

Financial Masterson Advisors LLC 05/01/18 0 Advisor

Tax Assessor/ Wheeler & Associates, Inc. 07/09/09 20,588 Collector

Investment Officer

Fran Matuska 01/07/09 N/A Bookkeeper

65

APPENDIX C

Specimen Municipal Bond Insurance Policy

MUNICIPAL BOND INSURANCE POLICY

ISSUER: Policy No: -N

BONDS: $ in aggregate principal amount of Effective Date: Premium: $

ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. -N

United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.

This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer.

ASSURED GUARANTY MUNICIPAL CORP.

By Authorized Officer

A subsidiary of Assured Guaranty Municipal Holdings Inc. 1633 Broadway, New York, N.Y. 10019 (212) 974-0100

Form 500NY (5/90)