HomeMy WebLinkAbout2003 $1,949.287.70 Unlimited Tax Refunding Bonds Series 2003NEW ISSUE-BOOK-ENTRY-ONLY Ratings: Moody's: "Aaa"
(See "MUNICIPAL BOND RATING
OFFICIAL STATEMENT
Dated March 10.2003
and BOND INSURANCE" herein)
In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes
under statutes, regulations, published rulings and court decisions existing on the date hereof, subject to the matters described
under "TAX MAnERS" herein, including the alternative minimum tax on corporations.
The District has designated the Bonds as "Qualiiied Tax-Exempt Obligations':
See "TAX MATTERS - Qualified Tax-Exemot Obligations for Financial Institutions" herein. -
$1,949,287.70
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
(A Poiitical Subdivision of the State of Texas Located in Denton and Tarrant Counties. Texas)
UNLIMITED TAX REFUNDING BONDS, SERIES 2003
Dated Date: April 1, 2003 Due: September 1, as shown on inside cover page
The Trophy Club Municipal Utility District No. 1 (the "District" or "Issuer") $1,949.287.70 Unlimited Tax Refunding Bonds, Series
2003 (the. "Bonds") are being issued pursuant to the Constitution and general laws of the State of Texas (the "State").
particularly Chapter 1207, Texas Governmen! Code, as amended, and an order (the "Order") adopted by the Board of Directors
(the "Board). (See "THE BONDS - Author~ty for Issuance" herein.) The Bonds are obligations solely of Trophy Club
Municipal Utility District No. 1 and are not obligations OF the State of Texas; Denton County, Texas; the Town of Trophy
Club, Texas; or any entity other than the District.
The Bonds, when issued, will constitute valid and legally binding obligations of the District and will be payable irom the
proceeds of an annual ad valorem tax, without legal limitation to rate or amount, levied against taxable property within the
District. THE BONDS ARE SUBJECT TO SPECIAL INVESTMENT CONSIDERATIONS DESCRIBED HEREIN. (See
"INVFSTMFNT CONSIDERATIONS " herein.) Bond ourchasers are encouraoed to read this entire Official Statement orior to ..~ ~ - making an investment decision.
The Bonds are being issued in part as current interest bonds ("CIBs") and in part as capital appreciation bonds ("CABs"). The
ClBs will be issued in fully registered form in principal denominations of $5,000 or any Integral multiple thereof within a maturity.
The ClBs will accrue interest from their dated date as shown above, and such Interest will be calculated on a 360-day year of
twelve 30-day months. Accrued interest on the ClBs is payable on March 1 and September 1 of each year, commencing
September 1, 2003, to the registered owners of the ClBs shown on the bond registration books of the Paying AgentIRegistrar,
which initially is JPMorgan Chase Bank. Dallas, Texas, at the close of business on the Record Date (see Record Date herein),
and such interest shall be payable by check or draft dated as of an interest payment date and mailed by the Paying
AgenffRegistrar to the address of the registered owners appearing on the bond registration books or by such other method
acceptable to the Paying A enffRegistrar, requested by and at the risk and expense of the registered owner. Principal of the
ClBs will be payable by t 2 e Paying AgentlRegIstrar, upon presentation and surrender of the Bonds for payment at its
designated corporate office.
The CABs will accrete interest from the date of their delivery to the underwriter, and such interest wlll compouricl semiannually
on March 1 and September 1, commencing September 1. 2003, and is payable only at maturity. The ac~retedlzompounded
interest on the CABS will be calculated on a 360-day year of twelve 30-day months, and such "Accreted Value", as used herein
with respect to CABs, shall mean the original principal amount of a CAB plus the initial premium, if an , paid theretor with J interest thereon compounded semiannually to March 1 and September 1, as the case may be, next prece ing the date of such
calculation (or the date of calculation, if such calculation is made on March 1 or September I), at the stated yield@) shown
therefore on the inside cover page of this Official Statement. The CABS will be issued in full registered form in denominations
of $5,000 of the "Accreted Value" due at maturity (the "Maturity Amount") or any integral muiiple thereqf within a maturity. For
any day other than a March 1 and September 1, the Accreted Value of a CAB shall be determined by a stralght line
interpolation between the values for the applicable semiannual compounding dates (based on 30-day months). The Accreted
Value of the CABs will be payable at maturity by the Paying AgenffRegistrar, upon their presentation and surrender, at its
designated corporate office.
Proceeds irom the sale of the Bonds are being used to refund the 2003 through 2007 maturities of the District's Unlimited Tax
Refunding Bonds. Series 1993 in orderto achieve level annual debt payments and reduce the required annual tax rate for debt
service, and to pay the costs related to the issuance of the Bonds. (See "PLAN OF FINANCING - Purpose" herein.)
The Pa ment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be
issued Ly Financial Guaranty Insurance Company ("Financial Guaranty") simultaneously with the delivery of the Bonds. (See
"BOND INSURANCE herein.)
The Bonds are not subject to redemption prior to maturity. (See "THE BONDS - Redemption" herein.)
Financial Guaraniy lnsurance FGIC. ~oml,:u~y
,,;,,:,,~,~~s,rm, m,,,,.,~rn,,,<"~L,,, ,,,,m,,cb,,,;"~,~,,,, L,,5LL,~"r~~~,,,,,>",~,. " ,,ri,",un,,ll,"i,, lllil .I"liilll.il "llll ill,? C_'. I.Cll.lli"""l rzrni..
STATED MATURITY SCHEDULE
(On Inside Cover Page) ~ ~
The Bonds are offered for delive , wlienLas and if issued and recg.ived by the Undenvriter and subject to the approving o inion r of the Attorney General olthe late 9 1 exas and ille approval or certain !egal matters by McC?ll. Parl<hurst & Horton L.~P.,
Dallas, Texas, Bond Counsel. !he le a1 oprnion oiBond Counsel wrll be pnnted on, or w~ll accompany the Bo~ids. Certain matters will be passed upon irtlie Undewrilerby Fulbright & Jaworski L.L.P., Dallas, Texas. as counsel
to tlie Undewdriter, Delivew of the Bonds through DTC IS expected on or about April 9, 2003, in Dallas, Texas.
First Southwest Company
STATED MATURITY SCHEDULE'
(Due September 1)
$1,949,287.70 UNLIMITED TAX REFUNDING BONDS. SERIES 2003
51,865.000.00 Current Interest Bonds
Stated Principal Rate Yield
(Interest Accrues form Dated Date)
$84,287.70 Premium Capital Appreciation Bonds
Oh Initial Offering
Stated Principal Premium Purchase Yield to Maturity Price per $5,000
Maturity Amount Amount - Price Value in Maturitv Value
2005 $84.287.70 $117,369.00 $201 -656.70 1.70 $210,000.00 $4,801.35
(Interest Accretes from Delively Date)
TABLE OF CONTENTS
3
4
4
4
5 ........................ .. ............ 5 SELECTED FINANCIAL INFORMATION 6
OFFICIAL STATEMENT 7
INTRODUCTION 7
PLAN OF FINANCING 7 MASTER DISTRICT CONTRACT .......................................... 22
INVESTMENT AUTHORITY AND INVESTMENT
PRACTICES OF THE DISTRICT ........................................ 22
Investment Officer and Authorized Investments ............ 23
.. 29
Schedule of Refunded Bonds Schedule I
Schedule of Accreted Values of Premium Capital Appreciation Bonds Schedule II
Financial Information of the Issuer Appendix A
General Information Regarding Town of Trophy Club, Texas and Denton Count)' Appendix B
Form of Legal Opinion of Bond Counsel Appendix C
The Issuer's General Purpose Audited Financial Statements for the Year Ended September 30,2002 Appendix D Municipal Band insurance Policy Specimen Appendix E
The cover page, subsequent pages hereof and the schedules and appendices attached hemto, are pa^ of this Ofiicial Staiement.
USE OF INFORMATION IN THE OFFICIAL STATEMENT
No dealer, broker, salesman, or other person has been authorized to give any information, or to make any representation other
than those contained in this Official Statement, and, if given or made, such other information or representations must not be
relied upon as having been authorized by the lssuer. This OfrTciaI Statement is not to be used in connection with an offer to sell
or the solicitation of an offer to buy in any state in which 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. Any information or expression 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 an implication that there has been no change in the affairs of the Issuer or other matters described
herein since the date hereof.
NEITHER THE DISTRICT NOR ITS FINANCIAL ADVISOR MAKES ANY REPRESENTATION OR WARRANN WlTH
RESPECTTO THE INFORMATION CONTAINED IN THlS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST
COMPANY ("DTC") OR ITS BOOK-ENTRY-ONLY SYSTEM OR INFORMATION UNDER THE CAPTION "BOND INSURANCE
REGARDING FINANCIAL GUARANN INSURANCE COMPANY ("FGIC") AND ITS INSURANCE POLICY AS SUCH
INFORMATION HAS BEEN FURNISHED BY THE DTC AND FGIC. RESPECTIVELY.
THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT.
THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND
AS PART OF, ITS RESPONSlBiLITlES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE
FACTS AND CIRCUMSTANCES OF THlS TRANSACTION. BUT THE UNDERWRITER DOES NOT GUARANTEE THE
ACCURACY OR THE COMPLETENESS OF SUCH INFORMATION.
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMiSSlON AND
CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION. QUALIFICATION, OR EXEMPTION
OF THE BONDS IN ACCORDANCE WlTH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN
WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A
RECOMMENDATION THEREOF.
IN CONNECTION WITH THIS OFFERING. THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
OFFICIAL STATEMENT SUMMARY
The following material is qualified in its entirety by the more detailed information and financial statements appearing elsewhere
in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official
Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire
Official Statement.
THE DISTRICT
The Issuer Trophy Club Municipal Utility District No. 1 (the "District") was created under the name of
Denton County Municipal Utility District No. 1 on March 4, 1975 and operates as a municipal
utility district pursuant to the provisions of Article XVI, Section 59 of the Texas Constitution and
Chapters 49 and 54 of the Texas Water Code, as amended. The District is subject to the
continuing supervision of the Texas Commission on Environmental Quality (the "TCEQ"). (See
"THE DISTRICT - General" herein.)
Location The District, a political subdivision of the State of Texas, is located in the far southeastern
quadrant of Denton County and northeastern Tarranl County, Texas near the southern shore of
Lake Grapevine, and just east of the Town of Roanoke, Texas and is partially within the
boundaries of the Town of Trophy Club. Texas, partially within the boundaries of the Town of
Westlake, Texas, and partially in unincorporated areas. (See "THE DISTRICT - Location"
herein.)
Status of Development The District is a residential and mixed-use development consisting of some 1,289 acres, of
which approximateiy 1,012 acres are developable. (See "THE DISTRICT - Status of
Development" herein.) The inirastructure of the District is essentially fully deveioped.
Payment Record
Authority for
issuance
Use of Proceeds
THE BONDS
Description The Bonds are being issued in part as current interest bonds ("CiBs") and in part as capital
appreciation bonds ("CABS"). (See "THE BONDS - General Description" herein.)
Redemption The Bonds are not subject to redemption prior to maturity.
Source of Payment Principal and interest on the Bonds are payable from the proceeds of a continuing direct
annual ad valorem tax levied upon all taxable property within the District, which under Texas
law is not limited as to rate or amount. The Bonds are obligations solely of Trophy Club
Municipal Utility District No. 1 and are not obligations of the Town of Trophy Club,
Texas; Denton County, Texas; the State of Texas; or any entity other than the District.
(See 'THE BONDS - Source of and Security for PaymenP' herein.)
The District has never defaulted in the timely payment of principal of or interest on its
outstanding obligations.
The Bonds are issued pursuant to the Constitution and general laws of the State of Texas,
including particularly Chapter 1207. Texas Government Code, as amended, and an order (the
"Order") adopted by the Board of Directors (the "Board) of the District. (See "THE BONDS -
Authority for lssuance" herein.
Proceeds from the sale of the Bonds are being used to refund the 2003 through 2007
maturities of the District's Unlimited Tax Refunding Bonds, Series 1993 in order to achieve
level annual debt payments and reduce the required annual tax rate for debt service, and to
pay the costs related to the issuance of the Bonds. (See "PLAN OF FINANCING - Purpose"
herein.)
Municipal Bond lnsurance The Payment of the principal of and interest on the Bonds when due will be insured by a
municipal bond insurance policy to be issued hy Financial Guaranty lnsurance Company
("Financial Guaranty") simultaneously with the delivery of the Bonds. (See "BOND
INSURANCE herein.)
Municipal Bond Rating Moody's investors Service. Inc. ("Moody's") has assigned a municipal bond rating of "Aaa" to
the Bonds with the understanding that, concurrently with the delivery of the Bonds, a municipal
bond insurance policy will be issued by Financial Guaranty. Moody's has assigned an
underiying rating of "Baa2 to the Bonds. An explanation of the significance of a rating may be
obtained from the company furnishing the rating. (See "MUNICIPAL BOND RATING" herein.)
Qualified Tax-Exempt The District has designated the Bonds as "qualified tax-exempt obligations" pursuant to section
Obligations 265(b) of the Internal Revenue Code of 1986, as amended, and will represent that the total
amount of tax-exempt bonds (including the Bonds) issued by it during calendar year 2003 is
not reasonably expected to exceed $10,000,000. (See "TAX MATTERS - Qualified Tax-
Exempt Obligations for Financial Institutions" herein.)
Book-Entry-Only System The Issuer intends to utilize the Book-Entry-Only System of The Depository Trust Company,
New York. New York relating to the method and timing of payment and the method and
transfer relating to the Certificates. (See "BODK-ENTRY-ONLY SYSTEM herein.)
Issuance of Additional The District does not anticipate 81e issuance of additional debt within the next twelve months.
Debt
Bond Counsel McCall, Parkhurst & Horton L.L.P.. Dallas. Texas
Underwriter's Counsel Fulbright & Jaworski L.L.P.. Dallas, Texas
Delivery When issued, anticipated on or about April 9, 2003
General Counsel Whitaker, Chalk. Swindle & Sawyer, L.L.P.. Fort Worth, Texas
Financial Advisor Southwest Securities, Dallas. Texas.
Engineer Carter & Burgess, Furl Worth, Texas.
Paying AgentlRegistrar JPMorgan Chase Bank, Dallas, Texas.
lNVESTMENT CONSIDERATIONS
The purchase and ownership of the Bonds involve certain investment considerations and all prospective purchasers are urged
to examine carefully the Official Statement, including particularly the section captioned "INVESTMENT CONSIDERATIONS,"
with respect to the investment security of the Bonds.
SELECTED FINANCIAL INFORMATION
2002 Taxable Assessed Valuation
Gross Bond Debt Principal Outstanding (after issuance of the Bonds)
Ratio of Gross Debt Principal to 2002 Assessed Valuation
2002-2003 Tax Rate
Maintenance & Operation
Debt Service
Fire Protection
Total
Debt Service Fund Balance as of January 31,2003
Average Percentage of Current Tax Collection -Tax Years 1997-2001
Average Percentage of Total Tax Collection -Tax Years 1997-2001
Projecteo Average Ann~lal Deb: Sen, ce Requ~remcnt (2003-201 1)
Of tile Bonds ana lne O~lstandlng Bonds ('Projezled Average Requ~remeni')
Tax Rate Required to Pay Projected Average Requirement Based Upon Current
Taxable Assessed Valuation at 99% Collections
Projccied Max~mum Ann~al Deb1 Sewtce Requ rcrnenr (2009 of ine Bonds and
Tne O~rstano~ng Bonos ( Projecreo Max~mum Requ~remenl )
Tax Rate Required to Pay Projected Maximum Requirement Based Upon
Current Taxable Assessed Valuation at 99% collections
Number of connections as of September 30.2002
Estimated population as of January 31. 2003
$0.173801$100 A.V.
'"I As ceriified by the Denton Centml Appraisal District. (See "TAXING PROCEDURES"1ierein.)
lb' Amount includes the "Value at Maturity" of the CABS for maturities 2005 and 2006
of the Series 1997 Bonds and forthe 2005maturity of the Series 2003 Bonds.
$0.17456/$100 A.V.
rrhe remainder of lhis page is intentionally lefl blanlr]
OFFICIAL STATEMENT
relating to
$1,949,287.70
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
(A Political Subdivision of the State of Texas Located in Denton and Tarrant Counties, Texas)
UNLiMlTED TAX REFUNDING BONDS, SERIES 2003
INTRODUCTION
This Official Statement provides certain information in connection with the issuance by the Trophy Club Municipal Utility District
No. 1 (the "District" or "Issuer") of its $1,949,287.70 Unlimited Tax Refunding Bonds. Series 2003 (the "Bonds").
The Bonds are issued pursuant to a bond order (the "Order") adopted by the Board of Directors (the "Board) of the District on
the date of the sale of the Bonds, and pursuant to the Constitution and general laws of the State of Texas, particularly Chapter
1207 of the Texas Government Code. as amended.
Unless otherwise indicated, capitalized terms used in this Ofticial Statement have the same meaning assigned to such terms in
the Order.
Included in this Official Statement are descriptions of the Bonds, the Order, the Status of Development and certain information
about the District and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY
AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may
be obtained from the District or its Financial Advisor.
PLAN OF FINANCING
Purpose
The proceeds of the Bonds are being used to refund the 2003 through 2007 maturities of the Districfs Unlimited Tax Refunding
Bonds. Series 1993 (the "Refunded Bonds") in order to achieve level annual debt payments and reduce the required annual tax
rate for debt service (see "Schedule I - Schedule of Refunded Bonds"), and to pay the costs of issuance for the Bonds.
Refunded Bonds
The Refunded Bonds, maturities 2003 - 2007 are being redeemed on April 9. 2003 (the "Redemption Date") at par, immediately
upon delivery of the Bonds. Southwest Securities will provide a Letter of Sufficiency of the money's deposited into the escrow
fund for redemption of the Refunding Bonds.
The Refunded Bonds, and interest due thereon, are to be paid from funds deposited with JPMorgan Chase Bank. Dallas. Texas
(the "Escrow Agent") or its successor. The Order approves and authorizes the execution of an escrow agreement (the "Escrow
Agreement") between the lssuer and the Escrow Agent: The Order further provides that, from a portion of the proceeds of the
sale of the Bonds and other lawfully available funds of the lssuer (the "Escrowed Securities'), if any, the District will deposit with
the Escrow Agent the amount sufficient to accomplish the discharge and final payment of the Refunded Bonds. Such amount
will be held by the Escrow Agent in an escrow account (the "Escrow Fund).
By the deposit of the Escrowed Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, the District will
have effected the defeasance of the Refunded Bonds pursuant to the terms of Texas Government Code, Chapter 1207, as
amended, and the order authorizing the issuance of the Refunded Bonds. It is the opinion of Bond Counsel that, as a result of
such defeasance, the Refunded Bonds will no longer be payable from ad valorem taxes, but will be payable solely from the
principal of and interest on the Escrowed Securities and cash held for such purpose by the Escrow Agent, and the Refunded
Bonds will be defeased and thus will not be included in or considered to be indebtedness of the District for the purpose of a
limitation on indebtedness or taxation or for any other purpose.
The District has covenanted in the Escrow Agreement to make timely deposits lo the Escrow Fund, from lawfully available
funds, of additional funds in the amount required to pay the principal of and interest on the Refunded Bonds should, for any
reason, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund be insuhicient to make such payments.
SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds will be applied approximately as follows:
Sources of Funds
Par Amount of Current lnterest Bonds
Capital Appreciation Bonds 84.287.70
Premium on Capital Appreciation Bonds 117,369.00
Less: Original Issue Premium 11.805.25
Accrued Interest on the Bonds 1.160.61
Total Sources of Funds S2.079.6-
Uses of Funds
Redemption of Series 1993 Bonds on April 9,2003 $1,950,000.00
Interest Due on Redemption Date 11,755.19
Costs of Issuance (including Bond Insurance) 97.122.66
Underwriter's Discount 15,195.80
Accrued Interest Deoosit to INS Fund 1.160.61
Contingency
Total Uses of Funds
THE BONDS
General Description
The Bonds shall be dated April 1. 2003, and will be issued in part as Current Interest Bonds ("CIBs"), and in part as Capital
Appreciation Bonds ("CABs"). lnterest accruing on the ClBs and the accretedlcompounded interest on the CABs shall be
calculated on the basis of 360-day year of twelve 30-day months. The paying agent and transfer agent (the "Paying
Agent/Registrarm') for the Bonds is initially JPMorgan Chase Bank, Dallas, Texas.
The ClBs are to mature on the dates and in the principal amounts set forth on the inside cover page hereof. The ClEs will each
be issued as fully registered bonds in principal denominations of $5,000 or any integral multiple thereof within a maturity.
lnterest on the ClBs will accrue from the dated date of such Bonds at the interest rates shown on the inside cover page hereof,
and such interest shall be payable to the registered owners thereof on September 1, 2003 and semiannually thereafter on
March 1 and September 1 in each year until maturity. lnterest on the ClBs is payable to the registered owners appearing on
the records of the Paying AgentIRegistrar at the close of business on the Record Date (hereinafter detined) and payment of
such interest shail be by check or draft dated as of an interest payment date and sent, first class mail, postage prepaid, by the
Paying AgentiRegistrar to the address of the registered owner appearing on the bond registration books of the Paying Agent
Registrar or by such other method, acceptable to the Paying AgentlRegistrar, requested by and at the risk and expense of the
registered owner. Principal of the ClBs will be payable to the registered owner at maturity upon presentation and surrender of
the Bonds at the designated corporate office of the Paying AgenVRegistrar.
The CABS will mature on the date and in the Maturity Amount (as defined below) set forth on the inside cover page of this
Official Statement. The CABs will be issued as fully registered bonds in Maturity Amount denominations of $5,000 or any
integral multiple thereof within a maturity. lnterest on the CABS will accrete from the date of their initial delivery to the
Underwriter and compound on each March 1 and September 1 ("Accretion Dates") commencing September 1, 2003. The
"Accreted Value", as used herein with respect to CABs, shall mean the original principal amount of a CAB plus the initial
premium, if any, paid therefor with interest thereon compounded semiannually to March 1 and September 1, as the case may
be, nexl preceding the date of such calculation (or the date of calculation, if such calculation is made on March 1 or
September l), at the stated yieid(s) shown thereiore on the inside cover page hereof. The Accreted Value of the CABs at
maturity is the "Maturity Amount", and based on the initial offering price for the CABs, a schedule of Accreted Values per
$5,000 Maturity Amount on the respective Accretion Date, using the yield stated on the inside cover page of this Offlcial
Statement, is set forth in Schedule II attached hereto. The Maturity Amount of the CABs at maturity is payable only upon
presentation to the Paying Agent /Registrar at its designated corporate trust office. The yields on the CABS to a particular
purchaser may differ depending upon price paid by such purchaser. For various reasons, securities that do not pay interest
periodically, such as the CABs, have traditionally experienced greater price fluctuations in the secondary market than securities
that pay interest on a periodic basis.
If the s~ecified date ior anv eavment of ~rincipal oi or interest on the Bonds is a Saturday, Sundav, or leaal holidav or
equivalent for banking institutidni generally'in the city in which Designated Payment I Transfer bfiice is lbcated. ;uch
mav be made on the next succeedino dav which is not one oi the foreooino days without additional interest and with the same -.
iorde and effect as if made on the spiciiiid dale for such payment.
initially, the Bonds will be registered and delivered only to Cede 6 Co.. the nominee oiThe Depository Trust Company CDTC")
pursuant to the Book-Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial
owners. Principal oi and interest on the Bonds will be payable by the Paying Agent to Cede & Co., which will distribute the
amounts paid to the participaiing members of DTC for subsequent payment to the beneficial owners of the Bonds. (See
"BOOK-ENTRY-ONLY SYSTEM " herein.)
Redemption
The Bonds are not subject to redemption prior to maturity.
DTC Redemption Provision
The Paying Agent and the District, so long as a Book-Entw-Only System is used for the Bonds. will send anv notice of - -
redempi:on, notice of proposed amendmentio the Order or oiher notlces w:ln respecl lo tne Bonds on y to OTC. ~n; iai ure by
DTC to aovise any DTC Panic~panl, as hereln defined or of any Erect Partici~ant or lnoirect Particioant. as herein dei,ned, to . notify the beneficial owner, shall not affect the validity of the redemption of ~onds called for redemption or any other scion
premised on any such notice. Redemption of portions of the Bonds by the District will reduce the outstanding principal amount
of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry Only System, a redemption of such
Bonds held for the account of DTC Participants in accordance with its rules or other agreements with DTC Participants and
then Direct Participants and Indirect Participants may implement a redemption of such Bonds and such redemption will not be
conducted by the District or the Paying Agent. Neither the District nor the Paying Agent will have any responsibility to DTC
Participants, indirect Participants or the persons for whom DTC Participants act as nominees with respect to the payments on
the Bonds or the providing of notice to Direct Participants, Indirect Participants, or beneficial owners of the selection of portions
of the Bonds for redemption.
Termination of Book-Entry-Only System
The D:sIrict is inillally utillzlng tile book-entry-only syslem of the DTC. (See "BOOK-ENTRY-ONLY SYSTEM' here!".) in the cvcnt
that tne Book-Entry-Only System is dscontinued by DTC or the D:stnci, the fo.lovr:ng prov:sions w I. be applcab e to the Bonds.
Pavment: Principal of the Bonds will be payable at maturity to the registered owners as shown by the registration books maintained
by the Paying Agent upon presentation and surrender of the Bonds to the Paying Agent at the designated office for payment of the
Paying AgenffRegistrar in Dallas, Texas (the "Designated Paymentrrransfer Office"). Interest on the Bonds will be payable by
check or draft, dated as of the applicable interest payment date, sent by the Paying Agent by United States mail, first class, postage
prepaid, to the registered owners at their respective addresses shown on such records, or by such other method acceptable to the
Paying Agent requested by registered owner at the risk and expense of the registered owner. If the date for the payment of the
principal of or interest on the Bonds shall be a Saturday, Sunday, legal holiday or day on which banking institutions in the city where
the Designated Paymentrrransfer Office of the Paying Agent is located are required or authorized by law or executive order to
close, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or day on
which banking institutions are required or authorized to close, and payment on such date shall for all purposes be deemed to have
been made on the original date payment was due.
Reaistmtion: The Bonds may be transferred and re-registered on the registration books of the Paying Agent only upon
presentation and surrender thereof to the Paying AgenffRegistrar at the Designated PayrnenVTransfer Office. A Bond also may be
exchanged for a Bond or Bonds of like maturity and interest and having a like aggregate principal amount or maturity amount, as
the case may be, upon presentation and surrender at the Designated PaymenVTransfer Office. All Bonds surrendered for transfer
or exchange must be endorsed for assignment by the execution by the registered owner or his duly authorized agent of an
assignment form on the Bonds or other instruction of transfer acceptable to the Paying Agenl. Transfer and exchange of Bonds will
be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid
with respect to such transfer or exchange. A new Bond or Bonds, in lieu of the Bond being transferred or exchanged, will be
delivered by the Pavina AsenffReoistrar to the reqistered owner, at the Desisnated Pavmentrrransfer Office of the Pavinq
~~enff~e~i&rar or by~?tedStates mail, first-class, postage prepaid. To the exteit possible;new Bonds issued in an exchange ;r
transfer of Bonds will be delivered to the registered owner not more than three (3) business days after the receipt of the Bonds to
be canceled in the exchange or transfer andihe denominations of $5,000 or any i&egral multiplethereof.
Limitations on Tmnsfer of Bonds: Neither the District nor the Paying Agent shall be required to make any transfer, conversion or
exchange to an assignee of the registered owner of the Bonds during the period commencing on the close of business on the 15Ih
calendar day of the month preceding each interest payment date (the "Record Date") and ending with the opening of business on
the next following principal or interest payment date.
Reolacement Bonds: If a Bond is mutilated, the Paying Agent will provide a replacement Bond in exchange for the mutilated bond.
If a Bond is destroyed, lost or stolen, the Paying Agent will provide a replacement Bond upon (i) the filing by the registered owner
with the Paying Agent of evidence satisfactory to the Paying Agent of the destruction, loss or theft of the Bond and the authenticity
of he registered owner's ownership and (ii) the furnishing to the Paying Agent of indemnification in an amount satisfactory to hold
the District and the Paying Agent harmless. All expenses and charges associated with such indemnity and with the preparation,
execution and delivery of a replacement Bond must be borne by the registered owner. The provisions of the Order relating to the
replacement Bonds are exclusive and the extent lawful, preclude all other rights and remedies with respect to the replacement and
payment of mutilated, destroyed, lost or stolen Bonds.
Authority for Issuance
The bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1207,
Texas Government Code, as amended, and the Order.
Source of and Security for Payment
The Bonds are payable as to principal and interest from the proceeds of an annual ad valorem tax, without legal limit as to rate
or amount, levied against taxable property within the District.
Tax Pledoe: The Board covenants in the Order that, while any of the Bonds are outstanding and the District is in existence, it
will levy and assess a continuing ad valorem tax upon each $100 valuation of taxable property within the District at a rate from
year to year sufficient. full allowance being made for anticipated delinquencies, together with revenues and receipts from other
sources which are legally available for such purposes, to pay interest on the Bonds as It becomes due, to provide for the
payment of principal of and interest on the Bonds when due, to pay when due any other contractual obligations of the District
payable in whole or in part from taxes, and to pay the expenses of assessing and collecting such tax. The Board additionally
covenants in the Order to timely assess and collect such tax. The net proceeds from taxes levied to pay debt service on the
Bonds are required to be placed in a special account of the District designated its "interest and Sinking Fund for the Bonds.
The Bonds are obligations solely of the District and are not obligations of the Town of Trophy Club, Texas; Denton
County, Texas; the State of Texas; or any political subdivision or entity other than the District.
Abolition: Under Texas law, If a district is located wholly in two or more municipalities and in unincorporated area, the district
may be abolished by agreement among the district and all of the municipalities in which parts of the district are located. The
abolition agreement must provide for the distribution of assets and liabilities (including the Bonds) of the abolished district. The
agreement must also provide for the distribution among one or more of the municipalities the pro rata assets and liabilities
located in the unincorporated area and must provide for service to customers in unincorporated areas in the service area of the
abolished district. The municipality that provides the service in the unincorporated area may charge its usual and customary
fees and assessments to the customers in that area. No representation is made concerning the likelihood of abolition or the
ability of the municipalities which contain parts of the District to make debt service payments on the Bonds should abolition
occur.
Consolidation: A district (such as the District) 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, with the water and wastewater
systems of districts with which it is consolidating as well as its liabilities (which would include the Bonds).
Yield on Premium Capital Appreciation Bonds
The approximate yield of the CABs as set forth on the inside cover page of this OMcial Statement is the approximate yield
based upon the initial offering price therefor set forth on the inside cover page of this Official Statement. Such offering price
includes the principal amount of such CABS plus premium equal to the amount by which such offering price exceeds the
principal amount of such CABs. Because of such premium, the approximate offering yield on the CABS is lower than the bond
interest rates thereon. The yield on the CABs to a particular purchaser may differ depending upon the price paid by that
purchaser. For various reasons, securities that do not pay interest periodically, such as the CABs, have traditionally
experienced greater price fluctuations in the secondary market than securities that pay interest on a periodic basis.
Payment Record
The District has never defaulted
Legality
The Bonds are offered when, as and if Issued, subject to the approval by the Attorney General of the State of Texas and the
rendering of an opinion as to legality by McCali. Parkhurst & Horton L.L.P.. Dallas. Texas. The legal opinion of Bond Counsel
will accompany the global certificates to be deposited with DTC or will be printed on the Bonds should the Book-Entry-Only
System be discontinued. A form of the legal opinion of Bond Counsel appears in Appendix C attached hereto.
Flow of Funds and investment of Funds
The Order creates an lnterest and Sinking Fund. This fund shall be kept separate and apart from all other funds of the District.
The interest and Sinking Fund shall constitute a trust fund, which shall be held in trust for the benetit of the holders of the
Bonds.
Any cash balance in any fund must be continuously secured by a valid pledge to the District of securities eligible under the laws
of Texas to secure the funds of municipal utility districts having an aggregate market value, exclusive of accrued interest, at ail
times equal to the cash balance in the fund to which such securities are pledged.
The Order establishes the Interest and Sinking Fund to be used to pay principal and interest on the Bonds. The Order requires
that the District deposit to the credit of the interest and Sinking Fund (i) from the delivery of the Bonds to the Undewriter, the
amount received from proceeds of the Bonds representing accrued interest on the CIBs, (ii) District ad valorem taxes (and
penalties and interest thereon) levied to pay debt service requirements on (or fees and expenses of the Paying Agent with
respect oi) the Bonds, and (iii) such other funds as the Board shall, at its option, deem advisable. The Order requires that the
lnterest and Sinking Fund be applied solely to provide ior the payment of the principal of and interest on the Bonds when due.
10
Defeasance of Outstanding Bonds
The Order orovides for the defeasance of the Bonds when uavment oi the orincioal of and oremium. if anv. on Bonds. olus
interest theieon to the due date thereof (whether such due dsebe by reason bf maturity, rede;nption, or otheGise), is
bv irrevocablv deoosilins with a oavins aaent, in trust (1) monev sufficient to make such oavment or (21 Defeasance Securities. .-- .
certified by in independent pubkc accounting firm of n'aiiona~ reputation to mature as to br[ncipal an; interest in such amounts
and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary
and proper fees, compensation and expenses of the paying agent for the respective series of Bonds. The Order provides that
"Defeasance Securities" means (1) direct, noncallable obligations of the United States of America, including obligations that
are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of
the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or
instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or
its equivalent, and (3) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision oi a
state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not
less than AAA or its equivalent. The District has additionally reserved the right, subject to satisfying the requirements of (1) and
(2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the
uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the District moneys in excess of the
amount required for such defeasance.
Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. After firm
banking and financial arrangements for the discharge and final payment of the Bonds have been made as described above, all
rights of the District to take any other action amending the terms of the Bonds are extinguished.
Paying AgentlRegistar
Principal of and semiannual interest on the Bonds will be paid by JPMorgan Chase Bank. Dallas, Texas, the initial Paying
AgenVRegisrrar (me "Payng Agent"). Tne Pay ng Agent mJst be aoank, lrcsr company, financial institution or orher eniry duty
qualified and eq~a.1~ aurnorized lo serve an0 perform the ouries as paying agent and reg'strar for the Bonos
Provision is made in the Order for the District to replace the Paying Agent by an order of the District giving notice to the Paying
Agent of the termination of the appointment, stating the effective date of the termination and appointing a successor Paying
Agent. If the Paying Agent is replaced by the District, the new Paying Agent shall be required to accept the previous Paying
Agent's records and act in the same capacity as the previous Paying Agent. Any successor paying agentlregistrar selected by
the District shall be subject to the same qualification requirements as the Paying Agent. The successor paying agenuregistrar,
if any, shall be determined by the Board of Directors and written notice thereof, specifying the name and address of such
successor paying agentlregistrar will be sent by the District or the successor paying agentlregistrar to each Registered Owner
by first-class mail, postage prepaid.
Record Date
The record date for payment of the interest on Bonds on any regularly scheduled interest payment date is defined as the
fifteenth (15th) day of the month (whether or not a business day) preceding such interest payment date.
Issuance of Additional Debt
The District may issue bonds necessary lo provide those improvements and facilities for which the District was created, with the
approval of the TCEQ and, in the case of bonds payable from taxes, the Districrs voters. Following the issuance of the Bonds,
$1,229,277 unlimited tax bonds authorized by the District's voters will remain unissued. In addition, voters may authorize the
issuance of additional bonds or other contractual obligations secured by ad valorem taxes. The District also has the right to
enter into certain other obligations including the issuance of revenue bonds and notes, bond anticipation notes and tax
anticipation notes without voter approval. Neither Texas law nor the Order imposes a limitation on the amount of additional
debt which may be issued by the District. Any additional debt issued by the District may dilute the security of the Bonds. (See
"INVESTMENT CONSIDERATIONS - Future Debt " herein.)
Specific Tax Covenants
In the Order the District has covenanted with respect to, among other matters, the use of the proceeds of the Bonds and the
property financed therewith by persons other than state or local governmental units, and the manner in which the proceeds of
the Bonds are to be invested. The District may cease to comply with any such covenant if it has received a writien opinion of a
nationally recognized bond counsel to the effect that failure to comply with such covenant will not adversely affect the
exemption from federal income taxation ai interest on the Bonds under Section 103 of the Code.
Additional Covenants
The District has additionally covenanted in the Order that it will keep accurate records and accounts and employ an
independent certified public accountant to audit and report on its financial affairs at the close of each fiscal year, such audits to
be in accordance with applicable IavJ, rules and regulations and open to inspection in the office of the District.
11
Remedies in Event of Default
In the event the District defaults in the observance or performance of any covenant in the Order including payment when due of
the principal of and interest on the Bonds, any Bond owner may apply for a writ of mandamus from a court of competent
jurisdiction requiring the Board of Directors or other officers of the District to observe or perform such covenants.
The Order provides no additional remedies to a Bond owner. Specifically, the Order does not provide for an appointment of a
trustee to protect and enforce the interests of the Bond owners or for the acceleration of maturity of the Bonds upon the
occurrence of a default in the District's obligations. Consequently, the remedy of mandamus is a remedy, which may have to
be enforced from year to year by the Bond owners.
Under Texas law, no judgment obtained against the District may be enforced by execution of a levy against the District's public
purpose property. The Bond owners themselves cannot foreclose on property within the District or sell property within the
District in order to pay principal of or interest on the Bonds. In addition, the enforceability of the rights and remedies of the
Bond owners may be limited by federal bankruptcy laws or other similar laws affecting the rights of creditors of political
subdivisions. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Order and the Bonds
are qualified to the customary rights of debtors relative to their creditors
MUNICIPAL BOND RATING
Moody's Investors Service. Inc. ("Moody's") has assigned a municipal bond rating of "Aaa" to the Bonds with the understanding
that, concurrently with the delivery of the Bonds, a municipal bond insurance policy will be issued by Financial Guaranty.
Moody's has assigned an underlying rating of "Baa2 to the Bonds. An explanation of the significance of a rating may be
obtained from the company furnishing the rating. The rating reflects only the respective view of such company, and the District
makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any
given period of time or that it will not be revised downward or withdrawn entirely by such rating company, If, in the judgment of
such company circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse
effect on the market price of the Bonds.
BOND INSURANCE
The following information regarding municipal bond insurance on the Bonds was provided by Financial Guaranty.
Concurrently with the issuance of the Bonds, Financial Guaranty lnsurance Company ("Financial Guaranty") will issue Its
Municipal Bond New Issue lnsurance Policy for the Bonds (the "Policy"). The Policy unconditionally guarantees the payment of
that portion of the principal of and interest on the Bonds, which has become due for payment, but shall be unpaid by reason of
nonpayment by the issuer of the Bonds (the "Issuer"). Financial Guaranty will make such payments to State Street Bank and
Trust Company, N.A.. or its successor as its agent (the "Fiscal Agent"), on the later of the date on which such principal and
interest is due or on the business day next following the day on which Financial Guaranty shall have received telephonic or
telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from an owner of Bonds or
the Paying Agent of the nonpayment of such amount by the Issuer. The Fiscal Agent will disburse such amount due on any
Bond to its owner upon receipt by the Fiscal Agent of evidence satisfactory to the Fiscal Agent of the owner's right to receive
payment of the principal and interest due for payment and evidence, including any appropriate instruments of assignment, that
all of such owner's rights to payment of such principal and interest shall be vested in Financial Guaranty. The term
"nonpayment" in respect of a Bond includes any payment of principal or interest made to an owner of a Bond, which has been
recovered from such owner pursuant to the United States Bank~ptCy Code by a trustee in bankruptcy in accordance with a
final, nonappealable order of a court having competent jurisdiction.
The Policy is non-cancelable and the premium will be fully paid at the time of delivery of the Bonds. The Policy covers failure to
pay principal of the Bonds on their respective stated maturity dates or dates on which the same shall have been duly called for
mandatory sinking fund redemption, and not on any other date on which the Bonds may have been otherwise called for
redemption, accelerated or advanced in maturity, and covers the failure to pay an installment of interest on the stated date for
its payment.
This Official Statement contains a section regarding the ratings assigned to the Bonds and reference should be made to such
section for a discussion of such ratings and the basis for their assignment to the Bonds. Reference should be made to the
description of the Issuer for a discussion of the ratings, if any, assigned to such entity's outstanding parity debt that is not
secured by credit enhancement.
The Policy is not covered by the Property/Casualty lnsurance Security Fund specified in Article 76 of the New York lnsurance
Law.
Financial Guaranty is a wholly owned subsidiary of FGlC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE Capital'). Neither the Corporation nor GE Capital is
obligated to pay the debts of or the claims against Financial Guaranty. Financial Guaranty is a monoline financial guaranty
insurer domiciied in the State of New York and subject to regulation by the State of New York lnsurance Department. As of
12
September 30. 2002, the total capital and surplus of Financial Guaranty was approximately $1.1 billion. Financial Guaranty
prepares financial statements on the basis of both statutov accounting principles and generally accepted accounting principles.
Copies of such financial statements may be obtained by writing to Financial Guaranty at 125 Park Avenue. New York, New
York 10017. Attention: Communications Department (telephone number: 212-312-3000) or to the New York State insurance
Department at 25 Beaver Street. New York. New York 10004-2319. Attention: Financial Condition PropertyiCasualty Bureau
(telephone number: 212-480-5187).
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership of tile bonds is to be transferred and how the principal 06 premium, if any, and interest
on the Bonds are to be paid to and credited by the Depository Tmst Company while the Bonds are registered in its nominee's
name. Tile information in this section concerning DTC and the Bool<-Entry-Only Systen? has been provided by DTC for use in
disclosure documents such as tllis OKiciai Statement Tlie District believes tile source of such iniormation to be reliable, but
takes no responsibility for the accuracy or completeness thereof
The District cannot and does not give any assurance the (f) DTC will distribnte payments of debt semice on the Bonds, or
redemption or other notices, to DTC Pedicipant, (2) DTC Participants or otliers wiil distribute debt service payments paid to
DTC or its nominee (as the registered owner oi the Bonds), or redemption or other notices, to the Beneficial Owners, or that
they will do so on a timely basis, or (3) DTC will serve and ad in the manner described in this Official Statement. The current
rdes applicable to DTC are on file with the Securifies and Exchange Commission, and the current procedures of DTC to be
followed in dealing with DTC Parficipants are on file with DTC,
The Depository Trust Company ("DTC), New York. New York, wiil act initially 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 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 2 million
issues of U.S, and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement
among Direct Particioants of sales and other securities transactions in denosited securities. throuoh electronic comouterized ,~- ~ ~-
book-entry transfers and pledges in Direct Participants' accounts. This eliminates the need fir physrcal movementif securities
certificates. Direct Particinants Include both U.S. and non-U.S, securities brokers and dealers. banks. trust comoanies. clearino ,~ ~~ ~ .,
corporations, and certain other organizations. DTC is a wholly owned subsidiary of he Depository Trust & clearin;
Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National
Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging
Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York
Stock Exchange. Inc.. the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 ("lndirect Participants"). DTC has Standard B Poor's highest rating: AAA. The DTC Rules applicable to its
Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com.
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 lndirect 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 lndirect 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 or lndirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of 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 OTC 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 reflecl
only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by OTC to Direct Participants, by Direct Participants to lndirect Participants.
and by Direct Participants and indirect Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish
Registered Owners' Remedies
Bond owners are entitled under Texas Law to seek a writ of mandamus to compel the District to perform its obligations under
the Order. Such remedy would have to be exercised upon each separate default and could prove costly, time-consuming and
difficult to enforce. Further, there is no trust indenture or trustee, and all legal actions to enforce such remedies would have to
be taken at the initiative of, and be financed by, Bond owners. The Order does not provide for acceleration of maturity of the
Bonds upon any default. Bankruptcy, reorganization and other similar laws affecting the enforcement of creditor's rights
generally may also limit the rights and remedies of the Bond owners and the enforceability of the Bonds. (See "THE BONDS -
Remedies in Event of DefaulP' herein.)
Bankruptcy Limitation to Registered Owners' Rights
The enforceability of the rights and remedies of Bondholders 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 District. Texas law
requires a municipal utility district such as the District to obtain the approval of the TCEQ as a condition to seeking relief under
the Federal Bankruptcy Code.
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 eiiminating 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 Ownet's claim
against a district.
A district may not be forced into bankruptcy involuntarily.
The Effect of the Financial Institutions Act of 1989 on Tax Collections of the District
The "Financial institutions Reform, Recovery and Enforcement Act of 1909" ("FIRREA"), enacted on August 9, 1989, 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 FDlC
is acting as the conservator or receiver of an insolvent financial institution.
Under FIRREA real property held by the FDlC is still subject to ad valorem taxation, but such act states (i) that no real property
of the FDlC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary liens shall attach to such
property, (ii) the FDlC shall not be liable for any penalties 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.
There has been little judicial determination of the validity of the provisions of FIRREA or how they are to be construed and
reconciled with respect to conflicting state laws. However, certain recent federal court decisions have held that the FDlC is not
liable for statutory penalties and interest authorized by State property tax law, and that although a lien for taxes may exist
against real property, such lien may not be foreclosed without the consent of the FDIC, and no liens for penalties, fines,
interest, attorneys fees, costs of abstract and research fees exist against the real property for the failure of the FDlC or a prior
property owner to pay ad valorem taxes when due. It is also not known whether the FDlC will attempt to claim the FIRREA
exemptions as to the time for contesting valuations and tax assessments made prior to and after the enactment of FIRREA.
Accordingly, to the extent that the FIRREA provisions are valid and applicable to any property in the District, and to the extent
that the FDlC attempts to enforce the same, these provisions may affect the timeliness of collection of taxes on property, if any,
owned by the FDlC in the District, and may prevent the collection of penalties and interest on such taxes.
Continuing Compliance with Certain Covenants
The Order contains covenants by the District intended to preserve the exclusion from gross income of interest on the Bonds
from the gross income of the owners thereof for federal income tax purposes. (See "THE BONDS - Specific Tax Covenants "
herein.) Failure by the District to comply with such covenants on a continuous basis prior to maturity of the Bonds could result in
interest on the Bonds becoming taxable retroactively to the date of original issuance. (See "TAX MATTERS " herein.)
Future Debt
The District has the right to issue the remaining $1,229,217 authorized but unissued unlimited tax bonds and such additional
bonds as may hereafter be approved by both the Board of Directors and voters of the District. All of the remaining unlimited tax
bonds, which have heretofore been authorized by the voters of the District may be issued by the District from time to time for
qualified purposes, as determined by the Board of Directors of the District, subject to the approval of the Attorney General of
the State of Texas and the TCEQ. In the opinion of the District's engineer, the remaining authorization should be sufficient to
complete ultimate development within the District. At this time no future bond issues are anticipated.
LOCATION MAP
THE DISTRICl
Creation of the District
The District was created under the name of Denton County Municipal Utility District No. 1 by order of the Texas Water Rights
Commission on March 4, 1975 for the purpose of providing water and sewer facilities and other authorized services to the area
within the District. The District's name was changed to Trophy Club Municipal Utility District ("MUD) No. 1 on April 1, 1983.
The District is governed by Chapter 54. Texas Water Code, and other applicable state laws.
General
The District is comprised of 1.289 acres, of which 1,012 acres are developable. The majority of the remaining acreage lies
within the boundaries of the golf course. Of the 1,012 developed acres, approximately 752 acres have been fully developed,
including approximately 921 single-family lots, 136 apartment units and 42 townhouses. Residential development in the District
is substantially complete, with only a iew leftover lots remaining to be built on. A 450-acre tract owned by Maguire Partners.
formerly known as Maguirenhomas Partners, and IBM Corporation is presently being developed as a mixed-use project
comprised of low-rise office and retail buildings, including a hotel, restaurants and fitness center. Phase I of this project known
as the Solana complex, which is approximately 40 acres, is complete and on the tax role at a valuation of $183,177,647
including the balance of 215 acres horizontally developed and 195 acres undeveloped. Officials of the project indicate that the
buildings are approximately 94% occupied. The residential development known as "Trophy Club" is a country club development
featuring a 36-hole golicourse, clubhouse, golf shop, swimming pool, tennis courts, and equestrian center.
Management of the District
Board of Directors
The District is governed by a board, consisting of five directors, which has control over and management supervision of all
affairs of the District. Directors are elected and serve four-year staggered terms and receive no remuneration, except a
Director's per diem allowance of $100 per day on which necessary service is performed for the District. The District and all
similar districts are subject to the continuing supervision and filing requirements of the Texas commission on Environmental
Quality ("TCEQ"), including the preparation and filing of an annual independent audit report. All District facilities plans are
submitted to the TCEQ for review and approval.
Name -
Dean Henry
Pasition
President
Term Length of Time
Expires May With District
2004 5 years
Wesley W. Obermeier Vice President 2006 11 years
Jim Hase Secretaryrrreasurer 2004 2 years
Ted Neidenberger Director 2006' 10 years
Constance S. White Director 2006 16 years
appointed June 2002
All of the directors are residents and homeowners of the District
The District has 17 full-time employees and maintains permanent offices within the district where all services are provided
and controlled.
Consultants
Tax Assessor/Collector
Land and improvements in the District are being appraised by the Denton County Appraisal District. The Tax
Assessor/Collector is appointed by lhe Board oi Directors of the District. The Denton County Tax AssessoriCollector
currently serves the District in this capacity under contract.
District Manaaer
Mr. Walter Fitzpatrick was an elected Director oi Trophy Club MUD No. 2 from 1995 through 2002 and assumed District
Manager responsibiiitles for the District in February 2003. He also serves as manager for Trophy Club MUD No. 2 and
Trophy Club Master District Joint Venture.
District Finance Director
Mr. Roger Unger has served as Finance Director for the District for one year and earlier served almost eleven years as
District Manager.
Enoineer
The District employs the following consulting engineers ior various District projects: Carter & Burgess (the "Engineer"),
Freese B Nichols, Inc.. and Camp, Dresser B McKee, Inc.
Rutledge Crain B Company. PC has served as the District's independent auditor since August 2997
Financial Advisor
Southwest Securities serves as the District's financial advisor (the "Financial Advisor"). The fee for services rendered in
connection with the issuance ofthe Bonds is based on the percentage oithe Bonds actually issued, sold and delivered and,
therefore, such fee is contingent upon the sale and delivery of the Bonds.
Bond Counsel
The District has engaged McCall. Parkhurst & Horton L.L.P., Dallas, Texas, as Bond Counsel in connection with the
issuance oithe District's Bonds. The fees of Bond Counsel are contingent upon the sale of and delivery of the Bonds.
Leoal Counsel
The District employs Whitaker, Chalk, Swindle 8 Sawyer, L.L.P. as general legal counsel ior the District
Location
The District is located in southem Denton County and northern Tarrant County partially within the Town of Trophy Club and
partially within the Town of Westlake. The District is directly adjacent to and accessible from State Highway 114, north of and
approximately mid-way between Dallas and Fort Worth. The District is approximately 27 miies from downtown Dallas, 25 miles
from downtown Fort Worth, 17 miles from Denton, 8 miies irom Grapevine and 14 miles from the Dallas-Fort Worth
International Airport.
Major highways connecting these popuiation centers, which will also serve the District, include State Highways 114, 170 and
377 and Interstate Highways 35E and 35W. State Highway 170 connects Trophy Club directly to Alliance Airport which is
located seven miles southwest of the District. (See "Vicinity Map" herein.)
Population
The popuiation of the District is estimated to be approximately 3.500 and the population of the entire Trophy Club Development
is estimated at 7,800.
Topography and Drainage
The land within the District has a gradual slope from the southeast to the northwest toward Marshall Creek, which iorms the
western boundary of the District. Runoff water enters Grapevine Reservoir just north of the District through Marshall Creek or
several other small tributaries. The maximum elevation in the area being developed is approximately 690 feet mean sea level
and the minimum elevation in the area being developed is approximateiy 576 feet mean sea level. The soil is sandy loam and
clay loam. and existing vegetation consists of native grasses and small oak trees. Areas which are subject to flooding by a
100-year frequency flood are located in the flood plan of Marshall Creek and have been delineated by the Water Resources
Branch of the U.S. Geological Survey. Additional fiood studies were made by the engineers to determine what areas may be
subject to flooding. It was determined that the area subject to flooding within the District is approximately 58.5 acres based on
100-year flood frequency; however, 57.6 acres of this area is within the golf course area and is not intended to be developed for
residential land use.
Shopping and Commercial Facilities
A recently constructed shopping center within Trophy Club MUD No. 2 has a major grocery store chain outlet, a bank, a drug
store, several service businesses, iast iood outlets, and a beauty shop. Additionally there are several more businesses and
proiessional offices located in the District, at the primary entrance to the Town oi Trophy Club. There are additional shopping
facilities in Roanoke, about two (2) miles west of the District and numerous shopping iacilities in Southlake about iive (5) miles
east of the Districi and in Grapevine about eleven (11) miles east of the District. Full metropolitan shopping facilities are
available in Dallas and Fort Worth, Texas which have their central business districts approximately 27 miles and 25 miles.
respectively irom the District.
19
Fire Protection
Trophy Club Municipal Utility District No. 1 operates a fire department with four emergency response vehicles, which are
housed and maintained in a six-bay station constructed in 1990. The operalion is staffed with nine full time fire
fighterlparamedics, one Captain, a Fire Chief, a fire inspector, and several volunteer fire fighters. This department serves the
entire community and is currently financed by a combination of a $0.0900 maintenance tax assessment in the District and
approximately $75,000 of reserves and a 50.1 1192 maintenance tax assessment in MUD No. 2 with an annual budget of
$743,400.
Police Protection
Twenty-four hour security is provided by the Town of Trophy Club Police Department
Schools
The District is located in the Northwest Independent School District. Lakeview and Beck Elementary Schools (grades K-5) and
Medlin Middle School (grades 6-8) are located in Trophy Club. Northwest Middle School (grades G-a), and Northwest High
School (grades 9-12) are both located in Justin, Texas, about 8.4 miies from the center of the District. School bus
transportation is provided by the school district and is available to students living at least two miles from campus or those
without a continuous walkway connecting their home and the campus.
Other Community Services
The District, in partnership with Trophy Club MUD No. 2, operates under a Master District concept to provide water, sanitary
sewer and storm drainage services to residents of the District. The District offices jointly with Trophy Ciub MUD No. 2 and the
Town of Trophy Ciub in a permanent operations office at the main water plant at 100 Municipal Drive, Trophy Ciub. Texas
76262.
Garbage and trash collection along with recycling is currently provided to residents of the District by contract between Trinity
Waste Services and the Town of Trophy Club, with pickups twice weekly. Other utilities serving the District are TXU Energy,
Southwestern Bell Communications. MCI Telecommunications, IONEX, ATBT, World Com. Sage Telecom, Birch Telecom, and
Charter Cable Company.
The U.S. Postal Service provides mail service to each occupied house in Trophy Club
Recreational opportunities in Trophy Club are afforded by Lake Grapevine, which lies two miies north and east of the District
and its surrounding parks. Trophy Club has several community parks including facilities for soccer, baseball, softball,
basketball, and tennis as well as playground amenities. The Town is currently constructing a new 10-acre park with additional
sports venues. Trophy Club Country Club is operated by Cobblestone Golf Group. Inc. as a private membership club and
provides a 36-hole golf course, tennis, swimming, clubhouse, and golf shop.
Principal Developers of the District - An Historical Perspective
The development of property within the District was first started in 1973 by Trophy Ciub Estates, a joint venture composed of
Johnson-Loggins, Inc., a Delaware corporation with principal ofrices in Houston, Texas, Ben Hogan, a businessman and former
professional golfer from Fort Worth, Texas, and John W. McMackin, as attorney from Fort Worth, Texas. Financing for the
project was provided by Gibraltar Savings Association.
As of March 30. 1977, the Trophy Club Estates joint venture was dissolved in a series of transactions which resulted in Messrs.
Hogan and McMackin's receiving legal title to 74.3 acres within the project and Johnson-Loggins, lnc.'s receiving legal title to
the remaining acres within the project. As part of the same series of transactions, Johnson-Loggins, Inc. transferred its legal
title and interest in the project to Gibraltar Savings Association. Mr. Hogan transferred his iegal title and interest in the project
to Lake Forest Developments, a new joint venture of which John W. McMackin was the principal and managing partner.
in June of 1983. Gibraltar Savin~s Association sold the maioritv of its interest in the oroiect to indeoendent American
Development Corporation or reiakd entities. ~ubsequentl~,'independent American ~eieid~ment Corporation or related
entities sold its interest in the oroied to various other develo~ers who are resoonsible for the land deveiooment of 134 acres
within the District
Maguire Partners, formerly known as Maguirenhomas Partners, and IBM Corporation formed a joint venture to develop a 450-
acre tract of land within the District as a rnixed-use development known as the Solana complex. Maguire Partners and tBM
Corporation Joint Venture has paid all expenses incurred for the development of this properiy, including the cost of on-site
utiiilies and the required expansion of the central facilities, including water supply, water storage and wastewater treatment.
Phase I of this project was completed in 1988 and includes 1.4 million square feet of office buildings. Presently there are
approximately 195 acres remaining to be developed.
Status of Development of the District
The area in the District is locally known as "Trophy Club." It is a residential and mixed-use development consisting of some
1.289 acres, of which approximately 1.012 are developable. The District is a mature district with no significant land left far
residential development, although there is substantial land lefl for commercial development in the Solana complex, which is
located within the city of Westlake. Most of the District's commercial land within the Town of Trophy Club is either developed or
currently under development.
Lot and custom home sales officially began in the District in mid-year 1975. Homes are currently being offered at prices
ranging from 5120,000 to $1,000,000 and lots range in price from $35,000 to $200,000. The status of single-family home
development as of February 15.2003 is shown below:
Status of Sinqle-Family Home Develo~ment
Houses Additional Total Multi-Family
Under Houses Total Developed Houses Units
Construction Occuuied Houses Lots Comuleted '"
'" In addition to the single-family development, there are 136 apartments and 42 completed townhouses, which are
approximately 99% occupied.
Status of Business / Commercial Develooment
The undeveloped commercial land within tile Solana complex (approximately 230 acres) is available for commercial
development, however the District is unaware of any current plans for additional development in the Solana complex. The
Town of Trophy Club and MUD No. 1 are currently experiencing commercial development on approximately 30 acres of land
along Highway 114. The development consists of a medical complex, hotels, restaurants and a short-stay hospital facility.
Additionally, the District currently has a small strip center along Highway 114 containing several food establishments and
professional offices.
THE DISTRICT'S SYSTEM
General
The following information describes generally the water, sewer and drainage systems for the entire Trophy Club project,
including those facilities located in the District and Trophy Club Municipal Utility District No. 2. Hereinafter, Trophy Club
Municipal Utility District No. 1 and Trophy Club Municipal Utility District No. 2 are referred to as "MUD No. 1" and "MUD No. 2.
MUD No. 2 in partnership with MUD No. 1 manages the operation of the District facilities under a Master District concept. All
financial transactions relating to water and sewer operations are included in the financial statements of the Master District, a
portion of which is included in APPENDIX A as TABLE 18. Specific information regarding water and sewer rates and other fees
within the District is included in APPENDIXA, TABLES 19-21.
Description of the Water System
Sources of Water Suooly: The present water supply is provided from two sources: (i) four ground wells which provide
approximately 1,000,000 gallons per day, and (ii) a 21 inch water line which is capable of delivering 8,000,000 gallons per day
of treated water from the City of Fort Worth facilities. (See "WATER SUPPLY CONTRACT" herein). Currently the District
contracts with the City of Fort Worth on behalf of the Trophy Club development, for water service in excess of that produced by
the four wells. Current maximum usage is some 5,000,000 gallons per day (of which 3,700.000 is Fort Worth water). These
sources, when combined, provide water, which complies with the quality requirements of the Texas Department of Health and
needs only chlorination at the water plant.
Water Plan1 Facility: The present facility provides 4,000,000 gallons ground storage with pumpingichiorination capacity of
10,000.000 gallons per day. This facility is currently being expanded.
Description of the Wastewater System
Wastewater Treatment Plant Facilitv: The wastewater treatment plant system has a permitted treatment /discharge capacity of
1,750,000 gallons per day from the Texas Commission on Environmental Quality under TPDES Permit No. 11593-001. This
facility is currently being expanded. Although the permit authorizes the discharge of wastewater to the adjacent tributary
leading to Lake Grapevine, the plant effluent is currently pumped to various holding ponds within the community and is re-used
for irrigating the golf course.
WATER SUPPLY CONTRACT
The charge to the Master District for the purchase of the City of Fort Worth's water is presently $1.55 per 1,000 gallons.
To finance MUD No. 1's share of the cost of the original water storage facility payable to the City and provide for use of the
water supply throughout the Trophy Club project, MUD No. 1 entered into a contract with Gibraltar Savings Association d/b/a/
Trophy Club dated August 21. 1979. Under the terms of such contract Gibraltar agreed to fund all money required to be paid
by MUD No. 1 to the City. Gibraltar also retained a right to a portion of the water made available through these facilities. MUD
No. 1 repaid its proportionate share of the advances made by Gibraltarto the City. MUD No. 1 and Gibraltar mutually agreed to
cooperate in establishing a central water system to serve the entire Trophy Club project by using MUD No. 1 as a "Master
Distric?'. Subsequently Gibraltar and MUD No. 1 entered into such contract including all successors to Gibraltar. MUD No. 2 as
a successor to Gibraltar became a party to this Master District Contract. In October 2000 MUD No. 1 and MUD No. 2
renegotiated the Master District Contract as an agreement between the two districts only.
In 1991, a 15,000-foot section of the 21-inch line had to be relocated due to road construction at a cost of 1.1 million dollars.
MUD No. 1 financed its portion plus all uncommitted capacity in the relocated line through a bond issue sold in 1991. MUD No.
1 fronted the total cost of relocating the line and was subsequently reimbursed by MUD No. 2 for their its current ownership
portion.
MASTER DISTRICT CONTRACT
On December 1, 1982, MUD No. 1 entered into a written Contract for the Provision. Operation and Maintenance of Water
Supply and Waste Disposal Facilities with Gibraltar Savings Association as the then principal developer of Trophy Club (the
"Contract"). Under the terms of the Contract. MUD No. 1 agreed to construct, operate, and maintain the central water supply
and wastewater treatment facilities to serve the entire Trophy Club project, including MUD No. 2 and other land to the north and
northwest of MUD No. 1 which is part of the Trophy Club project, but not yet developed or included in a municipal utility district.
On October 4. 2000, MUD No. 1 and MUD No. 2 renegotiated this contract between MUD No. 2 and MUD No. 1. They are
currently operating under the new Master District Contract.
The Contract contains provisions regarding the policies and procedures to be used in the planning, financing, and operation of
the joint facilities. In general, the Contract provides that the entity holding title to district facilities under the previous Master
District Contract will continue to hold title to those facilities. All future construction and/or renovation of facilities will be
overseen by the Master District Board, which consists of 3 members each from MUD No. 1 and MUD No. 2. All new
construction of central plant facilities will be shared equally by MUD No. 1 and MUD No. 2 while new construction specific to an
individual MUD will be paid for by that MUD.
The Contract may be terminated by any party as of September 30,2005, so long as notice to terminate is submitted in writing to
all parties by September 30,2003. After September 30, 2005, this Contract may be terminated by any party as of September 30
of any year by written notice to all other parties delivered at least two (2) years in advance. This Contract may be terminated at
any other time or upon shorternolice only upon consent of both districts.
INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE DISTRICT
Available District funds are invested as authorized by Texas Law and in accordance with investment policies approved by the
Board of Directors. Both state law and the District's investment policies are subject to change. The District's goal in its
investment policy is to preserve principal and maintain liquidity, while securing a competitive yield on its portfolio.
Available District funds are invested as authorized by Texas law and in accordance with investment policies approved by the
Board of Directors. Both state law and the DistricYs investment policies are subiect to change. Under Texas law. the District is
a~thorfzed to :west n (i) obllgalions of lhe United States oi its agenc'es and ;nstiumentaities. Inc Ld~ng lelters of credit; (2)
drect ob ioat~ons of the Srate of Texas or '1s aaencl?s and nslrumenla1it:es: (3) collateralzeo monaaae ob aatlons drecl v
issued by :a federal agency orinstrumentality oi tie United States, the underlying security for which is iuaranteei by an agency
or instrumentality of the United States: (4) other obligation, the principal and interest of which is guaranteed or insured by or
backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities;
(5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by
a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the
State of israel; (7) certificates of deposit that are issued by a state or national bank domiciled in the State of Texas, a savings
bank domiciled in the State of Texas, or a state or federal credit union domiciled in the State of Texas and are guaranteed or
Insured by the Federal Deposit lnsurance Corporation or the National Credit Union Share lnsurance Fund, or are secured as to
principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for District
deposits, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations
described in clause (I), and are placed through a primary government securities dealer or a financial institution doing business
in the State of Texas. (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations
of the accepting bank or its parent are rated at least A-I or P-I or the equivalent by at least one nationally recognized credit
rating agency. (10) commercial paper with a stated maturity of 270 days or less that is rated at least A-I or P-I or the
equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency il
the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-ioad money market mutual
funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated
22
maturity of 90 days or less and include in their investment objectives the maintenance oi a stable net asset value of $1 for each
share, and (12) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted
maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as
to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In
addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are
secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at
least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the
next succeeding paragraph.
The District may invest in such obligations directly or through government investment pools that invest solely in such
obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationallv recoanized
rating servce The Distrtcl may also conlract vrth an tnvesimenr management firm regslered under lne nvesrmknt ~ivisers
Act of 1940 (15 U S.C. Sect'on 80b-1 el seq.) or i'ltth tne Stale Set-rilies Boaro to provide for the investmenl and manasement
of its public iunds or other funds under its control for a term up to two years, but the District retains ultimate responsi~ility as
fiduciary of its assets. In order to renew or extend such a contract, the District must do so by order, ordinance, or resolution.
The District is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the
outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations
whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no
interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized
mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market
Index.
Under Texas law, the District is required to invest its funds under written investment policies that primarily emphasize safety of
principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment
management; and that include a list of authorized investments for District funds, the maximum allowable stated maturity of any
Individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All District funds must
be invested consistent with a formally adopted "lnvestment Strategy Statement" that specifically addresses each fund's
investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type. (2)
preservation and safety of principal, (3) liquidity. (4) marketability of each investment, (5) diversification of the portiolio, and (6)
yield.
Under Texas law, the District's investments must be made "with judgment and care, under prevailing circumstances, that a
person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for
speculation, but for investment considering the piobable safety of capital and probable income to be derived." At least quarterly
the District's investment officers must submit an investment report to the Board of Directors detailing: (1) the investment
position of the District, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, and
any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market
value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately
invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the
compliance of the investment portfolio as it relates to: (a) adopted investment strategies and (b) Texas law. No person may
invest District funds without express written authority from the Board of Directors.
Under Texas law, the District is additionally required to: (1) annually review its adopted policies and stratesies. (2) reauire anv
investmenl offcers with personal bustnessre at onsh'ps orfam y reial:onships vith frms seek~ng lo scl se&ri<e; lo the ~istricl
lo oisclose tne reationshi~ and fie a slalenlenr vviln tne Texas Ethics Comm ss:on and the Dslricl (31 reau.re the reqislereo
principal of firms seeking to sell securities to the District to: (a) receive and review the ~istrict;sinvestment (b)
acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activilies, and
(c) deliver a written statement attesting to these requirements; (4) In conjunction with its annual financial audit, perform a
compliance audit of the management controls on investments and adherence to the District's investment policy, (5) restrict
reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement iunds to
no greater than the ten of the reverse repurchase agreement, (6) restrict the lnvestment in non-money market mutual funds in
the aggregate to no more than 15% of the District's monthly average fund balance, ex~iuding bond proceeds and reserves and
other funds held for debt service and (7) require local government investment pools to conform to the new disclosure, rating,
net asset value, yield calculation, and advisory board requirements.
lnvestment Officer and Authorized Investments
The District's Finance Director or other person designated by the Board of Directors of the District shall be the investment
officer and invest District funds in legally authorized and adequately secured investments in accordance with generally
accepted accounting procedures and provisions of the Public Funds lnvestment Act. Authorized investments shall include:
Certificates of Deposit. Federal Agency Discount Notes, Investment Pools, Treasury Bills and Demand Accounts in Local
Banking Institutions.
investment Reports
Cash flow statements shall be prepared monthly for every designated fund. All receipts and disbursements shall be in the
statement with individual line items that are specific to each designated iund.
On a qJarter y bas's. rne inveslmenr oificcr wil s~bmt lo lne Board oi Drcclors a v~r lien report of invesl~nent lransactions for
all funds. The report r~:Ii descr~oe in oetai !he lnveslmenl pos tion of the Dlstrct on tha oale of me repon and 1st n deta~ the
transactions for the quarter
The investment officer will confirm that the par value of approved securities is of an adequate amount to protect the District's
uninsured deposits in the depository bank or other uninsured investments.
All investment reports shall specifically address whether current investment results have been affected by risks and shall
explain the actions the investment officer has taken to control or correct such risks, specifically: . All investment shall be legal investments.
lnvestments shall be made in a prudent manner. - The financial condition of institutions with which investments are placed shall be considered.
All investments over the insured amounts shall be secured by a pledge of approved securities.
Current investments
As of January 31. 2003 all the District's funds in the amount of $1,710.614 were invested in TexPool. The District does no!
currently own, nor does it anticipate the inclusion of long-term securities or derivative products in its portfolio.
TAX DATA
District Bond Tax Rate Limitation
The District's tax rate for debt service on the Bonds is legally unlimited as to rate or amount.
Maintenance Tax
The Board of Directors of District has the statutory authority to levy and collect an annual ad valorem tax for planning,
constructing, acquiring, or maintaining or repairing or operating the District's improvements, if such maintenance tax is
authorized by a vote of the District's electors. Such tax is in addition to taxes which the District is authorized to levy for paying
principal of and interest on the Bonds, and any tax bonds which may be issued in the future. At an election held on October 7,
1975, voters within the District authorized a maintenance tax not to exceed $0.25/$100 assessed valuation. As shown in
APPENDIX A. TABLE 13 - "TAX RATE DISTRIBUTION," the District levied a 2002 maintenance and operations tax of
$0.01/$100 assessed valuation.
Overlapping Taxes
Other governmental entities whose boundaries overlap the District have outstanding bonds payable from ad valorem taxes.
The statement of direct and estimated overlapping ad valorem tax debt shown in APPENDIX A -TABLE 14 (page A-6) was
developed from several sources, including information contained in "Texas Municipal Reports." published by the Municipal
Advisory Council of Texas. Except for the amount relating to the District, the District has not independently veriiied the
accuracy or completeness of such information, and no person is entitled to rely upon information as being accurate or
complete. Furthermore, certain of the entities listed below may have issued additional bonds since the dates stated in this
table, and such entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of
which cannot be determined. 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 debt service and the tax
burden for operation, maintenance andlor general purposes is not included in these figures. See APPENDIX A - TABLES 14-
16 for information on overlapping taxing entities.
TAXING PROCEDURES
Authority to Levy Taxes
The Board is authorized to levy an annual ad valorem tax on all taxable property within the District in an amount sufficient to
pay the principal of and interest on the Bonds, their pro rata share of debt service on any contract tax bonds and any additional
bonds or obligations payable from taxes which the District may hereafter issue and which are now outstanding (see
"INVESTMENT CONSIDERATIONS - Future Debt" herein) and to pay the expenses of assessing and collecting such taxes.
The District agrees in the Order to levy such a tax from year-to-year as described more fully herein under "THE BONDS -
Source of and Security for Payment". Under Texas law, the Board is also authorized to levy and collect an ad valorem tax for
the operation and maintenance of the District and its water and wastewater system and for the payment of certain contractual
obligations, if authorized by its voters. (See "TAX DATA herein.)
Property Tax Code and County-Wide Appraisal District
The Texas Propeny Tax Code (:ne "Propeny Tax Code ) specifies In5 iaxlng proceoJres of all polilcai s~oo~vis ons of !he Stale
of Texas, Inc~ding tnc D:slricl. Provisions of the Property Tax Code are complex an0 aro not fuliy s~mmarlzed tieren.
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 an appraisal district with the responsibility for recording and appraising
property for all taxing units within the county and an appraisal review board with responsibility for reviewing and equalizing the
values established by the appraisal district. The board of directors of the appraisal district selects a chief appraiser to manage
the appraisal offices of the appraisal district. The Denton County Appraisal District (the "DCAD) has the responsibility for
appraising property for ail taxing units within Denton County, including the District. Such appraisal values are subject to review
and change by the Denton County Appraisal Review Board (the "Appraisal Review Board"). The appraisal roll as approved by
the Appraisal Review Board must be used by the District in establishing its tax roll and tax rate.
General: Except for certain exemptions provided by Texas law, all property with a tax situs in the District is subject to taxation by
the District: however, no effort is made by the District to collect taxes on tangible or intangible personal property not devoted to
commercial or industrial use. Principal categories of exempt propem include: 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
non-profit cemeteries; farm products owned by the producer; and certain property owned by charitable, religious, scientific,
literary, student housing, veterans, youth, development or fraternal organizations. Goods, wares, ores and merchandise (other
than oil, gas or petroleum products) that are acquired in or imported into the state and forwarded out of state within 175 days
thereafter are also exempt (Freeport Property). Property owned by a disabled veteran or by the spouse or certain children oi a
deceased disabled veteran or a veteran who died while on active duty has been granted an exemption from $5,000 up to
$12,000 of assessed vaiue. The District does grant a Freeport Property exemption.
Residential Homestead Exemptions: The Board may exempt up to 20% of the market value of residential homesteads from ad
valorem taxation. Such exemption would be in addition to any other applicable exemptions provided by law. However, if ad
valorem taxes have previously been pledged for the payment of debt, then the Board may continue to levy and collect taxes
against the exempted value of the homesteads until the debt is discharged if the cessation of the levy would impair the
obligation of the contract by which the debt was created. The Board does not grant this exemption.
Also exempt, if approved by the Board or through a process of petition and referendum by the District's voters, are residenfial
homesteads of certain persons who are disabled or at least 65 years old, to the extent of $3,000 of appraised value or more.
The District is authorized by statute to disregard such exemptions for the elderly and disabled if granting the exemptions would
impair the District's obligation to pay tax supported debt incurred prior to adoption of the exemptions by the District. The Board
has granted such elderly and disabled exemptions in the amount of $25,000 of assessed valuation.
Tax Abatement: Denton County or the Town of Trophy Club may designate ail or part of the area within the District as a
reinvestment zone. Thereafter, the District may enter into tax abatement agreements with owners of real property within the
District for up to ten (10) years, all or any part of any increase in the assessed valuation of property covered by the agreement
over its assessed 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 a comprehensive plan. None of the area within the
District has been designated as a reinvestment zone to date and the District does not expect any area within the
District to be so designated in the foreseeable future.
Valuation of Property for Taxation
Generally, all taxable property in the District must be appraised by the Denton County Appraisal District at one hundred percent
(100%) of market value as of January 1 of each year, subject to review and approval by the Appraisal Review Board. In
determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the
income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by
the chief appraiser is to be used.
Certain iand may be appraised at less than market vaiue under the Property Tax Code. increases in the appraised vaiue of
residence homesteads are limited to 10 percent annually regardless of the market value of the property. Upon application of a
landowner, land which qualifies as "open-space iand" is appraised based on the category of land, using accepted income
capitalization methods applied to the average net income derived from the use of the land for agriculture and hunting or
recreational leases. Upon application of a landowner, land which qualifies as "limber land" is appraised using accepted income
capitalization methods applied to the average net income derived from the use of the land for production of timber. Land which
qualifies as an aesthetic management zone, critical wildlife management zone, or streamside management zone or is being
regenerated for timber production for 10 years after harvest is valued at one-half that amount. In the case of both open space
and timber land valuations, if the use of land changes, an additional tax is generally imposed on the iand equal to the difference
between the taxes imposed on the land for each of the five (5) years preceding the year in which the change of use occurs and
the tax that would have been imposed had the iand been taxed on the basis of market value in each of those years, plus
interest at an annual rate of seven percent (7%) calculated from the dates on which the differences would have become due.
There are also special appraisal methods for agricultural land owned by individuals whose primary occupation and income are
farming and for recreational, park, and scenic land. Also, houses or lots held for sale by a developer or builder which remain
unoccupied, are not leased or rented and produce no income are required to be assessed at the price for which they would sell
as a unit to a purchaser who would continue the owner's business, upon application of the owner.
Once an appratsa ro.. IS prepare0 and approved by the Appratsa. Red 6~ Boaro, il s Use0 Dy the Dlslrct tn eslao isnlng 11s tai
rak. Tne Propeny Tax Cooc- r2q~1res the Appraisal District to imp ernEnt a pan lor pertodlc reappratsal oi orooeny to uooale
appraised values. The plan must provide for appraisal of all real property in the Appraisal District at least one every three (3)
years. It is not know what frequency of reappraisal will be utilized by the Appraisal District or whether reappraisals will be
conducted on a zone or countywide basis.
District and Taxpayer Remedies
The chief appraiser must give written notice before the Appraisal Review Board meeting to an affected owner if a reappraisal
has resulted in an increase in value over the prior year or the value rendered by the owner, or if property not previously included
on the appraisal roll has been appraised. Any owner who has timely filed notice with the Appraisal Review Board may appeal
the final determination by the Appraisal Review Board of the owner's protest by filing suit in Texas district court. Prior to such
appeal, however, the owner must pay the tax due on the amount of value of the property involved that is not in dispute or the
amount of tax paid in the prior year, whichever is greater, but not to exceed the amount of tax due under the order from which
the appeal :s taken. In tne event of such wit, tne value of the propeny :s determine0 by the co~rt, or apry f requested by any
party. Adoitona y the D:stncr ,s entil,ed to cnall~nge cenaln matlers oefore the Apprasal Review Board, ~ncl~o;no the leve of
app;aisal of certain category of property, the exclusion of property from the appraisal records, or the grant in wholeor in part of
a partial exemption, or a determination that land qualifies for a special use appraisal (agricultural or timber classification, for
example). The District may not, however, protest a valuation of individual property.
Levy of Taxes
The rate of taxation is set by the Board based upon the valuation of property within the District as of the preceding January 1
and the amount required to be raised for debt service, maintenance purposes, and authorized contractual obligations.
Unless the Board, or the qualified voters of the District or of Denton County at an election held for such purpose, determines to
transfer the collection of taxes to the DCAD or another taxing unit, the District Is responsible for the levy and collection of its
taxes.
Collection of Taxes
Taxes are due on receipt of the tax bill and become delinquent afler January 31 of the following year. However, a person over
65 is entitled by law to pay current taxes on his residential homestead in installments or to defer taxes without penalty during
the time he owns and occupies the property as his residential homestead. The date of the delinquency may be postponed if
the tax bills are mailed after January 10 of any year. Delinquent taxes are subject to a 6% penalty for the first month of
delinquency, one percent (1%) for each month thereafter to July I, and 12% total if any taxes are unpaid on July 1. Delinquent
taxes also accrue Interest at the rate of 1% per month during the period they remain outstanding. In addition, where a district
engages an attorney for collection of delinquent taxes, the Board may impose a further penalty not to exceed fifteen percent
15% on all taxes unpaid on July 1 in lieu of recovering attorney's fees. The District may be prohibited from collection of
penalties and interest on real property owned by the Federal Depository Insurance Corporation. In prior years the District has :
engaged a delinquent tax attorney and imposed such a penalty.
District's Rights in the Event of Tax Delinquencies 1
Taxes levied by the District are a personal obligation of the owner of the property on 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 iocai 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 the District, having power to tax the property. The Districts tax lien is on a parity with tax liens of
such other taxing units. 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 the 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 afler taxes on property become delinquent, the District may file suit to foreclose the lien securing payment of the
tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the 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, by taxpayer redemption rights (a taxpayer may redeem property within two years afler the purchaser's
deed issued at the foreclosure sale is filed in the county records) or by bankruptcy proceedings which restrict the collection of
taxpayer debts. (See "INVESTMENT CONSiDERATlONS - General -Tax Collections and Foreclosure Remedies" herein.)
LEGAL MATTERS
Legal Opinions i
Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving opinion of the Attorney $ General of the State of Texas and McCall. Parkhurst & Horton L.L.P., Bond Counsel. whose opinion will accompany the Bonds. 4
In its capacity as Bond Counsel, McCall. Parkhurst & Horton L.L.P, has reviewed the information appearing in this Official 1
Statement under the captions "PLAN OF FINANCING," "THE BONDS" (exclusive of the information in the subcaption "Payment 8
Record"). "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof) "TAX MATrERS," "CONTINUING
DISCLOSURE OF INFORMATION (exclusive of the information in the subcaption "Compliance With Prior Agreements"), and
"OTHER MATTERS - Registration and Qualification of Bonds for Sale, and Legal Investments and Eligibility to Secure Public
Funds in Texas" to determine whether such information accurately summarizes the material and documents referred to therein
and is correct as to matters of law. Such firm 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 issuer for the purpose of passing upon the
accuracy or completeness of this Ofticia1 Statement. No person is entitled to rely upon such firm'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 of
the information contained herein. The iegal fees to be paid Bond Counsel for services rendered in connection with the
issuance of the Bonds are contingent on the sale and delivery of the Bonds. The iegal opinions of Bond Counsel will be printed
on the definitive Bonds or will accompany the global certificates deposited with DTC and the form of such opinion is attached
hereto as Appendix C. Certain iegal matters will be passed upon for the Underwriter by Fulbright 8 Jaworski L.L.P., Dallas.
Texas, counsel for the Underwriter.
The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the
respective 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 oi that 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.
Litigation
The District is not a party to any litigaiion or other proceeding pending or to its knowledge threatened, in any court, agency or
other administrative body (either city, state or federal) which, if decided adversely to the District would have a material adverse
effect on the financial condition of the District.
No Material Adverse Change
The obligation of the Underwriter to take and pay for the Bonds is 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 Official Statement.
TAX MATTERS
Opinion
On the date of initial delivery of the Bonds, McCaii, Parkhurst 8 Horton L.L.P.. Dallas, Texas Bond Counsel, will render its
opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof
C'Existing Law"), (1) interest on the Bonds for federal income tax purposes wiil be excludable from the "gross income" of the
holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be
included as an alternative minimum tax preference item under section 57 (a) (5) of the lnternal Revenue Code of 1986 (the
"Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax
consequences of the purchase, ownership or disposition of the Bonds. (See APPENDIX C - "Form of Bond Counsel's Opinion"
herein.)
In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the District, including
information and representations contained in the District's federal tax certificate, and (b) covenants of the District contained in
the Order relatino to certain matters, includin~ arbitraqe and the use of the proceeds of the Bonds and the orooertv financed or
refinanced therewith. Although it is expectedthat theBonds will qualify as tax-exempt the status of the ~onds could be affected
bv iuture events. However. future events bevond the control of the District, as well as the failure to observe the aforementioned
representations or covenants, could dause the interest on the Bonds to become taxable retroactively to the date of issuance,
Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the
aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The
Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts
and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof wiil not be
changed in a manner, which would adversely affect the tax treatment ofthe purchase, ownership or disposition of the Bonds.
A Ruling was not sought from the internal Revenue Service by the District with respect to the bonds or property financed with
the proceeds of the Bonds. No assurances can be given as to whether or not the lnternal Revenue Service will commence an
audit of the Bonds, or as to whether the lnternal Revenue Service would agree with the opinion of Bond Counsel. If an audit is
commenced, under current procedures the Internal Revenue Service is likely to treat the District as the taxpayer and the
Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of
taxability.
Federal Income Tax Accounting Treatment of Original lssue Discount
The initial public offering price to be paid for one or more maturities of the Bonds (the "Original lssue Discount Bonds") may be
less than the principal amount thereof or one or more periods for the payment of interest on the Bonds may not be equal to the
accrual period or be in excess of one year. In such event, the difference between (i) "stated redemption price at maturity" of
each Original lssue Discount Bond, and (ii) the initial offering price to the public of such Original lssue Discount Bond would
constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the
Bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during
equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods
which do not exceed one year. Under Existing Law, any owner who has purchased such Original lssue Discount Bond in the
initial public offering is entitled to exclude frokgross income (as defined in section 61 of the Code) an amount of income with
resuect to such Orioinal lssue Discount Bond eaual to that uortion of the amount of such orioinal issue discount allocable to the
acdrua~ period. Fo;a discussion of certain collaieral federai tax consequences, see discussion set forth below.
in the event of the redemption, saie or other taxable disposition of such Original lssue Discount Bond prior to stated maturity.
however, the amount realized by such owner in excess of the basis of such Original lssue 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 Original lssue
Discount Bond was held by such initial owner) is includable in gross income
Under Existing Law, the original issue discount on each Original lssue 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 date of the Bond and ratably within each such six-month per~od) and the accrued amount is added to
an initial owner's basis for such Original lssue Discount Bond for purposes of determining the amount of gain or loss recognized
by such owner upon the redemption, saie or other disposition thereof. The amount to be added to basis for each accrual period
is equal to (i) the sum of the issue price and 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 (ii) the amounts payable as current interest during such accrual period on such Bond.
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original lssue
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 lssue Discount Bonds should consult their own tax advisors
with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon
redemption, sale or other disposition of such Originai lssue Discouni Bonds and with respect to the federal, state, local and
foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original lssue Discount
Bonds.
Collateral Federal Income Tax Consequences
The following discussion is a summary of certain collateral federai income tax consequences resulting from the purchase.
ownership or disposition of the Bonds. This discussion is based on existing statutes, regulations, published rulings and court
decisions, all of which are subject to change or modification, retroactively.
The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as
financial institutions, property and casualty insurance companies, life insurance companies, owners of an interest in a FASIT,
individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S
corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued
indebtedness to purchase tax-exempt obligations.
THF DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS. INCLUDING THOSE WHO ARE -- ~
SUBJECT TO SPECIAL PROV~SIONS OF THE CODE. SHOULD CONSULT THEIR OWN'TAX ADVISORS AS TO THE TAX
TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DiSPOSlTlON OF
TAX-EXEMPT BONDS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds will be includable as an adjustment for "adjusted earnings and profits" to calculate the alternative
minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for
corporations, or 26 percent for non-corporate taxpayers (28 percent for taxable excess exceeding $175,000), of the taxpayer's
"alternative minimum taxable income." if the amount of such alternative minimum tax is greater than the taxpayer's regular
income tax for the taxable year.
lnterest on the Bonds may be subject to the "branch profits tax" imposed by Section 884 of the Code on the effedively-
connected earnings and profits of a foreign corporation doing business in the United States.
Under Section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest
received or accrued during each taxable year on their returns of federai income taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt
obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation
is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such
gain does not exceed the accrued market discount of such obligations. A "market discount bond" is one which is acquired by
the holder at a purchase price which is less than the stated redemption price or, in the case of an obligation issued at an
original issue discount, the "revised issue price" (i.e., a market discount). The "accrued market discount" is the amount which
bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the
number of days between the acquisition date and the final maturity date.
State, Local and Foreign Taxes
Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the
Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax
consequences unique to investors who are not United States persons.
Qualified Tax-Exempt Obligations for Financial Institutions
Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial
institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible by such
taxpayer in determining taxable income. Section 265(b) of the Code provides an exception to the disallowance of such
deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a "financial institution" allocable to
tax-exempt obligations, other than "private activity bonds," which are designated by an "qualified small issuer" as "qualified tax-
exempt obligations." A "qualified small issuer' is any governmental issuer (together with any subordinate issuers) who issues
no more than $10,000,000 of tax-exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term
"financial institution" as referring to any corporation described in section 585(a)(2) of the Code, or any person accepting
deposits from the public in the ordinary course of such person's trade or business which is subject to federal or state
supervision as a financial institution.
The District has designated the Bonds as "qualified tax-exempt obligalions" within the meaning of section 265(b) of the Code.
In furtherance of that designation, the District will covenant to take such action, which would assure or to refrain from such
action, which would adversely affect the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers
should be aware that if the issue price to the public (or, in the case of discount bonds, the amount payable at maturity)
exceeds $10,000,000, then such obligations might fail to satisfy the $10,000,000 limitation and the obligations would
not be "qualified tax-exempt obligations."
CONTINUING DISCLOSURE OF INFORMATION
The offering of the Bonds qualifies for an exemption from Rule 15c2-12 (the "Rule") of the Securities and Exchange Commission
regarding the District's continuing disclosure obligations because the District has less than $10,000,000 in aggregate amount of
outstanding obligations and no person other than the District is committed by contract or other arrangement with respect to the
payment of the Bonds. In accordance with such exemption, the District in the Order has made the following agreement for the
benefit of the holders and beneficial owners of the Bonds. The lssuer is required to observe the agreement for so long as it
remains obligated to advance funds to pay the Bonds. Under the agreement, the lssuer will be obligated to provided certain
updated financial information and operating data annually, and timely notice of specified material events, to certain information
vendors. This information will be available to securities brokers and others who subscribe to receive the information from the
vendors.
Annual Reports
The District will provide certain financial information and operating data, which is customarily prepared by the District and is
publicly available to the appropriate state information depository ("SID"). The financial information and operating data with
respect to the District of the general type included in this Official Statement in Appendix A, Tables 1. 12 and 13 will be provided.
Under Texas Law, the District must keep its fiscal records in accordance with generally accepted accounting principals, must
have its financial accounts and records audited by a certified public accountant within 120 days after the close of each fiscal
year of the District, and must file each audit report with the TCEQ within 135 days after the close of the fiscal year. The
District's fiscal records and audit reports are available for public inspection during regular business hours, and the District and
the TCEQ are required by law to provide a copy of the District's audit reports to any member of the public within a reasonable
time on request, upon payment of applicable copying charges. Requests for copies should be addressed to the District 100
Municipal Drive, Trophy Club, Texas 76262. The District will provide this information to the SID within six months after the end
of each of its fiscal years ending in or after 2003.
The lssuer may provide updated information in full text or may incorporate by reference certain other publicly available documents,
as permined by SEC Rule 15c2-I2 (the "Rule"). The updated information will include audited financial statements for the lssuer, if
the lssuer commissions an audit and it is completed by the required time. If audited financial statements cannot be provided. the
lssuer will provide unaudited financial statements until the audited financial statements become available. Any such financial
sratemenls v,.l be prepared :n accoroance vr tn the acco~nlng princples descr:oeo in the Issuer's ann~al financla: stalements, or
s~ch orher accounting princples as tne lss~er may be required to employ lrom I me lo lime pLrsuant lo slate avr or reg~lat'on
The Issuer's current fiscal year end is September 30. Accordingly, it must provide updated information by the last day in March in
each year, unless the lssuer changes its fiscal year. If the lssuer changes its fiscai year, it will notify any SID of the change.
29
Material Event Notices
The lssuer will also provide timely notices of certain events to certain information vendors. The lssuer will provide notice of any of
the following events with respect to the Bonds, if such event is material to a decision to purchase or sell Bonds: (1) principal and
interest payment delinquencies; (2) non-payment related defaults; (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 periornl: (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds;
(7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution, or sale of property
securing repayment of the Bonds: and (11) rating changes. Neither the Bonds nor the Order make any provision for debt service
reserves, or liquidity enhancement. In addition, the lssuer will provide timely notice of any failure by the lssuer to provide
information, data, or financial statements in accordance with its agreement described above under "Annual Reports". The lssuer
will provide each notice described in this paragraph to any SID and the Municipal Securities Rulemaking Board ("MSRB).
Availability of Information from SID and MSRB
The lssuer has agreed to provide the foregoing information only to any SID and the MSRB. The information will be available to
holders of Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or
obtain the infomlation through securities brokers who do so.
The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID, and has been qualified as a SID by
the staff of the SEC. The address of the Municipal Advisory Council is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-
2177, and its telephone number is 5121476-8947.
Limitations and Amendments
The lssuer has agreed to update information and to provide notices of material events only as described above. The lssuer 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 or agreed to update any information that is provided, except as described above. The lssuer 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 lssuer 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 lssuer to comply with its agreement.
The lssuer may amend its continuing disclosure agreement to adapt to 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 lssuer, if the agreement, as
amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein 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 or any person
unaffiliated with the lssuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair
the interests of the beneficial owners of the Bonds. The lssuer may also repeal or amend these provisions if the SEC amends or
repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are
invalid, but in either case only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully
purchasing or selling Bonds in the primary offering of the Bonds giving effect to (a) such provisions as so amended and (b) any
amendments or interpretations of the Rule. If the lssuer amends Its agreement, it must include with the next financial information
and operating data 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 information and data provided.
Compliance with Prior Agreements
During the past five years, the lssuer has complied with all continuing disclosure agreements made by it in accordance with the
Rule.
FINANCIAL ADVISOR
Southwest Securities is employed as Financial Advisor to the District to assist in the issuance of the Bonds. In this capacity,
the Financial Advisor has compiled certain data relating to the Bonds that is contained in this Official Statement. The Financial
Advisor has not Independently verified any of the data contained herein or conducted a detailed investigation of the affairs of
the District to determine the accuracy or completeness of this Official Statement. Because of their limited participation, the
Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The
fee of the Financial Advisor for services with respect to the Bonds is contingent upon the issuance and sale of the Bonds. In
the normal course of business, the Financial Advisor may from time to time sell investment securities to the District for the
investment of debt proceeds or other funds of the District, upon the request of the District.
OFFICIAL STATEMENT
Experts
In approving this Official Statement, the District has relied upon the following experts in addition to the Financial Advisor
The Enoineer: Some oi information contained in the Official Statement relating to engineering matters has been provided
by Carter & Burgess. Inc, and has been included in reliance upon the authority of said firm as experts in the field of civil
engineering.
Ap~raisal District: The information contained in this Official Statement relating to the certified assessed valuation of
property in the District and has been provided by the Denton County Appraisal District, in reliance upon their authority as
experts in the field of appraising and tax assessing.
Tax Assessor/Collector: The information contained in this Official Statement relating to tax collection rates, and principal
taxpayers has been provided by the Denton County Tax Assessor/Collector in reliance upon her authority as an expert in
the field of tax assessing and collecting.
Updating the OKcial Statement During Underwriting Period
If, subsequent to the date of the Official Statement to and including the date the Underwriter is no longer required to provide an
Official Statement to potential customers who request the same pursuant to Rule 15~2-12 of the federal Securities Exchange
Act of 1934 (the "Rule") (the earlier of (I) 90 days from the "end of the underwriting period (as defined in the Rule) and (ii) the
time when the Official Statement is available to any person from a nationally recognized repository but In no case less than 25
days after the "end of the underwriting period"), the District learns or is notified by the Underwriter of any adverse event which
causes any of the key representations in the Official Statement to be materially misleading, the District will promptly prepare
and supply to the Underwriter a supplement to the Official Statement which corrects such representation to the reasonable
satisfaction of the Underwriter, unless the Underwriter elects to terminate its obligation to purchase the Bonds as described
above.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement, and in any other information provided by the District, that are not purely
historical, are forward-looking statements, including statements regarding the District's expectations, hopes, intentions, or
strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking
statements Included in this Official Statement are based on information available to the District on the date hereof, and the
District assumes no obligation to update any such forward-looking statements. The District's actual results could differ
materially from those discussed in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are
inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the
underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market.
legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including
customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and
officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic,
competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately
and many of which are beyond the control of the District. Any of such assumptions could be inaccurate and, therefore, there
can be no assurance that the forward-looking statements included in this Offlcial Statement will prove to be accurate.
OTHER MATTERS
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:
"All bonds, notes. and other oblioations issued bv a district shall be legal and authorized investments for all
banks, trust companies, building and loan associaiions, savings and ioanassociations, insurance companies of
all kinds and tvoes, fiduciaries. and trustees, and for all interest and sinkincl funds and other public funds of the
State of ~exai'and all agenciks, subdivisions, and instrumentalities of th;! state including all counties, cities,
towns, villages, school districts and all other kinds and types of districts, public agencies, and bodies politic."
For the Bonds to be eligible investments for municipalities, political subdivisions or public agencies of Texas, the Public Funds
lnvestment Act, V.T.C.A.. Government Code. Chapter 2256, provides a rating of "A or its equivalent as to investment quality
must be assigned by a national rating agency.
Pursuant to the Public Funds Collateral Act (Chapter 2257, Texas Government Code), the Bonds are eligible to secure deposits
of public funds of the State of Texas or any political subdivision or public agency of the State of Texas and are lawful and
sufficient security for those deposits to the extent of their market value.
31
No representation is made that the Bonds wili be acceptable to public entities to secure their deposits or wili be acceptable tc
such institutions for investment purposes. No representation is made concerning other laws, rules, regulations, or investmenl
criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of th~
Ioregolng purposes. ho representation 1s maoe concern ng tne eilg b I ly of tne Bonds lo secure p-bl~c f~nds or lnclr legal~ty as
lnvestmenrs by lnslltut ons in slates other than rcxas
Registration and Qualification of Bonds for Sale
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:
nor have the Bonds been registered or qualified under the securities laws of any other jurisdiction. The District assumes no
responsibility for registration 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.
Annual Audits
Under Texas Law, the District must keep its fiscal records in accordance with generally accepted accounting principles, must
have its financiai accounts and records audited by a certified or permitted public accountant within 120 days after the close of
each fiscal year of the District, and must file each audit report with TCEQ within 135 days afler the close of the fiscal year.
Copies of each audit report must also be filed in the ofiice of the District. The DistricPs fiscal records and audit reports are
available for public inspection during regular business hours, and the District is required by law to provide a copy of the
District's audit reports to any Registered Owner or other member of the public within a reasonable time on request, upon
payment of charges prescribed by the Texas General Services Commission.
GASB 34
in June 1999, the Governmental Accounting Standards Board issued Statement No. 34. "Basic Financial Statements - and
Management's Discussion and Analysis - for State and Local Governments." The objective of this Statement is to enhance the
clarity and usefulness of the general-purpose external financial reports of state and local governments to the citizenry,
legislative and oversight bodies, and investors and creditors. The District must implement GASB 34 beginning with its fiscal
year ending September 30, 2004. While adoption of this Statement may alter the presentation of the District's financial
information, District management does not believe that adoption of GASB 34 will have any material adverse impact on the
District's financial position, results of operation, or cash flows.
Underwriting
The Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the issuer at a price of $2,063,266.15
(representing the par amount of the ClBs of $1,865,000, plus the par amount of the CABS of $84.287.70, plus Premium on the
CABS of $117,369.00, plus an original issue premium of $11,805.25, less an Underwriter's discount of $15,195.80), plus
accrued interest on the ClBs to the date of initial delivery of the Bonds to the Underwriter.
The Underwriter's obligation is subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the
Bonds, if any Bonds are purchased. The Bonds may be offered and soid to certain dealers and others at prices lower than
such public offering prices, and such public prices may be changed, from time to time, by the Underwriter.
Concluding Statement
The financial data and other information contained in this Official Statement have been obtained from the District's records.
audited financiai statements and other sources which are believed to be reliable. This is no guarantee that any of the
assumptions or estimates contained herein wili be realized. All of the summaries of the statutes, documents and resolutions
contained in this Official statement are made subject to all of the provisions of such statutes, documents and resolutions.
These summaries do not purport to be complete statements of such provisions and reference is made to such documents for
further information. Reference is made to original documents in ail respects.
The Order will also approve the form and content of this Official Statement, and any addendum, supplement or amendment
thereto, and authorize its further use in the offering of the Bonds by the Underwriter.
Is1 Dean Henrv
President, Board of Directors
Trophy Club Municipal Utility District No. 1
/s/ Jim Hase
Secretary, Board of Directors
Trophy Club Municipal Utility District No. 1
32
SCHEDULE I
SCHEDULEOFREFUNDEDBONDS
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
UNLIMITED TAX REFUNDING BONDS. SERIES 1993
Original
Original Maturity Principal Amount to be Interest
Dated Date LSeptember 11 Amount Refunded Rates
June 1.1993 2003 $ 350,000 $ 350,000 5.50%
These maturities will be redeemed prior to original maturity on April 9, 2003, at par.
SCHEDULE II
SCHEDULE OF ACCRETED VALUES OF PREMIUM CAPITAL APPRECIATION BONDS ("CABS)
CABS Delivery Date: April 9,2003
2005
Maturity
Accreted
Value
Qa&
APPENDIX A
FINANCIAL INFORMATION OF THE ISSUER
(This appendix contains quanlitative financial information and operating data with respect to the Issuer. The Information is only a
partial representation and does not purport to be complete, For further and more complete information, reference should be made
to the original documents, which can be obtained from various sources, as noted.)
FINANCIAL INFORMATION OF THE ISSUER
ASSESSED VALUATION TABLE 1
2002 Actual Market Value of Taxable Properly S 386,925,224
Less Exemptions:
Local Optional Over-65
Disabled and Deceased Veterans'
Pioduclivily Loss
Freeporl
10% Value Cap Loss
Total Exempt Properly
Other -
2001 Net Taxable Assessed Valuation (100% of ~ctuai)"'
'" See "TAXING PROCEDURES" in the Official Statement ior a description ofthe issuer's taxation procedures.
Does not include net taxable value of 87,203,133 iorpropeiiy currently under RweL%,.
Source: Denton County Appraisal District
GENERAL OBLIGATION BONDED DEBT TABLE 2
(As oiFebrua~~ 1.2003)
Gcncrill Obllgatlon Deb1 Princlpal Outstanding:
Unt mlreo iax Rciund no Bonds. Sertes 1993 (be ng rri~ndeo v. tn I,!? Bonds)
WW 8 SS Colnb ned Tax and Reven-e Refl.no no Bonds Soi~es 1897
Unlimited Tax Refunding Bonds. Series 2003 (the;'8ondsq')
Total General Obligation Debt Principal Outstanding:
Genera Ob 9311on lnleresl and Slnklng F-nd Balance as of 1-31-03
Rallo 01 General Ob igailon Deo! Princ pa lo 2002 Net Assesseo Val~a; on
2002 he1 A-sesseo 'laluat on
Population Estimates: 2000 - 3.450: Current (Estimate) -
Per Capita 2002 Net Assessed Valuation -
Per Capita General Obligation Debt Principal -
I nc ~des me "/a -c at Kerl.nrv"ofrr~~ Przms~m CAB5 lor 2005 and2006 rnaru,!L.s
I~CILO~S [he 'Val~e a1 h<=runr," oirno Fremsdm CAB5 lor In? 2005 m~lurrry : See 'TAXING P2OCEDURES' m rno Oificlal Sr~lemmr lor a oesc~orlco clrne IsSLer s 1arol.on cra?eodrcs
OTHER OBLIGATIONS TABLE 3
Notes Payable: The District has financed the purchase of personal firefighting equipment with a note payable annually at
$2,445, including interest accruing at2.50%, payable through May, 2005.
Capllal Lease Obligations: T?e Dlstricl snares ilie p-rcnass of LanoLs ofilce aq.1 plnenl v.;ll, capllal eases is. In lne Toan
of Tropt>{ Cluo and IAJO 2 Tne D:slnno anarc of tne lo:a monlnly pabrnc-nls nc .umg nlcresl accru ng at 7 00:0) te S547
payable through May, 2005.
Linc of Crcdil: n Septemoer oi 2002 tne D!s:ricl cnlerco'nl, a reiol.lng t.ne ofcruo;~ (tne L nc IS,. It) konncsst Bsn~ lo
proroe addllionoi I q~d ;) for lne D'sl:8cl in ine men1 I occoines econom~zal / pr.oen1 to lemponr y ~se eo#nc pown oi
existing reserves lor capital project financing. Under the terms of the Line, the Distrlct, at its discretion, may fund up to
51.000.000 through one or more draws. As oithe date of this Oflicial Statement, the District has not exercised any draws
under the Line. Repayment terms are to be determined ai time of draw, with the initial interesl rate to be 4.75%
MUD 2 Paymsnt Agreement: In December of 2002 the Dtstrict entered into an agreement with MUD 2 pursuant to which the
District agreed to pay one-haif of the debt service on bonds issued by MUD 2 to finance the construction of a two million
gallon storaae tank bv MUD 2. The District's share of the total vearlv debt service (including inteiesll is anlici~ated to be
approximatr& 530.000 per year for 20 years.
Public Property Finance Contractual Obligations: (Paid from M8O Funds)
Fiscal Year
Ended 9-30 Prindoal
2003 S 56,000.00 S 15.125.00
2004 59,000.00 11,962.50
Debt Seivice
S 71.125.00
70,962.50
GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS
Fiscal Year
30-Sep
Current Total
Debt Service
~utstandinq'"
$ 750,912.50
859,525.00
860,055.00
857.825.00
859,045.00
398,575.00
398,065.00
401.505.00
398,620.00
$ 5.784.127.50
Less:
Refunded
Bonds
The Bonds
Principal Interest Total
Combined
Debt Service
la' Does not include Public Properly Finance Contractual Obligations indebtedness (see Table 3, page A-I). " Includes the Refunded Bonds and excludes all March 1, 2003 interestpayments.
TAXADEQUACY TABLE !
2002 Assessed Valuation
Maximum Annual Debt Service Requirements (Fiscal Year Ending 9-30-09)
Indicated Maximum Interest and Sinking Fund Tax Rate at 99% collections
Note: Above computation is exclusive of investment earnings, delinquent tax colleclions and
penalties end interest on delinquent tax collections.
INTEREST AND SINKING FUND MANAGEMENT INDEX TABLE E
Interest and Sinking Fund Balance. Fiscal Year Ended September 30.2002
FY 2003 lnterest and Sinking Fund Tax Levy of $0.20 at 99% Collections Produces
Total Available for Debt Service
Less: General Obligation Debt Service Requirements. Fiscal Year Ending 9-30-03 (prior to refunding) 861.825
Estimated Surplus at Fiscal Year Ending 9-30-03") (prior to refunding) $ 47.319
'"I Does not include delinquent tax collections, penalties and interest on delinquent tax collections or
investment earnings.
PROJECTED GENERAL OBLIGATION PRINCIPAL REPAYMENT SCHEDULE TABLE 7
(As of Februafy 1. 2003)
Fiscal Year
Endina 9/30
2003
Principal Repayment ScheduleIb)
Outstanding The Bondsl"' Bonds Total
$ 290.000 $ 285.000 $ 575,000
305.000 205,000 510,000
315,000 270,000 525,000
315.000 215.000 530,000
315,000 220,000 535,000
330,000 225,000 555,000
345.000 235,000 580,000
365,000 235,000 600,000
380,000 245.000 625.000
$ 2,960,000 $ 2,075,000 $ 5,035,000
Bonds Percent of
Unpaid at Principal
End of Year Retired (%)
5 4,460.000 11.42%
3,950,000 21 55%
3,425,000 31.98%
2,895,000 42.50%
2,360.000 53.13%
1,805,000 64.15%
1,225,000 75.67%
625.000 87.59%
100.00%
' Excludes the Reiunded Bonds and all PPFCO principal outstanding (see Table 2, page A-I) '" All CABS are stated at Maturity Amounts.
FUND BALANCES TABLE 8
(As of Janauav 31. 2003
General Fund
Debt Service Fund
Other (Master District)
$ 764,815
559,050
386.749
Totai $ 1,323,865
TAXABLE ASSESSED VALUATION FOR TAX YEARS 1995-2002 TABLE 9
Tax
Year -
1995 -
1996
1997
1998
1999
2000
2001
2002
Net Taxable
Assessed Valuation
$ 266.901.000
Change From Preceding Year
Amount ($1 Percent l%l
NIA NIA
''I Reduction in total value is primarily due to the revaluation ofpersonal property at the Solana Business
Complex.
Sources: Texas Municipal Report published by the Municipal Advisory Council of Texas and the
Denton Central Appraisal District
ssssss s p r 2 -$+ - WVtN m. m m w. mmm-mm -NUNU* '9 m. m. 0. rq N i?EE%L%S - 0 C % 2 m E u - m C m m 5 - m z;;, mwolomm m - .m mm- g m 0 0- % moohoo'z OLnmlDh m. o. m. -? m. m awl-mmm .-mmmmw 7 m a- N W r-b LV~N a-
h 0
N. M 'X
oooumo~ NO-01-h ~.o.m.m.nm m-+morn -mm--w 0- - 0. " m r
W
womb-m (DmUmmm m. m. m. -. 14. ". -0mwwm mmmcu~m
W
2 OL m w
.5 ssssss s 8 m -
mm- %
k
W
m h h
S 9
*gr- ",
W*W
m U .9
N. 5 % 2 0
=? VI
2 0 -2
L m s 0 W
mmmwwm om*mmq
u.W.CD.N.*.*. mmm~~m a mwmmmo om wwo :/ 6.6 ui;ui * m P?"
w
W
VI 2 2 .S "i
mmr 2 2 .m
mmmmmm m -UwNWU m m. 4 m. *. V? a. m. v?O.-.m.m?N b -hCnV)OW 7 hl-=,NO- 8gm"om mNmNur IC 3 ml-- '9 - u m w- m *Xss G ;ii E s
Vftftvf
6 3
W fA M g $ - m .g 5 2 * m $ s - - - m %" - " 5 - 0 2
W M W M ‘.+
m C m d .-
% % -.
m w 7 w m N < G
w
E
a*
q mm% 2
~XZE:ZE:E: -. 9 r o? m. ? N
6gWwXzj 9 N. " - (1
w
- a s Y m 2 c 0
LO c
2 .O ; 3
MV~~AQ~
PRINCIPAL TAXPAYERS 2002-2003 TABLE 11
% of Total 2002
ZOO2 Net Taxable Assessed
Name - Type of ProperQ Assessed Valuatior Valuation
Maguire Thomas Partners Westiake PS Commercial Office Complex $133,939,555 35.34%
Levi Strauss & Company Commercial Office 4.026.939 1.06%
TC Plantations Ltd. PS Apartment Complex 3.941.473 1.04%
Clubcorp Golf of Texas LP PIS Golf Course Management 3,745,614 0.99%
Trophy Club 114 LP Pis Strip Shopping Center 3,224,031 0.85%
MTP-IBM Phase 11 8 111 Joint Venture Undeveloped Land 3,187,289 0.84%
Beck Properiy Trophy Club LP Undeveloped Land 2,958,828 0.78%
Chrysler Financial Company Commercial Office 2.859.307 0.75%
Oakmont Ent Inc Land Development Company (Com. & Res.) 2.338.963 0.62%
TC Indian Creek Ltd PIS Townhomes 1,784,428 0.47%
Total ~~427
Based on a 2002 Net Taxable Assessed Valuation of $ 378,958.339
Source: Texas Municipal Report published by the Municipal Advisory Council of Texas and the Denton Central Appraisal District
PROPERTY TAX RATES AND COLLECTIONS "' TABLE 12
Tax Net Taxable
Year Assessed Valuation -
1997 5 319,497,081
1998 344172,113
1999 366,021,775
2000 412,096,656
2001 415,244,076
2002 378,958,339
Tax
Rate -
$ 0.2900
0.2800
0.2400
0.2400
0.2400
0.3000
Tax % ~o~~ections'~' Fiscai Year
& - Current T& Ended
$ 925,541 98.90% 99.58% 9-30-98
1,006,417 98.54% 100.03% 9-30-99
908,448 99.45% 100.22% 9-30-00
1,005,235 99.40% 100.09% 9-30-01
1,026,892 98.99% 99.55% 9-30-02
1,136,639 (In Process of Collection) 9-30-03
'a' See "TAXING PROCEDURES - Levy and Collection of Taxes-in the body of the Official Statement for a complete discussion of the
District's provisions. "' Includes penalties and interest.
Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Denton Central Appraisal District and the issuer
TAX RATE DISTRIBUTION TABLE 13
General Fund
I & S Fund
Fire Protection
TOTAL
Sources: Texas Municipal Repori published by the Municipal Advisory Councii of Texas
-"ON 10 "MU 'ayellsa~
SL.L~-OL I.# onw qnl3 Audo~~
00-PL-LO 10 u~ai'qn13 hlido~~
auON IS10 IElldPoH '03 lucilel
auoN 1~10 a6a11o3 03 lueuel
912.~151a 1eswddvr(1un03
lUeYel pue uoluaa pue s~xal lo ll3uno3 hos~~pvledjquoyy eq, liqpaqrilqnd spoday ledqunyy sexal luala, ISOW :almoS
'xet Apadmd r
LSOWO
OPZEZ'O
BE6EL'O
OSZLZ'O
16'PEe.L
LGBPZ'O
OOSEG'L S Emm
ZOOZ
. - . .-
an en 1enl3y 1072 01 lqa~ Eu doe mnO p-c 1x31 a lo c luh
uo!len cna Sere1 passarsv ION zo7z 01 lqaa Ou doc lano p-c :=a> 0 lo olsh
9PZ3L09'LC S LE9'ELE'LPL S 1qaa Gulddepano Pile ledlluud loalia SSW0 lel01
OOO'SEO'S %OO'OOL OOO'SEO'S EO-LO-zo L:: onw qn13 Audoj~
SPZ'ZLSZE s LES'QFE'9EL S IVO Bulddeilano I~N le101
008'Lgo'L %S6'9S 000'00VZ1 EO-10-20 JO UMOL layensa~
~PO'SSL'Z %LVW OOO'S~Z'~ EQLO-zo qn13 Aqdml JO u,nq
96LL9 %PC0 OOO'S99'E EO-LWZO 13uls!a ielidSOH bun03 luwel
O~L'P~L ?&PZ'O ooo'oo6'o8 ~(1-10-20 VIJISIO aBai103 i(1uno3 luwe~
96L'ZSE %PC0 OOO'SLP~ESL EIl-10-20 f,luno3luwel
SLS'ECZ'IL %P6'9 US'LLB'L9L EULVZO I3VlSiO 100435 ~uapuada~ui lSaM4UON
LUS'Z8O'L 9608'0 LLS'ZLE'SEL c0-LO-ZO Alunw uoluaa
ESE'Zl.8'6 S %69'S EBO'6PP'ZLL S E0-10-20 ~~1510 10042~ lua~uadapul ilolle3
t)~~ae~i~a,%o nu~aecpano lCllllUUd FW AWE uulxel
IUIIOWV .A ~qaa SSOJEI
a10 Aq paqsllqnd svodan ledplunyy sexel a41 loipue suoliqpryn! lenplnlpul aql mmj pmnms elep uodn paseq sl uoltelruojul siql
sa!l!lua leluamuanoGlo 'saw warolen pe wall =lqei(ed spuoq Gu~pucls~no se PaullaP 'ssaupaiqapul aql rele3!Pui alqei Gui~ollol a41
GENERAL FUND COMBINED STATEMENT OF REVENUES AND
EXPENDITURES AND CHANGES IN FUND BALANCES TABLE 17
Revenues:
Water, Sewer, Fire Department 5 - 5 - 5 2.410.442 S 2.137.246 5 2.096.183
Standby Fees 0 2.699 3.343 5.414
Inspeclion and Tap Connections 64.403 94.455 83.961
AV Taxes. Penalties & Interest 270,501 265.961 142.693 368,892 303.944
Sale of Aszeta 907,900
Miscelianeous Revenues 323,605 28.754 341,964 02.649 85,022
lntere5t 60.031 69.713 116.548 64.200 74.393
Total Revmes S 1.562.037 S 364.448 S 3.086.749 5 2.770.792 5 2,849,737
Expcndltures:
current:
AdministmUonlGenenl Government 5 918.103
Water and Sewer
FireDepanment 279.070
Contribution to Tmphy Club I
WeStlake DPS
Capital Dutlay
Debt Service
iota1 Expenditures S 1.197.253
Other Financing Sources (Uses) $
Excess (Deficit) 01 Revenues
Oveilunderl Expendtlures S 364.784
Fund Balance - October 1 896,604
Residual Eqully Transfer
Fund Balance -September30 $ 1.263.388 -
Source: me Isrueh Audifed Floanclal Sfa$menfs
MASTER DISTRICT WATERWORKS AND
SEWER SYSTEM OPERATING EXPERIENCE TABLE 18
Revenues
FISCUI Year Ended Scptombsr 30
2002 - - 2001 - ZOO0 - 1999 1990 -
Water a Sewer Service s 2,792,553
lnspedion and Tap Connection Fees 63,585
Dlhei 36.909
Total Revenues 5 2,893,157
Expenditures:
Water 8 Seiver Purchased S
Adminlsliative 604,341
Water Openlions 1,752,729
Wastewater Opcrallons 454,009
Wastewater Coliedlon System 311,341
Storm Sewer 136.286
Dther 700
Capital Outlay 275.115
Total Expenses 5 3,136,601
Excess (deficiency) of revenuer
over (under) expenses 5 1243.444) 5 (593,101) 5 223,435 S 136.694 5 (106,325)
Other Ftnanong Sourcer [Uses): S - 5 219.032 NIA NIA NIA
Fund Balance Odober 1 733,356 NlA NIA NIA
Residual Equity Tranrler In - 1,106.625 NIA NIA NIA
Fund Balance September30 S 489.912
Customer Count
Water1 Sewer MUD No1 1.271 1.252 1.231 1.211 1179
Water I Sewer MUD No.2 1.434 - 1.383 1.259 1.216 - 1.055
Total 2.705 2.635 2.490 2.427 2.234
Note: Tmphy Club MarterDis1"~t Joint Venturz baaan openlions on October 1. 2000. Amounlspiessnied far 1998
lhmugh 2000 an pm lorma and ere compiled fmm lnfomalion lor the iilnrter Dlslticl as a fund a1 Tmphy Club
Munidpal Ulllily D1sl"cl No.? lorlhe period. Expense calsganes dlrarham actual MssterDlslticl audll calsgooes
WATER SERVICE RATES TABLE 19
(Monthly Billing)
Rates Amended Effective September 1,2002
WATER
Minimum Charge
0 to 6,000 gallons
6,000 to 12,000 gallons
12.000 to 25.000 gallons
Over 25,000 gallons
Note: Out-of-District water rates are determined by contract.
GOLF COURSE
First 300.000 gallons per month
Over 300.000 gallons per month
$11.00
2.00 per 1,000 gallons
2.30 per 1,000 gallons
2.50 per 1,000 gallons
2.60 per 1,000 gallons
$ 1,000.00 (minimum/rnonth)
2.60 per 1.000 gallons
SEWER SERVICE RATES TABLE 20
(Monthly Billing)
Rates Amended Effective September 1,2002
WASTEWATER
Minimum Charge
0 to 6,000 gailons
6,000 to 12.000 gallons
Over 12,000 gallons
$1 I .oo
2.00 per 1,000 gallons
2.30 per 1,000 gallons
2.30 per 1,000 gallons
OTHER FEES TABLE 21
Rates I Fees Effective September 1.2003
Tap Fees
Standard will include 314 inch (District side) by 518 inch (cuslomer side)
Larger than standard is actual cost to District of larger line plus 20%
Fire Line Tap Fee = $30.00 per inch of diameter of the fire line
Sewer Inspection Fee
Maintenance and Repair (charge to video sewer line to determine condition)
Effluent Charge: (sold toTrophy Club County Club and discharged on course lakes)
Stand-By Charge
Disconnection 1 Re~onnection Fee (due to non-payment of bill)
Disconnection I Reconnection Fee (due to non-payment of bill)
Disconnection I Reconnetiton Fee (temporarily, at customer request)
Returned Checks
Confidentiality Request
Same-Day Service
Accuracy Reading Fee
Security Deposits
Builders
Residential Owners
Residential Lessees
Construckion Meters
Other Customers
Storm Drain Assessment
Temporary Water Service
Installation/Meter Hook-up Fee
Sale of Water
150.00
150.00
0.20 per each 1.000 gallons
6.00 per month
25.00 during regular hours
65.00 after regular hours
10.00 each to dislre connect
25.00
5.00 on-time charge
25.00
10.00
75.00
40.00
100.00
Price equal to two months avg. bill
Price equal to two months avg. bill
1.00 per month
100.00
2.60 per each 1,000 gallons
APPENDIX B
GENERAL INFORMATION REGARDING THE TOWN OF TROPHY CLUB AND DENTON COUNTY, TEXAS
TOWN OF TROPHY CLUB
General
The Town of Trophy Club (the 'Town"), incorporated in January of 1985 is Texas's first premiere planned residential and
country-club community. The Town is located In the southem portion of the County on State Highway 114 approximately 8
miies west of the City of Grapevine, 17 miles south of the City of Denton, 25 miles north of downtown Fort Worth. 27 miles
northwest of downtown Dallas, and 14 miies northwest of the Dallas-Fort Worth international Airport. Lake Grapevine is located
approximately 2 miles north and east of the Town. The majority of properly within the Town consists af single-family and multi-
family housing. The Solana Business Complex is located adjacent to the Town's eastern border in the cities of Westlake and
Southlake. Both residents and businesses of the Town are furnished water and wastewater treatment from either Trophy Ciub
Municipal Utility District ("MUD") No. 1 or Trophy Ciub MUD No. 2. The Town's 2000 Census was 6,350, which is a 61.9%
increase over the 1990 Census. The Town's current population estimate is 7,800.
Source: Latest Texas Municipal Report published by fhe Municipal Advisory Council of Texas, U.S. Census Reporl and
Issuer's Website.
Population:
Census
1980
Town of
Trophv Ciub
NIA
1990 3,922 273.525
2000 6.350 423,976
Current Population Est. 7,800 468,600
Sources: United States Bureau of the Census. Texas Municipal Reports, Sales and Marketing Magazine, 2002 Survey of
Buying Power and the Town of Trophy Club
Leading Employers Trophy Club MUD No. 1:
The following employers have 50 or more employees:
Ernplover Tvpe of Business
Verizon Wireless Communications
Sabre Travel
Wells Fargo Banking
IBM Computing and Software Design
Citigroup Investment Banking
Pfizer Pharmaceuticais
Levi Strauss Merchandising
DaimlerChrysler Automotive
McKesson Pharmaceuticals
Sonitroi Security
Johnson & Johnson Pharmaceuticais
Marriott Corporation Hotels
Source: lnformation from the Issuer
Education
The Town of Trophy Club is served by the Northwest independent Schooi District (the "NISD). NISD covers approximately
232 square miles in Denton, Tarrant and Wise Counties. In addition to serving the Town, NlSD also serves the communities of
Aurora. Avondaie, Drop, New Fairview, Hasiet, Justin, Marshall Creek, Newark. Northlake, Rhome and Roanoke. Northwest
ISD is comprised of eight elementary schools for grades pre-kindergarten through five, three middle schools for grades six,
seven and eight, and one high schooi for grades nine through twelve. Ail campuses offer enriched curricula with special
programs for giftedltalented students as well as students achieving below grade level, and all are equipped with computers and
fuii cafeteria service. NISD expects to serve an estimated 6,000 students in the 2002-2003 schooi year.
Source: lnformation from Northwest Independent School District
DENTON COUNTY
Denton County (the "County") is located in north central Texas, encompassing 912 square miles, and was created in 1846 from
Fannin County. it is the third largest county of the nine counties comprising the Dallas-fort Worth Consolidated Metropolitan
Statistical Area (CMSA). The county is traversed by interstate Highway 35, United States Highways 77, 377 and 380 and State
Highways 114 and 121. The county is divided north and south geographically by the East CrossTimers, which is a narrow strip
of woodland that extends from the Red River to the Brazos River around Waco. The economy is diversified by manufacturing.
state supported institutions, and agriculture. The Texas Almanac designates cattle, horses, poultry, hay and wheat as the
principal sources of agricultural income. Minerals produced in Denton County include natural gas and clay. Institutions of
higher education include University of North Texas and Texas Woman's University. Lake Lewisville attracts over 3,000.000
visitors annually. Alliance Airport, located in the County has continued to expand. A major NASCAR racetrack was opened in
1997, which has had a positive impact on employment and recreational spending for the area. Several growing urban centers
are located in the County. including the cities of Denton, Lewisviile, Carrollton and The Colony. The 2000 census was 423.976.
which is a 551% increase since 1990. The 2002 estimated population for the County is 488,600.
Source: Latest Texas Municipal Report published by the Municipal Advisory Council of Texas and Sales and Marketing
Magazine. 2002 Survey of Buying Power
Leading Employers Denton County: 2002
Emplover Type of Business
University of North Texas, Denton State University
Lewisviiie Independent School District Public Education
Number Employees
5,900
4.500
Frito-Lay Food Distribution 2,436
American Airlines Maintenance Base and Engineering Center 2.350
Denton independent School District Public Education 2.000
Horizon Health Health Care Services 1.500
Denton County
Denton State Schooi
Boeing Electronics
City of Denton
Peterbilt Motors Co.
Texas Woman's University
Xerox Corporation
Federal Express
Genuity
sysco
County Government
Mental Health, Mental Retardation Facility
Electronics
Municipal Government
Diesel Truck Manufacturing
State University
Office Equipment
Package Processing and Delivery
Regional Corporate Headquarters
Distribution Center
Source: Denlon County Economic Deveiopment Oiiice
8-2
Labor Force Statistics
Denton County
December 2002 December 2001
Civilian Labor Force 266,144 264,968
Total Employed 255,129 262.200
Total Unemployed 11.015 9.931
% Unemployed 4.1%
% Unemployed (Texas) 5.7%
% Unemployed (United States) 5.7%
Source: Texas Worl(force Commission. Labor Marltet information Department.
Estimated Retail Sales Statistics ($000,~)
Denton State of
Year - - Texas
2002 $5,166,964 $286,003,615
2001 5,124,640 288,535,506
2000 5,501,681 263,430,625
1999 3.1 80.028 189.976.641
1998 2.853.148 176.771.820
Source: Sales & Marketing Magazine. Survey of Buying Power 1995-2002. Figures represent estimates as of January 1 of each
year given.
Estimated Total Effective Buying lncome (EBI)
Denton County
Total Effective Median
Buying lncome Household
($000) a
$1 1,184,697 $54,508
9.338.442 49.146
State of Texas
Total Effective Median
Buying Income Household
Source: Sales 8 Marlreiing Magazine, Survey of Buying Power 1995-2002. Figures iepresent estimates as of January 1 of ti~e
year noted.
Agriculture
The Texas Almanac designates cattle, horses, poultry, hay and wheat as the principal sources of agricultural income. Cash
receipts from iaml marketings are as iollows:
2002 2000 - 1999 - 1998
Crops $20,165,800 $13,129,000 519,360,000 $23,692,000
L~vestock and L~vestock Products $29,605,700 $24,709.200 $33,861,000 $33,044,000
AG Cash Rece~pts Total $97,219.380 589.257.440 $102,784,350 $99,987,400
Source: ONCOR Agnculfure lncome Evaluation, 1998 Nlmugh 2002
Government payments not included
APPENDIX C
FORM OF LEGAL OPINlON OF BOND COUNSEL
Proposed Form of Opinion of Bond Counsel
An opinion in substantially the following form will be delivered by
McCall, Parkhurst & Horion L.L.P., Bond Counsel,
upon the delivery of the Bonds, assuming no material changes in facts or law.
LAWOFFICES
McCALL, PARKHURST & HORTON L.L.P.
GX CONG.?ESS AVEG 717 NO131 HAX\2003 7W 7\ ST l.'ARYS Si?EET
12% OYE N:=RCA\ CENER h MI-, noo? 125 ONE RIVERWAX ?ACE
AUSTIN, TEXAS 78701-3248 DALLAS. TEXAS 75201-6587 SAN ANTONIO, TEXAS 782053503
Telephone: 512 470-3805 Telephone: 2111 754-9200 Telephone: 210 225-2800
Facilmile: 512 472-0871 Facsimile: 214 754.9250 Facsimile: 310-225.2904
TROPIIY CLUB WNNCII'AL UTILlTY DISTRICT NO. 1
UNLDIITED TAX REFUNDLNG BONDS, SERIES 2003. DATED APRIL 1,2003
IN THE AGGREGATE PRINCIPAL AMOUNT OF %1,949.2R7.70
AS BOND COUNSEL FORTROPHY CLUBMUMCPALUTILIWDISTRIUNO. 1 (the "District") issuer ofthe
Bonds described above (tlie "Bonds"), wchave examined into tlic legality andvalidity oftheBonds, wltich bear interest from
the dntes specified in the text of the Bonds, at tho rates and payable on tbc dates as stated in tlic tcxt of tlie Bonds, maturing
serially on September 1 in each ofthe years 2003 through 201 1, inclusive, all in accordance with the terms and conditions
stated in tlie text of the Bonds.
FVEYEW EUNDNED tlie Constitution and laws of the State ofTexas, certiiied copies oftlie proceedings of thc
District, tlie Escrow Agreement, dated as ofApril 1,2003, between the District and JPMorgan Chase Bank, Dall;is, Texns, as
Escrow Agent (the "Escrorv Agreement"), and other documents authorizing and relilting to tlie issuance of said Bonds,
including one of tlie executed Bonds (Bond Numbcr R-I), and spccilncns of Bonds to be nuilienticated and delivered in
exchange lor the Bonds.
BASED ON SAID EX4MINATION, IT IS OUR OPINION that the Escrow Agreement has been duly nutliorized,
executcd and delivered by the District and constitutes a binding andenforceablc agreement in accordance with its terms and
that tlic Refunded Bonds, as defi ned in the Order authorizing the Bonds, in the aggregate principal amount oT$1,950,000,
being refundcd by the Bonds, are outstanding undcr the resolution authorizing tlicir issuance only for the purpose of
rcceivingtlie funds provided by, and aresecured solely by and payablesolely from. the Escroiv Agreement and the cashand
investinents, including thc income tlicrefrom, held by the Escro\v Agent pursuant to the Escrow Agreement. In rendcring
this opinion, ive have relied upon the repon of Sootltwest Securities as to the sufficiency of the cash and investments
dcpositcd with theEscrorv Agenipursuant to the Escrow Agrcement for the put'posc ofpaying sucli Refunded Botids to be
retired with the procccds of the Bonds and the inierest thcrcon.
BASED ONS~ESAMIN~~T1ON,ITISOUROPINlONT~~T the Bonds havc bccn ziuthorizcd and issucd and
tlic Bonds delivered concunently with tliis opinionhavcbecn duly delivered, and tliat, assuming due authentication. Bonds
issucd in crchange therefor will have bcen duly delivcrcd, io accordance with law, and tliat seid Bonds. cxcel~t as may be
limited by laws applicable to the District rclati~ig to banl;mptcy, rcorganizniion and other similor matters affcciing creditors'
rights, constitute valid nndlegallybindingobligatio~is ofthcDistrict,payable from ad valoremtaxes to bc levied ;and collected
by the District upon taxable property within the District, which taxes thc District has covenanted to levy in ail amount
sufficient to pay the i:itcrcst on and the principal oftlic Bonds. Such covenant to lcvy taxes issubject to the right ofa city,
under exisling Tcnas laru, to annex all of tlic territory within the District; to t;ikc overall propcrtics ;lnd assets ofthe District;
lo assulneall debts,liabilitics, and obligations oftheDistrict, including thcBonds; and to abolisli thc District orifthc District
consolidates witit another District.
WEESI'RESSNO OI'INION as to any insuranccpolicies issued ivith respect to tI~cpa>~ments due Surtlie principal
ofand interest on thc Bonds, 1101 as to nny such insurance policies issued it1 the future.
IT IS FURTHER OUROPINION, except as discussed below, that the intercston Ule Bonds is excludablc from the
gross income ofthe owncrs for federal income tax purposes under tlic statutes, regulations, published rulings, and court
decisions existing on the date ofthis opinion. Weare furthcrofthe opinion thattheBonds are not "specitied private activity
bonds" and that accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum
lax preference item under Section 57(a)(5) of the Internal llcvenuc Codc of 1986 (the "Code"). In exprcssing the
aforementionedopinions, we havc assumed complianceby the Districtwith, certain rcpresentations and covenants regarding
the use and investment of thc proceeds of tl~e Bonds, and tlie usc of the Property refinanced therewith. We call your
attention to the fact tliat failurc by thc District to comply with such representations and covenants may cause the interest
on the Bonds to become includable in gross income retroactively to the date of issuance ofthe Bonds.
OUR OPINIONS.4RE BASED ON ESISTmG LAW, which is subject to change. Such opinions arefurthcrbased
on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect ;iny
facts or circumstances that may thereafter come to ourattcntion or to reflcctany changes in any la\vrhat may thereafter occur
or become cffectivc. Moreover, our opinions arc not a guarantee of result and are not binding on the Internal Revenue
Service (the "Service"); mtlicr, such opinions represe~it our legal judgmcnt based upon our rcvicw of cxistiilg lnw and in
reliance upon the rcpresentations and covenants rcferenced above that we dcem relevantto sucl~ opinions. The Scrvice has
an ongoing audit program to dcterminc compliance with rules that relate to whetlicr intercst on state or local obligations is
i~icludable in gross income for fcderi~l income tax purposes. No assurance can be given whcther or not the Service will
commence an audit of the Bonds. If an audit is commenced, in accordance with its currcntpublishedprocedures the Service
is likcly to treat the District as thc taxpayer. We obsc~ve that the District has covenanted not to take ;my action, or omit to
take any action within its control, tliat if taken or omitted, respectively, may result in the treatment of interest on thc Bonds
as includable in gross income for federal income tax purposes.
WE CALL YOUR ATTENTION TO T'LE FACT that the interest oil tax-exempt obligations, such as the Bonds is
(a) included in a corpontion's alternative minimum taxable incomc for purposes ofdetennini~ig tile alternative minimum tax
imposed on corporations by Section 55 of thc Code, (b) subjccl to the branch profits tax imposed on foreign corporations
by Section 884 of the Code and (c) included in the passive invcstment income of an S corporation and subject to the tax
imposed by Section 1375 of the Codc.
EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state or local tax consequences of
acquiring, carrying, owning or disposing of the Bonds.
OURSOLE ENGAGEMENT in connection with tlie issuanccofthc Bonds is as Bond Counsel forthe District, and,
ill that capacity, wc have been engaged by the District for the sole purpose of rendering an opinion with respect to the
Icgality and validity of the Boitds under tlie Constitution and laws of the State of Texas, and with respect to the exclusion
frorngross income of the intcrcst oil the Boiids for federal income tax purposes, and for no other reason or purpose. Wc havc
not been requested to investigate or verify, and have not independently investigated or verified any records,dnta, orother
material relating to the financial condition orcapabilitics oithc District, or the disclosure thereofin connection with the sale
ofthe Bonds, and have not assumed any responsibilitywith respect tliereto. We express no opinion and makc no commcnt
withrcspect to the markctabiliLy ofthe Bonds and have rclied solcly on certificates executed by officials of theDistrict as to
tlic current outstandi~lg indebtedness of, and assessed valuation of taxable propcrty within tlie District. Our role in
connection with the District's Ofticial Statement prepared for use in connection with the sale oftllc Bonds has been limitcd
as described therein.
IN EXPRBSSLh'G THE AFOREMENTIONED OPINIONS, wc have relied on, certain representations, the accuracy
of which we havc not independently verified, and assume compliance with certain covenants, regarding the use and
investment ofthe procccds oftlie Bonds and the use of the property financed therewith. We call your attention to the fact
that iisucli representations are dcter~nincd lo bc inaccur;~te or t~pon a failurc by the District to comply withsuch covenants,
interest on the Bonds may becomc includable in gross income retroactively to the date ofissunnce ofthe Bonds.
TIIEFOREGOING OPINIONS represent our legal judgement based upon a review ofexisting lcgal autliorities that
we dccm relevant to render such opinions and are not a guarantee ofa result.
APPENDIX D
EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2002
(Independent Auditor's Report, General Financial Statements and Notes to the Financial Statements - not intended to be a
complete statement of the issuer's financial condition. Reference Is made to the complete Annual Financial Report for further
information.)
RUTLEDGE CRAlN & COMPANY, PC
CERTIFIED PUBLIC ACCOUNTANTS -- -
2401 Garden Park Courl. SUlle B
Arlington. Texas 76013
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Trophy Club Municipal Utility District No. 1
Trophy Club, Texas
We have audited the accompanying general purpose financial statements of Trophy Club Municipal Utility District No. 1, as
of September 30, 2002 and for the year then ended. These general purpose financial statements are the responsibility of
the District's management. Our responsibility is to express an opinion on the general purpose 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 general purpose
financial statements are free of material misstatement. An audi includes examining, on a test basis, evidence supporting
the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion the general purpose financial statements referred to above present fairly, in all material respects, the financial
position of Trophy Club Municipal Utility District No. 1, as of September 30. 2002, and the results of its operations for the
year then ended in conformity with accounting principles generally accepted in the United States of America.
Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole.
The accompanying supplemental information listed in the table of contents is presented for purposes of additional analysis
and is not a required part of the general purpose financial statements of Trophy Club Municipal Utility District No. 1. Such
information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements
and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a
whole.
November 1,2002
PC
Members
Melio (817) 265-9989 Arnerlcan lnstilule 01 Certltled Public Accounlanls Fax (617) 861-9623
Texas Society 01 Ceflilied Publlc Accounlanls
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
COMBINED BALANCESHEET
ALL FUND TYPES AND ACCOUNT GROUPS
SEPTEMBER 30,2002
(WITH COMPARATIVE TOTALS FOR SEPTEMBER 30,2001)
Governmental Fund Types
General Debt Service
Fund Fund
ASSETS AND OTHER DEBITS
Assets:
Cash and cash equivalents
lnvestmenls
Receivables (net of allowances for uncollectibles):
Taxes
lnlergovernmenlal
Miscellaneous
Due from other funds
Prepaid Items
Restricted assets:
Note receivable
Conlract receivable
Fixed assets
Other Debik:
Amount available in debt service fund
Amount lo be provided forrelirement of general long-ten debt
Total Assets
LIABILITIES, EQUITYAND OTHER CREDITS
Liabilities:
Accounts payable
Accrued liabililies
Liabilities payable from restricted assets:
Due to ofher funds
Due to other governments
Deferred revenue
General obligation bands payable
Contractual obligations payable
Notes payable
Capital leases payable
Total Liabilities
Equity and other credits:
Investment in general fiired assets
Fund balances:
Reserved for nole recsivable
Unresewed, undesigneted
Total equity and other credits
Total Liabilities, Equity & Other Credits
The accompanying notes are an integral part of this statement
Totals
Account Groups
General General Long-
Fixed Assets Term Debt
(Memorandum Only)
September 30. Seotember 30
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES
YEAR ENDED SEPTEMBER 30,2002
(WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30,2001)
Totals
Governmental Fund Types (Memorandum Only)
General Debt Service September 30, September 30,
Fund Fund 2002 2001
Revenues:
Ad valorem taxes, penalties and interesl $ 270,501 $ 756,348 $ 1,026,849 S 1.011,054
Sale of assets 907,900 - 907,900 -
MisceNaneous revenues 323.605 - 323.605 69.049
interest
Total revenues
Expenditures:
Current:
Administrative 918,183 - 918,183 112,751
Fire department 279.070 - 279,070 14,256
Contribution to Trophy ClubM/esllake DPS - - - 258,026
Debt service:
Principal - 585.000 585,000 515,000
Interest - 250.865 250,865 275,845
Paying agent fees
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Other financing sources (uses):
Operatins transfers in
~'perating transfers out
Total other financing sources (uses)
Excess of revenues and other financing sources over
(under) expenditures and other financing uses 364,784 (70.305) 294,479 (3,956)
Fund balances, October 1 898.604 229,111 1,127,715 2,238,296
Residual equity transfer - - - (1 ,I 06,625)
Fund balances, September 30 $ 1,263,388 $ 158,806 $ - 1,422.194 S 1,127.715
The accompanying notes are an integral part of tnis sratement.
7
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. I
S JA JEMENT OF REVENUES. EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL
GENERAL FUND
YEAR ENDED SEPTEMBER 30,2002
Revenues:
Water. sewer, lire department
Ad valorem taxes, penalties and interest
Sale of assets
Miscellaneous revenues
Interest
Total revenues
Expenditures:
Current
Administrative
Fire department
Total expenditures
Excess (deficiency) of revenues over (under) expenditures
Fund balances, October 1
Fund balances, September 30
General Fund
Variance
Favorable
Budget Actual (Unfavorable)
$ 4,000 $ - $
264.686 (4,000)
270,501 5,815 - O"7.900 907.900
The accompanying notes are an integral part of this statement
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
Trophy Club Municipal Utility Ditrict No. 1 (the District) was created by an order of the Texas Natural Resources
Consewation Gommission FCEQ) (formerly the Texas Water Commission) on March 4, 1975 and confirmed by the
electorate of the District at a confirmation election held on October 7. 1975. The Board of Director's held its first meeting on
April 24, 1975. The bonds ware first sold on June 8, 1976. The D'itrict operates pursuant to Article XVI, Chapter 59 of the
Texas Camtitution and Chapter 54 of the Texas Water Code, as amended.
The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for the District. The financial
statements of the District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied
to government units.
As required by generally accepted accounting principles, these financial statements present the District only. There are no
component units which setiify requirements for blending within the District's financial statements or discrete presentation.
Master District
The Master District holds legal title to the central water supply system and the central waste disposal system. The
proportionate allocation of costs end related beneficial usage rights in the major assets is estimated as follows:
Water plant and wells wen<-one inch watar line
Elevated tank
Original treatment plant and land
First expanded treatment plant
Second expanded treatment plant
Administration building
(A) Future MUD 1 MUD2
40.91% 27.14% 31.85%
(A) The developer's original intent was for five districts.
(8) MUD 2 does not acknowledge any portion of the cost of the administration building as being their responsibility
Pursuant to the provisions of the New Master District Contract dated October 4. 2000, the Master District is menaged as a
joint venture of the District and MUD2 whereby representatives of the boards of directors of the Ditrict and MUM serve on
the Master District board of directors. Accordingly the financial statements of the Master District have been removed from
those of the District effective October 1. 2000 and are presented separately. Agreements exist batween the District and
MUM that compensate the District for watar and sewer plant capacity and out of district sales as approved and required by
the TCEQ.
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
Based upon this arrangement, all financial transactions relating to water and sewer operations are included in the financial
statements of the Master District joint venture. A summary of the Master District financial statements for the year ended
September 30, 2002 follows:
Tolal assets
Total liabilities
Total equity
Total revenue, including other sources $ 2,893,157
Total expenditures (3,136,801)
Excess of revenues over (under) expenditures (243,444)
Plus capital expenditures 275.1 15
Net revenue (loss) before capital expenditures $ 31,671
The Master District Joint Venture financial statements are available at the District's administrative oifices
Termination of Trophv Club I Westlake De~artment of Public Safetv Joint Venture
Effective June 1, 2002, the joint venture was terminated by the venturers - the Trophy Club Entities (Town of Trophy Club,
Texas. Trophy Club Municipal Utility District No. I, and Trophy Club Municipal Utility District No. 2) and the Town of
Westlake, Texas. The Town of Trophy Club, Texas assumed responsibility for police and emergency medical services:
MUD1 assumed responsibilities for fire protection.
B. Measurement Focus, Basis of Accounting and Basis of Presentation
The accounts of the District are organized and operated on the basis of funds and account groups. Afund is an independent
fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their
intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual
provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account
groups are a reporting device to account for certain assets and liabilities of the governmental funds not recorded directly in
those funds.
The District utilizes governmental fund types to account for the District's activaies and to prepare its financial statements.
Governmental fund types use the flow of current financial resources measurement focus and the modified accrual basis of
accounting. Under the modified accrual basis of accounting revenues are recognized when susceptible to accrual (i.e.. when
they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available"
means collectible within the current period or soon enough thereaiter to pay iiabiliies of the current period. The District
considers all revenues available if they are collected within 60 days after year end. Expenditures are recorded when the
related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and
certain compensated absences and claims and judgments which are recognized when the obligations are expected to be
liquidated with expendable available financial resources.
Those revenues susceptible to accrual are ad valorem tares and interest. Penalties and interest on proper& taxes and
miscellaneous revenue are recorded when received, as they are generaliy not rneasurable until received.
The District reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue
does not meet both the 'rneasurable" and "available" criteria ior recognition in the current period.
Governmental funds include the following fund types:
The general fund is the District's primary operating fund. It accounts for all financial resources of the general government.
except those required to be accounted for in another fund.
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
Debt service funds account for the servicing of general long-term debt not being financed by proprietary or nonexpendable
trust funds.
Account Groups include the following:
The general tixed assets account group is used to account for all foced assets of the District.
The general long-term debt account group is used to account for general long-term debt and certain other liabilities of the
District.
C. Assets, Liabilities and Equity
1. Deposits and lnvestments
The District's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term
investments with original maturities of three months or less from the date of acquisition.
State statutes authorize the District to invest in (1) obligations of the United States or its agencies and instrumentalities:
(2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are
unconditionally guaranteed or insured by the State of Texas or the United States; (4) obligations of states, agencies.
counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally
recognized investment rating firm and having received a rating of not less than A or its equivalent: (5) certificates of
deposit by state and national banks domiciled in this state that are (A) guaranteed or insured by the Federal Deposit
Insurance Corporation, or its successor; or, (8) secured by obligations that are described by (1) - (4); or, (6) fully
collateralized direct repurchase agreements having a defined termination date, secured by obligations described by (I),
pledged with third party selected or approved by the District, and placed through a primary government securiiies
dealer.
lnvestments are stated at fair value.
2. Receivables and Payables
Transactions between funds that are representative of lendinglborrowing arrangements outstanding at the end of the
fiscal year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or
"advances tofirom other funds." All other outstanding balances between funds are reported as "due tofirom other
funds."
Advances between funds are offset by a fund balance reserve account in applicable governmental funds to indicate they
are not available for appropriation and are not expendable available financial resources.
Trade accounts receivables are shown net of an allowance for uncollectibles. Trade accounts receivable in excess of
ninety days comprise most of the allowance for uncollectibles.
Property taxes are levied as of October 1, on the assessed value listed as of the prior January 1, for all real and certain
personal property located in the District. The appraisal of property within the District is the responsibility of Denton
Appraisal District (Appraisal District) as required by legislation passed by the Texas legislature. The Appraisal District is
required under such legislation to assess ail property within the Appraisal District on the basis of 100% of its appraised
value and is prohibted from applying any assessment ratios. The value of property within the Appraisal District must be
reviewed every five years: however, the District may, at its own expense, require annual reviews of appraised values.
The District may challenge appraised values established by the Appraisal District through various appeals and, if
necessary, legal action. Property taxes for the District are not limited as to rate or amount. In an election held October
7. 1975, the electorate of the District authorized the levy of up to 50.25 per 8100 valuation for the operations and
maintenance of the District. Property taxes attach as an enforceable lien on property as of January 1, following the levy
date. Taxes are due by January. 31, following the levy date. Proprty taxes are recorded as receivables when levied.
Following is information regarding the 2001 tax levy:
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
Adjusted taxable values $ 427,871,500
O&M tax levy $0.0632/$100 5 270.415
I &S tax levy $0.1768/$100 756.477
Total tax levy $0.2400/$100 $ 1,026,892
3. Prepaid Items
Certain payments to vendorj reflect costs applicable to future accounting periods and are therefore recorded as prepaid
items.
4. Fixed Assets
Fixed assets used in governmental fund types of the District are recorded in the general fixed assets account group at
cost or estimated historical cost if purchased or constructed. Dedicated fixed assets are recorded at their estimated fair
value at the date of dedication. Assets in the general fixed assets account group are not depreciated.
The cost of normal maintenance and repain that do not add to the value of the asset or materially extend assets' lives
are not included in the general fixed assets account group.
Public domain ("infrastructure") general fixed assets consisting primarily of drainage systems have been capitalized
5. Organizational Costs
The District, in conformance with requirements of the TCEQ, capitalized costs incurred in the creation of the District.
The TCEQ requires capitalization as organizational costs for the construction period all costs incurred in the issue and
sale of bonds, bond interest and amortized bond premium and discount, losses on sales of investments, accrued
interest on investments purchased, attorney fees and some administrative expenses until construction and acceptance
or use of the first revenue producing facility has occurred.
6. Long-term Obligations
The District reports long-term debt of governmental funds at face value in the general long-term debt account group.
Certain other governmental fund obligalions not expected to be financed with current available financial resources are
ako reported in the general long-term debt account group.
For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized during the
current period. Bond proceeds are reported as an other financing source net of the applicable premium or discount.
Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures.
7. Fund Equity
Reservations of fund balance represent amounts that are not appropriable or are legally segregated for a specific
purpose. Reserved fund balance represents the amount of prepaid items.
8. Memorandum Only-Total Columns
Total columns on the general purpose financial statements are captioned as "memorandum only" because they do not
represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not
present information that reflects financial position, resulk of operations or cash flows in accordance with generally
accepted accounting principles. Interfund eliminations have not been made in the aggreaation of this data.
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
9. Comparative Data/Reclassifications
Comparative total data for the prior year have been presented in selected sections of the accompanying financial
statements in order to provide an understanding of the changes in the Diitrict's financial position and operations. Ako,
certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's
presentation.
11. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles as follows:
1. The Board of Directors adopts an annual budget for the General Fund on the modified accrual basis. The Board of
Directors budgets revenue but does not budget expenditures for the Debt Service Fund.
2. The Board of Directors approves all budget appropriations. Any revisions which alter the total appropriations of the
General Fund must be approved by the Board of Directors. The level of budgetary responsibility is by total
appropriations of the General Fund.
3. All annual appropriations lapse at fiscal year end
4. No significant amendments to the budgat occurred during the year.
B. BudgeVGAAP Reconciliation
The budget is adopted on the modified accrual basis of accounting, thus there ere no reconciling items between the Budget
basis and the GAAP basis of accounting.
C. Utcess of Expenditures Over Appropriations
For the year expenditures exceeded appropriations for the following funds:
General Fund $ 559,812
Ill. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS
A Cash, Cash Equivalents, and lnvestments
Cash -
At year end. the District's carrying-amount of deposits was 5190.531 and the bank balance was 5132.469. All of the bank
balance was covered by federal depository insurance or by collateral held by the District's agent in the District's name.
lnvestments
Investments are categorized into these three categories of credit risk:
1. Insured or registered, or securities held by the District or its agent in the D~trict's name.
2. Uninsured and unregistered, with securities held by the counter party's trust department or agent in the District's name.
3. Uninsured and unregistered, with securities held by the counter party's, or by its trust department or agent but not in the
District's name.
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
At year end, the District's investments were as follows:
Msrket
Investments not subject to categorization:
Texas Local Government Pool System (TexPool) 8t185.309 81.185.30?
TexPool is an external investment pool operated by the Texas Comptroller of Public Accounts and is not SEC registered.
The Texas lnteriocal Cooperation Act and the Texas Public Investments Act provide for creation of public funds investment
pools and permit eligible governmental entities to jointly invest their funds in authorized investments. The fair value of
investments in the pool is independently reviewed monthly. At September 30, 2002, the fair value of the position in TexPool
approximates fair value of the shares.
B. Fbted Assets
Activity in the general fixed assets account group for the District was as follows for the year ended September 30. 2002:
Land
Buildings
Furniture and fixtures
Machinery and equipment
Autos and tmcks
Water system
Sanitary wastewater system
Drainage system
Constmction in progress
Engineering fees
District Organization
Balance
Total $18,927,987
Additions
$ -
Balance
Disposals 9/30/2002
$ 5 248.093
Interfund Receivables and Payabies
There were no interfund rece~vable balances as of September 30,2002
D. Long-Term Debt
1. Combination Tax and Revenue Bonds/Contractual Obligations
The District periodically issues combination tax and revenue bonds for general uses and expansions of the system. This
debt for the bonds is recorded in the general long-term debt account group (to be repaid from a combination of propem
tax revenue and revenues of the water and waste water utility system). Combination bonds ere as follows:
Water works and sewer system combination unlimited tax end revenue bonds. Series 1993.
with interest rates ranging from 3.25% to 5.9% , due through 2007. $ 1.9s0.000
Water works and sewer system combination unlimited tax and revenue refunding bonds,
Series 1997, with interest rates ranging from 4.0% to 5.05;. due through 2011, including
related capital appreciation bonds. 2,960,000
Total combination tax and revenue bonds
Less unaccreted discount
Total long-term bonds
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. I
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
The District periodically issues other forms of long-term debt including contractual obligations,
and public property finance contractual obligations, which are unsecured. The debt for the
bands is recorded in the general long-term debt account group (to be repaid from revenues of
the water and waste water utility system). Such other debt is as follows:
Public property finance contractual obligations, Series 1996, with interest rate of 5.50%, due
through 2006. $258.000
Public property finance contractual obligations, Series 1999, with interest rates ranging from
5.50%, due through 2006. 40.000
Total long-ten contractual obligations 298.000
Total general long-term debt net $ 5.108.955
2. Notes Payable
The District has financed the purchase of personal firefighting equipment with a note payable
Annually at $2,445 including interest accruing at 2.50% through September, 201 8. $ S3im
3. Capital Lease Obligations
The District shares the purchase of various office equipment with capital leases with the Town
of Tmphy Club and MUD2. The District's share of the total monthly payments (including
interest accruing at 7.00%) is $447, payable through May. 2005. $SO
4. Changes in General Long-Term Debt
During the year, the following changes in general long-term debt occurred:
Balance Balance
9/30/2001 Additions Payments 9/30/2002
Combination tax & revenue bonds $ 5,495,000 $ $ (585.000) $ 4,910,000
Unaccreted discount (1 11,865) 12,820 (99.045)
Net combination bonds 5.383.135 (572.180) 4,810.955
Contract obligations 352.000 (54.000) 298.000
5,735,135 (626,180) 5,108,955
Note payable 30,786 (1.476) 29,310
Capital lease obligations 15,914 32,001 (12.285) 35.630
$ 5.781.835 $ 32.001 $ (639.941) $ 5,173,895
5. Debt Service Requirements
The requirement to amortize all bonds and contractual obligations outstanding as of September 30 is summarized
below:
Year Endina
September 3-0, Principal Interest Total
2003 $ 696.000 $ 238,915 $ 932,915
2004 729.000 201.484 930.484
2005 767;000 163;694 930.694
2006 789,000 137,982 926,982
zoo7 ao7.000 137,982 944,982
Thereafter 1,420,000 176.765 1,596,765
Total 5,208,000 S 1,054,822 $ 6.262.822
Discount (99,045)
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
The requirements to amortize the note payable and capital lease obligation as of September 30 are summarized below:
Year Endins Notes Capital
September 30. Payable ease Oblig.
2003 $ 2,245 $ 15,704
2004 2.245 15.704
Thereafter 24;695
Total 35,920 41.877
Less interest (6,610) (6.247)
6. Additional Long-term Debt Disclosure
Tax and revenue bonds authorized and unissued as of September 30.2002 amounted to $1,229,217,
The bonds are payable from the proceeds of ad valorem taxes levied upon all property subject to taxation within the
District, without limitation as to rate or amount, and are further payable from, and secured by a lien on and pledge of the
net revenue to be received from the operation of the District's waterworks and sanitaty sewer system.
The outstanding bonds are callable for redemption prior to maturity at the option of the District as follows:
Series 1993 -All maturities from 2003 to 2007 are callable in principal increments of $5,000 on or after September 1.
2002 at par plus unpaid accrued interest to the fixed date for redemptions.
Series 1996 -All maturities are callable at anytime in principal increments of $1,000 plus unpaid accrued interest to the
fixed date for redemptions.
Series 1997 -All maturities from 2008 to 2011 are callable in principal increments of $5.000 on or after September 1,
2007 at par plus unpaid accrued interest to the fixed date for redemptions.
The provisions of the bond resolutions relating to debt service requirements have been met, and the cash allocated for
these purposes is sufficient to meet debt service requirements for the year ended September 30,2002.
IV. OTHER INFORMATION
A Risk Management
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets: business
interruption; errors and omissions: injuries to employees: employee health benefits; and other claims of various nature.
Commercial insurance is purchased for the risks of loss to which the Dktrict is exposed. Any losses reported but unsettled
or incurred and not reported, are believed to be insignificant to the District's general purpose financial statements.
B. Commitments
The District iollows the guidelines of the TGEQ in its dealings with developers. The District leases certain equipment and a
modular building under the provisions of operating leases. One half of the monthly rent ($450 per month) on the modular
buildings lease is repaid to the District by the Town of Trophy Club. Future minimum rental payments are $3.600 for 2002.
C. Contingent Liabilities
The District is currently not subject to any pending litigation. However, the District is en interested party to several
administrative hearings at year end. Although the outcome of these matters is not presently determinable, it is
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
September 30,2002
management's opinion that resolution of these matters will not have a material adverse effect on the financial condition of the
District.
D. Concentration Of Credit Risk
Property taxes and accounts receivable for utilities are due from citizens and businesses within the District's boundaries.
Risk of loss is immaterial due to wide dispersion of receivables and policies which address procedures for filing property tax
liens or utility service cut-off.
E. Contracts
Under the terms of a contract whereby MUD 1 and MUD 2 sold an unused portion of the water supply system to the Ci of
Roanoke, Texas, the City of Roanoke will make annual payments to the Master District account of $23.663 including interest
through 2006. At September 30, 2002, the District's share (60%) of the receivable was $48,638.
APPENDIX E
MUNICIPAL BOND INSURANCE POLICY SPECIMEN
Financial Guannty Insunnce
Company
125 Park Avenue
NewYork, NY I0017
(212) 312-3000
(800) 352-0001
A GE Capital Company
Municipal Bond
New Issue Insurance Policy
Exhibit A
Issuer: Policv Number:
Control Number: OOlOOOl
Bonds:
Financial Guaranty Insurance Company ("Financial New York stock insurance company, in
irrevocably agrees to pay to U.S. Bank T
Agent"), for the benefit of Bondholders of the principal and interest on the above-described debt
by the Issuer. J
Financial Guaranty will make such payments to the Fiscal Agent on the date such principal or interest becomes
Due for Payment or on the Business Day next following the day on which Financial Gunranty shall have
received Notice of Nonpayment, whichever is later. The Fiscal Agent will disburse to the Bondholder the face
amount of principal and interest which is then Due for Payment but is unpaid by reason of Nonpayment by the
Issuer but only upon receipt by the Fiscal Agent, in form reasonably satisfactory to it, of (i) evidence of the
Bondholder's right to receive payment of the principal or interest Due for Payment and (ii) evidence, including
any appropriate instruments of assignment, that all of the Bondholder's rights to payment of such principal or
interest Due for Payment shall thereupon vest in Financial Guamnty. Upon such disbursement, Financial
Guaranty shall become the owner ofthe Bond, appurtenant coupon or right to payment of principal or interest
on such Bond and shall he fully subrognted to all of the Bondholder's rights thereunder, including tlle
Bondholder's right to payment thereof.
This Policy is oon-cancellable for any reason. The premium on this Policy is nor refundable for any reason,
including the payment of the Bonds prior to their maturity. This Policy does not insure against loss of any
prepayment premium which may at any time be payable with respect to any Bond.
As used herein, the term "Bondholder" means, as to a particular Bond, the person other than the Issuer who, at
the time of Nonpayment is entitled under the terms of such Bond to payment thereof "Due for Payment"
means, when referring to the principal of a Bond, the stated mahnity 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 and means, when referring to interest on a Bond, the stated date
FGlC ir nrrnirarcd rcrviccmzri: vicd by einrncirl Gurmly ImunnceComplny under license imm its psicnt company. FGlC Corponrion.
Form 9(M10(10113) Pnge 1 of2
Financial Guaranty Insurance
Company
125 Park Avenue
New York, NY 10017
(212) 312-3000
(800) 352-0001
A GE Capital Company
FGIC
Municipal Bond
New Issue Insurance Policy
for payment of interest. 'Wonpayment" in respect of a Bond means the failure of the issuer to have provided
sufficient filnds to the paying agent for payment in Full of all principal and interest Due for Payment on such
Bond. "Notice" means telephonic or telegraphic notice,
registered or certified mail, from a Bondholder or a
"Business Day" means any day other than a Saturday, Sunday or
by law to remain closed.
y to be affixed with its corporate seal and to be
e effective and binding upon Financial Guaranty by
virtue of the countersignature of its duly
-
President
Effective Date: Autllorizcd Representative
U.S. Bank Trust National Association achowledges that it has agreed to perform the duties oCFiscal Agent
under this I'olicy.
Autl~orized Officer
FGIC is s rcgiitcred scwice mark ued by Financial GUIUIIY lnsumnct Compnny under liccngc imm ih pawn1 campmy. FGlC Carpamlion.
Form 9000 (10193) Pogc2 012
Financial Guannty Insurance
Company
125 Pa& Avenue
NewYo4NY I0017
(212) 312-3000
(800) 352-0001
A GE Capital Company
Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number: Control Number: 0010001
..
It is fiuther understood that the term "Nonpayment" in respect izcludes any payment of principal or
interest made to a Bondholder by or on behalf of the isswmf s h%Pwhirh hs been recovered from'such
Bondholder pursuant to the ~niied States Badmpt a trustee in banhptcy in accordance with a
final, nonappealable ordcr of a court having co
NOTHING HEREIN SHALL BE CON WANE, ALTER, REDUCE OR AMEND COVERAGE
IN ANY OTHER SECTION OF THE . IF FOUND CONTRARY TO THE POLICY LANGUAGE,
THE TERMS OF THIS ENDORSEME
In Wihless Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal and
to be signed by its duly authorized ofilcer in facsimile to become effective and binding upon Financial Guannty
by vhe of the countersignature of its duly authorized represenhtive.
Q!? 5% /Q& -
President
Effective Dote:
Ackno~vledged as of the Effective Date written above:
Authorized Oficer
U.S. Bank Trust National Associntion, as Fiscal Agent
Authorized Representative
FGIC is a regincrrd rerviccmerk ucd by 1:inanriul Guamnty InrunnceCompnny under iicenie from ie prrcn! compmy. FGlC Cornontion.
Form E-0002 (10193) Page 1 of I
FINAL
TO: Individuals Listed Below
FROM: Dan A. Almon
DATE: January 6, 2003
RE: $1,949,287.70 Trophy Club Municipal Utility District No. 1
Unlimited Tax Refunding Bonds, Series 2003
Please find attached the closing memorandum for the above captioned Bonds.
If you have any questions, give me a call at (214) 859-9452 or Mary Jane Dietz (214) 859-6803 or fax at
(214) 859-9475.
Distribution to:
Name Entity Email Phone
Number
Mr. Walter Fitzpatrick Trophy Club MUD No. 1 wfitzpatrick@trophyclub.org 682-831-4610
Mr. Roger Unger Trophy Club MUD No. 1 runger@trophyclub.org 682-831-4613
Ms. Renae Gonzales Trophy Club MUD No. 1 rgonzales@trophyclub.org 682-831-4611
Mr. Pete Tart McCall, Parkhurst & Horton ptart@mphlegal.com 214-754-9230
Ms. Tina Ward McCall, Parkhurst & Horton tward@mphlegal.com 214-754-9220
Ms. Kristen Savant Fulbright & Jaworski L.L.P. ksavant@fulbright.com 214-855-8072
Ms. Beverly Knight First Southwest Company bknight@firstsw.com 214-953-4040
Ms. Joann Smith First Southwest Company josmith@firstsw.com 214-953-4087
Ms. Maryanna Manchee JPMorgan Chase Bank maryanna.manchee@jpmorgan.com 214-468-6411
Ms. Stephanie Cain Financial Guaranty Ins. Co. stephanie.cain@ge.com 212-312-3230
1
2
FINAL
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
$1,949,287.70
Unlimited Tax Refunding Bonds, Series 2003
CLOSING MEMORANDUM
CLOSING
Payment for and delivery of the captioned Bonds is scheduled to occur on Wednesday, April 9, 2003 (the “Closing Date”)
at 10:00 A.M. at the offices of JPMorgan Chase Bank, Dallas, Texas (“JPMorgan”).
RECEIPT AND DISBURSEMENT OF FUNDS
On the Closing Date, First Southwest Company will wire transfer the Purchase Price of the Bonds in the amount of
$2,064,426.76 to JPMorgan Chase, Houston, Texas, ABA #113 000 609, credit Dallas Issuer Administrative Services,
Account # 00103237013, for further credit to Trophy Club Municipal Utility District No. 1, Unlimited Tax Refunding Bonds,
Series 2003, Attention Maryanna Manchee, (214-468-6411). Details regarding all funds to be received by JPMorgan are
shown below.
Par Amount of Bonds $1,949,287.70
Plus Premium 117,369.00
Plus Accrued Interest 1,160.61
Plus Original Issue Premium 11,805.25
Less Underwriter’s Discount 15,195.80
Total Purchase Price of the Bonds $2,064,426.76
Upon receipt of such funds the following disbursements are to be made by JPMorgan:
1. Chase will retain $1,962,355.19 in payment of the following:
Redemption of the Series 1993 Bonds (maturities 2004-2009) $1,950,000.00
Interest Due to Redemption Date (4-9-03) 11,755.19
Paying Agent/Registrar Fee on New Bonds (First Year) 300.00
Early Redemption Notice and Processing 300.00
$1,962,355.19
2. By wire transfer, transmit the FGIC insurance premium in the amount of $22,122.66 to Bankers Trust, New York,
ABA # 021-001-033, 16 Wall Street, New York, New York, for credit to Financial Guaranty Insurance Company,
Account # 50-256-127, for Policy # 03010323, Trophy Club Municipal Utility District No. 1, Unlimited Tax Refunding
Bonds, Series 2003, Attention; Stephanie Cain (212-312-3230)
3. By wire transfer, transmit the amount of $8,740.02 to the depository bank as follows: Northwest Bank, Roanoke, Texas ABA
#111-910-681 for credit to Trophy Club MUD #1 I&S Account #6000145. This amount (representing the items shown
below) is the initial deposit to the Interest and Sinking Fund for the Series 2003 Unlimited Tax Refunding Bond issue.
Accrued Interest $1,160.61
“Use of Funds” Contingency Amount 4,388.30
Excess Cost of Issuance Funds 3,191.11
Total Amount for Deposit to I&S Fund $8,740.02
3
FINAL
4. By wire transfer, transmit the amount of $34,999.85 to JPMorgan Chase Bank, ABA # 113 000 609, FAO SWS
Securities, Account # 08805076955, Attention: Lisa Henderson, Reference: Trophy Club MUD No.1 # 9003-119375.
This amount is in payment of the Financial Advisory Fee, Refunding Calculations Fee and Electronic Internet
Posting/Distribution Fee, as listed in Exhibit “A” attached hereto.
5. By wire transfer, transmit the amount of $31,999.85 to Colonial BHAM, 1999 Bryan St., Dallas Texas, ABA # 0620-
0131-9, Account # 00000-0152-9, for credit to McCall, Parkhurst & Horton L.L.P. Operating Account, for further credit
to Client Reference #2667.009 Trophy Club MUD No. 1. This amount is in payment of Bond Counsel fee including
expenses and Attorney General fee, as listed in Exhibit “A” attached hereto.
6. The remaining portion of the Bond proceeds, in the amount of $4,209.19 is to be disbursed in the form of checks
payable to (1) Moody’s Investors Service, Inc. and (2) Island Printing, representing payments for all remaining costs
of issuance, as indicated in Exhibit A attached hereto: These checks should be sent via Courier Delivery to Dan
Almon at Southwest Securities, 1201 Elm St. Suite 3500, Dallas, Texas 75270, for delivery to the individual
parties.
GOOD FAITH CHECK
On the Closing Date, the District is to return via Federal Express or Certified Mail, uncashed, the good faith check in the
amount of $19,500.00 to First Southwest Company, Attention: Beverly Knight, 325 N. St. Paul, Suite 800, Dallas, TX
75201 (214-953-4040).
[The remainder of this page is intentionally left blank.]
4
FINAL
TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1
$1,949,287.70
Unlimited Tax Refunding Bonds, Series 2003
EXHIBIT A
JPMorgan will make disbursements as follows:
JPMorgan Payments Via Wires
SWS Securities, Attention: Dan Almon
Financial Advisory Fee $30,999.85
OS Electronic Internet Posting/Distribution Fee 1,500.00
Refunding Calculations Fee 2,500.00 $34,999.85
McCall, Parkhurst & Horton L.L.P. Attention: Pete Tart
(Includes $750.00 for A.G. Fee)
31,999.85
Sub Total $66,999.70
JPMorgan Payments Via Checks Sent to Dan Almon Southwest Securities by
Courier
Moody’s Investors Service, Inc. $ 3,250.00
Island Printing (Final Official Statement Printing) 959.19
Sub Total $ 4,209.19
_______________________________________________________________
Additional costs included in Cost of Issuance as follows:
Paying Agent/Registrar Fee, Early Redemption Fee retained by
Chase upon the initial receipt of funds
$ 600.00
Excess Cost of Issuance Reimbursed to District in Item #4 3,191.11
Total Cost of Issuance $75,000.00